Archives for May 2024

Sunrise Surrounds San Diego with Latest Add-On

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Sunrise Produce, a produce distribution company and a portfolio company of Investcorp, has acquired Moceri Produce, a produce distributor based in San Diego.

Sunrise’s products include over 3,000 SKUs of dairy, eggs and cheese; fruits and vegetables; nuts and seeds; rice, grains, beans and legumes; oils and dressings; and proteins. The company’s more than 2,000 customers are active in the restaurant and resort, education, healthcare, and retail sectors.

Source: Sunrise Produce

Sunrise, led by CEO David Sapia, was founded in 1991 and is headquartered near Los Angeles in Fullerton, California. Investcorp acquired Sunrise Produce in October 2022.

Moceri’s products include a full line of fresh and cut fruits and vegetables, fresh herbs, and microgreens; a wide variety of dairy products – milk, cream, butter and eggs – and specialty cheeses; dried fruits, vegetables, and nuts including apricots, blueberries, chiles, almonds, cashews, and walnuts; beans, grains, and rice; and non-food items including paper products and cleaning supplies.

Family-owned Moceri Produce has a rich history dating back to 1893. The company was founded by Dominico Moceri, who initially started the business in Detroit, Michigan. In 1946, Dominico’s son, Sam Moceri, moved to California to expand the family’s operations to the West Coast. By the late 1950s, the third generation of the Moceri family, including Sam’s sons Dominic and Sal Sr., took over the business. The fourth generation, consisting of Dominic’s sons Sal, Dominic II, and John, joined the family business in the 1970s.

Source: Moceri Produce

Today, San Diego-headquartered Moceri Produce has more than 80 employees and operates a fleet of trucks to deliver products throughout Southern California.

The buy of Moceri Produce expands Sunrise’s footprint in San Diego, and it is now the city’s largest produce distributor and one of the largest produce distributors in Southern California. Post closing, Mr. Sapia will continue as the CEO of Sunrise, and John and Dominic Moceri, co-owners of Moceri Produce, will join Sunrise’s senior management team and will oversee the company’s San Diego operations.

“Sunrise and Moceri share a passion for the produce industry and our loyal customers,” said John Moceri. “A partnership through this transaction makes sense for both of our customer bases. We look forward to working with one of Southern California’s best in the produce distribution space and to continuing to drive our business forward.”

Source: Sunrise Produce

“We are very pleased to acquire Moceri whose business and culture we have always admired,” said Mr. Sapia. “We are complementary brands, and our combined relationships and sourcing networks position us to deliver the best customer experience in the produce industry. To the greater benefit of customers, this acquisition grants wider access to both brand’s sourcing, vendor relationships and distribution assets, which enables Sunrise to capitalize on Moceri’s robust distribution network and San Diego distribution center.”

Investcorp is active in alternative investments, including private equity, real estate, absolute return investments, and credit management. Since its founding in 1982, Investcorp has closed more than 200 private equity transactions across a range of sectors, including retail and consumer products, technology, business services, and industrials. Investcorp, with $52 billion of assets under management, has more than 500 employees with multiple offices, including New York City, London, and Bahrain.

© 2024 Private Equity Professional | May 31, 2024

Arcline Exits Voltyx with Sale to Asplundh

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Arcline has sold Voltyx Energy Solutions, a provider of electric infrastructure services, to family-owned Asplundh.

Voltyx specializes in technical electric infrastructure services, including design and engineering, testing and commissioning, and repair and maintenance to more than 1,500 utility, renewable energy, data center, commercial and industrial customers.

Source: Getty Images

Arcline acquired Electric Power Systems International (EPS) and North American Substation Services (NASS) from Industrial Growth Partners in April 2021 (Arcline Acquires Electric Grid Platform from IGP). In December 2021, the company rebranded as Voltyx following the acquisition of California-based HART High Voltage in October 2021 and Wisconsin-based Krause Power Engineering in August 2021. Other operating companies of Voltyx include Quebec City-based NOMOS Systems, Tennessee-based Transformer Lifecycle Services, and Connecticut-based EPS Technology.

Source: Voltyx

Today, Voltyx is led by CEO Mark Day and has more than 1,200 employees and 35 North America locations with a headquarters near St. Louis in Maryland Heights, Missouri.

“Thanks to our dedicated team, loyal customers, and partnership with Arcline, Voltyx has continued to be at the forefront of economy wide electrification trends,” said Mr. Day. “We look forward to the next chapter of growth with the Asplundh team.”

“We’re excited to welcome Voltyx to the Asplundh family of companies,” said Matt Asplundh, the CEO of Asplundh. “Voltyx’s expertise in the substation and transformer services market will help us expand the already excellent, safe, and cost-effective services we provide to our current customers as One Asplundh. We look forward to working together with Voltyx’s employees and customers toward continued growth and success.”

Asplundh is a provider of vegetation management and utility infrastructure services including tree pruning and removals, right-of-way clearing and maintenance, emergency storm work, and logistical support. Other services of the company include power line design, construction, meter reading, electrical testing and commissioning, utility pole maintenance, traffic signalization, and roadway lighting. Customers of Asplundh include electric utility companies, municipalities, pipelines, and railroads.

Source: Asplundh

The family-owned and operated company was founded in 1928 by brothers Griffith, Lester and Carl Asplundh to trim trees around power and telephone lines. According to the company, it was the first company to specialize in utility line clearance and vegetation management services and today is the largest line clearance company in the United States. Asplundh has more than 36,000 employees located throughout the United States, Canada, Australia, and New Zealand, and is headquartered near Philadelphia in Willow Grove, Pennsylvania. Annual revenues of the company exceed $4.7 billion.

Arcline makes control investments in companies with recurring revenue business models in the defense and aerospace; infrastructure services; industrial and medical technology; life sciences and specialty materials sectors. Arcline’s targets will typically have from $10 million to $100 million of EBITDA and enterprise values up to $1 billion. The firm closed its third fund in March 2023 with total capital commitments of $4.5 billion. Arcline’s earlier fund closed in January 2021 with $2.75 billion of capital commitments.

Harris Williams and Stifel Nicolaus & Company were the financial advisors to Arcline on this transaction, and BofA Securities advised Asplundh.

© 2024 Private Equity Professional | May 31, 2024

Riata Closes Newest Fund Above Hard Cap

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Riata Capital Group (RCG) has closed its second fund, RCG Equity Fund II LP, above its hard cap with capital commitments of $285 million.

RCG makes control and non-control equity investments of $25 million to $150 million in companies with $5 million to $30 million of EBITDA and enterprise values of $25 million to $300 million. Sectors of interest include business services, consumer, and healthcare services. RCG’s investment types include recapitalizations, buyouts, carve-outs, CEO-led buy and builds, and growth capital.

RCG is expected to acquire six platform companies for RCG II and has already deployed 50% of its capital in three platforms.

“We are very pleased with the support of both our existing and new limited partners, allowing us to exceed our target and hard cap in what is a challenging fundraising market,” said Jeff Fronterhouse, a managing partner of RCG. “We attribute this to the compelling performance of the investments we’ve made from RCG II, as well as delivering liquidity and value creation across the rest of our portfolio. RCG is well-positioned to complete the deployment of RCG II; as well as execute the larger strategy of building the Firm into a market-leading manager in the lower-end of the middle market, delivering strong and consistent results to our investors.”

RCG was founded in January 2015 by managing partners Jeff Fronterhouse and Barron Fletcher. In 1999, Mr. Fronterhouse co-founded Dallas-based Brazos Private Equity, which invested more than $1 billion of equity capital in 80 platforms and add-on acquisitions across three private equity funds. Similarly, Mr. Fletcher founded Dallas-based Parallel Investment Partners in 1999 which invested over $330 million of equity capital in 27 platforms and 23 add-on acquisitions across two private equity funds. In 2022, Blake Battaglia joined the firm as a managing partner after spending 2 years at Dallas-based Delta-v Capital and 19 years at Boston-based ABRY Partners.

Raymond James Private Capital Advisory and Probitas Partners were the advisors to RCG on this fundraise.

© 2024 Private Equity Professional | May 31, 2024

Within the Complexity of the Lending Market: The Advisor Advantage

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The Dynamic World of Private Credit
Reflecting on the past eighteen months, it’s hard not to be reminded of the old saying, “The only constant in life is change.”

The rapid pace of change and disruption in the credit markets has been reminiscent of the Global Financial Crisis. The commercial bank and broadly syndicated markets have shifted abruptly — especially in the middle market — leaving traditional lending as a less viable option for the average middle-market borrower. While these markets have begun to reopen recently, the landscape has been forever altered.

The void left behind by commercial banks and syndicated markets was a tremendous opportunity for private credit. Direct lenders stepped up to fill the gap – and take market share – in a manner that not only provided borrowers with necessary capital but also captured the hearts and minds of the market. Direct lenders gained market acceptance as the more straightforward and predictable alternative to the broadly syndicated markets.

To be abundantly clear, debt placement is not something private equity firms can’t do — on the contrary, it’s been a part of their business model from the start.

The private credit landscape is clearly more dynamic now than at any time in the past. As the asset class has grown, existing direct lenders have increased assets under management, typically also increasing hold size. In addition, new direct lenders have also entered the market at an unprecedented pace. While some new direct lenders are entering the lower end of the middle market, many have debuted with $1 billion plus inaugural funds.

The frenetic changes in the private credit landscape have led private equity firms to face a hard truth when it comes to sourcing financing — the days of approaching a discrete number of key relationship lenders to achieve best execution in debt financing seem to be in the rearview mirror.

Financing as Table Stakes
To be abundantly clear, debt placement is not something private equity firms can’t do — on the contrary, it’s been a part of their business model from the start. The typical debt financing strategy employed by private equity professionals involves a limited outreach to select relationship lenders.

Although this approach tactic does not offer a true “market test” of terms, it has worked reasonably well in the past — especially in the world of cheap and abundant debt capital. In that environment, the market was relatively efficient, and terms were more or less consistent across direct lenders.

Staying abreast of market appetite at a lender-by-lender level is key to finding the right lender.

In today’s capital markets, which are less efficient and more dynamic, broader outreach is critical to ensure optimal execution. Best execution (and best terms) means finding the right lender for the right opportunity at the right time.

This requires extensive outreach to the right group of lenders —including some brand-new lenders. While it is certainly possible for private equity to execute this plan on their own, it is often not the best use of time for these professionals. In the “higher-than-longer” interest rate environment, sponsors are increasingly focused on value creation strategies at the portfolio company level to drive returns. It is not typically in the best interests of a private equity firm to allocate the internal time and effort required to run a debt placement process. Those resources are best deployed elsewhere — finding the best management team, identifying potential add-on acquisitions, setting portfolio company operating strategy, and a host of other value creation efforts.

Finding the Right Lender…
Staying abreast of market appetite at a lender-by-lender level is key to finding the right lender. The rapidly evolving lender ecosystem requires full-time effort and constant activity in the market. This real-time intel is the only way to effectively navigate and create a healthy competitive dynamic amongst lenders in a debt placement process.

Identifying the right lender at the right time depends on the lender’s current risk appetite — whether they are ‘risk on’ or ‘risk off.’

The right lender for a given portfolio company is often not the last lender to do a deal with the same private equity firm. Instead, the right lender is a function of the borrower’s credit profile. Increasingly, direct lenders have been selecting industries and even subsectors where they will be more aggressive. Conversely, a lender that happens to have a troubled borrower in a given industry may be leaning out of that industry.

The level of effort required to constantly monitor lender activity is not feasible for most private equity professionals as they are typically balancing other higher value creation activities.

…At the Right Time
Identifying the right lender at the right time depends on the lender’s current risk appetite — whether they are ‘risk on’ or ‘risk off.’ This is further complicated in an ecosystem that is changing as rapidly as private credit is evolving. New lenders are being formed on a near-weekly basis, and Configure data shows that 60% to 75% of the most active lenders are replaced by a new cohort of active lenders every six months.

As new lenders raise funds and enter the market, they are under pressure to deploy capital, creating a pronounced “risk on” posture. Conversely, lenders who are actively fundraising or in the late stages of their fund may be more “risk off” over that period of time. The ebb and flow of individual risk appetite within the broader ecosystem of private credit further reinforces the necessity of constant market activity.

The Growing Case for Outsourced Debt Placement
There are two primary factors that contribute to the best execution in a debt financing: real-time knowledge of the market and appropriate breadth of outreach.

Real-time knowledge and market intelligence about the lender ecosystem and behavior form the basis for determining which lenders should be contacted for specific opportunities. Constant transaction activity is the only way to truly know the market. Most private equity firms evaluate between three and seven financings in a given year — a combination of new platform financing and portfolio company refinancings. To put this in perspective, Configure is engaged on 30 to 50 debt placements in a given year. This depth of market intelligence is impossible to create synthetically.

If each lender needs an hour of time — not an unreasonable request — then the time commitment begins to approach that of a full-time job – beyond the already full-time effort of getting a new transaction to close.

Appropriate breadth of outreach is also critical to a true market test and this breadth is directly informed by real-time market knowledge. The “appropriateness” of the breadth of outreach can be violated in both directions — too broad or too narrow. The objective is not to email blast a large set of lenders and wait to see who responds, nor is it the objective to select and approach only a handful of lenders. The objective is to identify the right set of lenders who are high probability and then provide those lenders with the time and effort necessary to address their questions and help them understand the opportunity.

The outreach itself can be time-consuming and often difficult to manage with a private equity sponsors team during the storm of activity involved in closing a transaction. Compounding this time pressure is the necessity to dedicate time and effort with each lender to answer questions, ensure they understand mitigants to key credit concerns, and address a multitude of other important lender questions.

If each lender needs an hour of time — not an unreasonable request — then the time commitment begins to approach that of a full-time job – beyond the already full-time effort of getting a new transaction to close. As the process moves into management presentations with lenders, negotiating term sheets, and ultimately credit agreement and documentation, the time commitment only builds, distracting from higher value-add activities along the way.

Many private equity firms have realized that the considerable investment of time and resources required in a financing process does not deliver an appropriate return. Reallocating those resources to evaluate and close more deals or to improve profitability at portfolio companies is more effective at driving returns and fund performance.

The Configure Difference
Configure Partners is a credit-oriented investment bank specializing in debt placement. The firm provides the highest level of client service and execution to middle-market private equity sponsors in acquisition finance, refinancing, and dividend recapitalization transactions.

Configure is one of the largest firms dedicated to debt advisory. We’ve developed our processes and systems to ensure execution across all types of financing transactions. Unlike other debt placement groups, we don’t treat debt advisory as a secondary service offering to M&A – debt placement is our entire business.

As previously stated, private equity firms often rely on a “relationship” lending approach, typically limiting outreach to a discrete set of lenders that have financed other portfolio companies. Make no mistake: relationships are critical and Configure takes great care to include relationship lenders in the outreach in a manner that is respectful of the existing relationships.

Of course, the pressure of a competitive process often encourages relationship lenders to tighten up on terms to secure the deal. It’s not unusual for a competitive process to drive both increased leverage/proceeds and reduced economics in the form of reduced original issue discount (OID), lower interest rates, lower fees and other areas of savings. At the end of the process, the private equity firm or borrower is able to compare proposals from the set of relationship lenders alongside proposals from new lenders and determine the preferred solution.

This holds true in refinancing engagements as well, where the incumbent lender is typically assumed to be the “best” answer. A broader, competitive process almost always results in a materially improved refinancing proposal from the incumbent lender. Sometimes, the improved proposal of the incumbent lender is determined to be the best solution; sometimes, a new lender will displace the incumbent. In both examples, the benefits of a financing process almost always outweigh the cost of the debt placement advisor. In fact, the fee paid to the advisor by the private equity sponsor or the borrower is typically recouped through improved financing economics in less than twelve months.

About the Author
Joseph Weissglass is a managing director at Atlanta-headquartered Configure Partners. He joined the firm in 2017 from Guggenheim Securities where he was a vice president in the firm’s special situation group. Earlier in his career he was with Barclays Capital in its restructuring and finance group. Mr. Weissglass has his undergraduate degree in construction science and management from Clemson University and his MBA from the University of North Carolina.

If the above article has sparked a question or thought concerning hiring an advisor for financing, please feel free to reach out to any Configure team members. Mr. Weissglass  can be reached via email at [email protected].

© 2024 Private Equity Professional | May 31, 2024

L Squared Closes Big Exit with Sale of Raptor Scientific

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Publicly traded TransDigm Group has agreed to acquire Raptor Scientific from L Squared Capital Partners for approximately $655 million in cash.

Raptor Scientific was founded in September 2019 by L Squared to invest in the highly fragmented aerospace-focused testing and measurement systems market. At that time, L Squared backed the effort with a $60 million capital commitment from the firm’s second fund.

Source: Raptor Scientific

Under L Squared ownership, Raptor completed five add-on acquisitions with the buys of Space Electronics, a Connecticut-based provider of engineering, testing and measurement services, including the design and manufacture of mass properties (weight, center of gravity, inertia), air data test technology, and radar cross section (RCS) measurement instruments (September 2019); Sensor Concepts, a California-based Tier II designer and manufacturer of RCS instruments and measurement services that are used by aerospace and defense OEMs to develop stealth programs including the F-35 Joint Strike Fighter (October 2020); TestVonics, a New Hampshire-based manufacturer of air data test equipment that is used to test, verify and calibrate instruments used on rotary and fixed-wing aircraft (March 2021); King Nutronics, a California-based manufacturer of test, measurement, and calibration equipment that is used in the defense, industrial, space, and aerospace markets (March 2023); and MEDTHERM, a Alabama-based provider of heat flux sensors, infrared radiometers, and thermocouples used in the aerospace, defense, space, and industrial markets (November 2023).

Today, Berlin, Connecticut-headquartered Raptor is a manufacturer of complex test and measurement components with significant aftermarket content and a strong presence across major aerospace and defense platforms. The company’s core capabilities include test and measurement instrumentation and services; physical property systems; and pressure, air data, and temperature systems. Nearly all of Raptor Scientific’s revenue is generated from proprietary products and the company is expected to have approximately $90 million in revenue for the year ending December 31, 2024.

Source: Raptor Scientific

Raptor Scientific, led by CEO Derek Coppinger, has more than 170 employees and manufacturing locations in California (2), Connecticut, Alabama, and New Hampshire.

“I greatly appreciate the support and resources the L Squared team have provided over the years as we built Raptor Scientific into a leading provider of complex test and measurement solutions supporting the defense, space, and aerospace industries,” said Mr. Coppinger. “We are excited to begin our next chapter of growth with TransDigm, who is well positioned to provide us with the additional resources and scale necessary to accelerate our momentum and drive future success. The world-class and dedicated employees of Raptor Scientific deserve the highest recognition for building this superior organization which supports our customers and warfighters every day. For that I am truly grateful.”

“We are grateful to Derek and the entire Raptor Scientific executive team for their leadership that drove this highly successful outcome,” said Sean Barrette, the chairman of the board of Raptor Scientific and a partner at L Squared. “Raptor Scientific was founded with the mandate to accelerate the growth of advanced aerospace and defense test and measurement technologies that support national security assets. These unique capabilities protect our freedom in a variety of operational theaters. We believe that TransDigm is the ideal new partner for Derek and the Raptor Scientific team as they continue this important mission.”

Newport Beach, California-based L Squared invests from $50 million to $125 million of equity in North America-based companies that have revenues of $20 million to $125 million and EBITDA of $5 million to $30 million. Sectors of interest include tech-enabled services and software, education technology, and industrial technology and services.

L Squared is led by Robert Healy, Jeff Farrero, Sean Barrette, Randall Hunt and Adam Kimura, all of whom worked together at Chicago Growth Partners prior to founding L Squared in July 2014. In November 2023, L Squared held the final closing of its fourth fund with $840 million of capital. The firm’s earlier fund closed in September 2020 with $505 million of capital.

TransDigm (NYSE: TDG), is a designer, producer and supplier of aircraft components for use on nearly all commercial and military aircraft in service today. Major product categories for the company include pumps and valves used in aircraft fluid control systems including fuel, hydraulic fluids, and water; motors, actuators, and controls used to for the movement and control of aircraft parts; quick disconnects, couplings, and rods used to quickly and securely connect and disconnect fluid and air lines; batteries, chargers, and power conditioning components used in both primary operations and backup systems; and specialized flight, wind tunnel and jet engine testing services and equipment.

TransDigm was founded in 1993 by Kelso & Company to acquire four aerospace companies – Adel Fasteners, Aero Products Component Services, Controlex Corporation and Wiggins Connectors – from IMO Industries. Today, Cleveland, Ohio-headquartered TransDigm is led by President and CEO Kevin Stein and is comprised of 48 independent companies with 60 manufacturing locations in the United States and 7,000 employees.

Source: Raptor Scientific

“We are excited about the acquisition of Raptor Scientific,” said Mr. Stein. “The company’s comprehensive proprietary and highly engineered product portfolio of aerospace and defense testing and instrumentation solutions fits well with our value generation strategy. Raptor Scientific’s test and measurement solutions are used on a diverse range of new and existing aircraft platforms, and the company has an outstanding reputation with its customers. As with all TransDigm acquisitions, we expect this acquisition to create equity value in-line with our long-term private equity-like return objectives.”

The sale of Raptor Scientific is the L Squared’s ninth overall exit since the firm’s formation in 2014 and its second exit (Going Up? L Squared Sells Elevated to APi Group) in the last 45 days.

Harris Williams & Co. was the financial advisor to L Squared and Raptor Scientific on this transaction and BakerHostetler provided legal services. The BakerHostetler transaction team was led by Partner John Allotta and included Associates Katie O’Brien and Charlotte Pasiadis.

© 2024 Private Equity Professional | May 29, 2024

Blue Point Stays Home with Buy of National Safety Apparel

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Blue Point Capital Partners has acquired National Safety Apparel, a manufacturer of branded personal protective equipment.

National Safety Apparel (NSA) is a provider of flame-resistant clothing (FRC), electrical personal protective equipment (PPE) and thermal and industrial PPE, workwear, and uniforms.

The majority of NSA’s branded products including DRIFIRE, Enespro, and Wild Things are made in the United States. The company’s DRIFIRE products include hi-vis, arc flash and flash fire industrial workwear and flame-resistant base layers, combat uniforms, and flight suits; the Wild Things brand includes cold weather military clothing; and its Enespro products include flame-resistant clothing, electrical safety PPE, and rubber voltage gloves.

Source: National Safety Apparel

NSA was founded in 1935 by Walter “Wally” Grossman in the basement of his father’s house in Cleveland. Today, the company today is a fourth generation, family-owned business headquartered in Cleveland, Ohio.

“Blue Point’s experience in our industry and alignment with our culture made them the right choice for NSA as we explore new avenues for expansion in the safety products market,” said Chuck Grossman, the president and a fourth-generation owner of NSA. “Together, we will continue to scale the business while staying true to NSA’s mission — to ensure the protection of workers and help them return home safely every day.”

“This partnership is a continuation of Blue Point’s history of partnering with local, family-owned businesses,” said Jonathan Pressnell, a partner at Blue Point. “NSA’s impressive performance and customer loyalty demonstrate their exceptional market position and quality products. The company is an excellent fit with Blue Point’s manufacturing and safety sector investing experience. Looking ahead, we plan to provide capital and operational resources to assist management in accelerating growth and driving efficiency, building on the impressive track record already established by the NSA team.”

Blue Point invests in companies that are active in the industrial, business services, consumer, and value-added distribution sectors and have from $30 million to $300 million in revenue and EBITDA greater than $7 million. The firm has offices in Cleveland, Charlotte, Seattle, and Shanghai.

Source: National Safety Apparel

Now in partnership with Blue Point, NSA is actively seeking complementary partnerships with like-minded founders and owners of safety products businesses.

© 2024 Private Equity Professional | May 29, 2024

Compass Sells Gas Meter Distributor to Tinicum

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Tinicum has acquired a controlling interest in KGM from Compass Group Equity Partners.

KGM is a distributor of natural gas products including gas meters, instruments, regulators, valves, and related equipment and parts to utilities and commercial and industrial customers.

In addition to its product offerings, KGM also provides a range of services including technical support, training, testing, calibration, and product repair and refurbishment. KGM, led by its founder and CEO Tim Wood, is headquartered in Tulsa, Oklahoma.

Source: KGM

Compass Group acquired KGM through its second fund in January 2022 and its sale is Compass Group’s first exit from Fund II which closed in April 2022 at its hard cap of $255 million.

During Compass Group’s ownership term, KGM closed three add-on acquisitions with the buys of Alabama-based MarieCo (December 2022), South Carolina-based Bartlett Controls (August 2023), and Minnesota-based Nelson Technologies (February 2024). As a result of these acquisitions and organic growth, KGM’s revenues increased by 2.5 times and its geographic coverage doubled, enabling it to service customers in over 40 states.

“This marks an exciting new chapter for KGM. Tinicum’s family heritage and focus on long-term business building are an excellent fit for our company and industry,” said Mr. Wood. “We’ve been fortunate to have a great partner in Compass Group over the last few years who has worked with us to drive tremendous growth. Our partnership with Tinicum will enable further investments in our team, product offering, capabilities and facilities in order to continue delivering superior solutions that enable growth and efficiency gains for our customers.”

“Our partnership with KGM epitomizes what we’re all about at Compass Group – partnering with great companies in mid-America and driving growth in both their business and in their people,” said Chris Gibson, a managing partner at Compass Group. “Over the years, our partnership with KGM yielded numerous friendships and we look forward to seeing our friends have continued success with a great partner in Tinicum.”

Tinicum partnered with members of KGM’s senior management team on this acquisition and they have retained a significant equity interest in the company.

“We deeply respect the team and the business that Tim and his management group have developed, and it is an honor to partner with them,” said Trip Zedlitz, a partner at Tinicum. “KGM has valuable long-term partnerships with its OEM suppliers and customers and a differentiated ability to deliver individualized and comprehensive customer solutions with industry-leading product availability and technical expertise. We look forward to building on KGM’s strong foundation.”

Compass Group invests up to $50 million of equity in Midwestern-headquartered companies that have enterprise values of $20 million to $100 million and EBITDA of $2 million to $12 million. Sectors of interest include niche manufacturing and distribution, and business and consumer services. In April 2024, Compass held a first and final closing of its third fund, Compass Group Fund III LP, at its hard cap of $408 million. Compass Group was founded in 2014 and is headquartered in St. Louis.

Tinicum invests from $50 million to $500 million of equity per transaction in companies that are active in the manufacturing, distribution, industrial technology and specialty infrastructure sectors. The firm invests in both private control transactions and minority positions in private and public companies. Tinicum was founded in 1974 to manage the holdings of the Ruttenberg family and began managing outside capital in a traditional private equity fund structure in 1998. In 2012, the firm established Tinicum LP – a long-term investment vehicle with an indefinite life and multiple, successive commitment periods – and today manages more than $2.4 billion of committed capital from families and individuals. Tinicum is led by its managing partner Eric Ruttenberg and has offices in New York City, San Francisco, Houston and Frankfurt.

Piper Sandler was the financial advisor to KGM on this transaction, and Bank of Montreal and Citizens Bank provided debt financing.

© 2024 Private Equity Professional | May 29, 2024

Eir Closes Oversubscribed Fund II

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Eir Partners Capital has held a final oversubscribed closing of Eir Partners Investment Program II LP with $496 million in capital commitments.

Limited partners in Fund II, which was raised in just four months, includes financial institutions, insurance companies, family offices, funds-of-funds, endowments and foundations, and industry executives.

“We are thrilled to receive support from a distinguished group of investors to continue our strategy of partnering with exceptional businesses and teams,” said Brett Carlson, the founder and chief executive officer of Eir Partners. “Their commitment will help grow and establish Eir as a leading health-tech investment firm in the market.”

Eir Partners invests from $25 million to $100 million in middle market healthcare technology and tech-enabled services companies. The firm’s transaction types range from growth equity through control buyouts. The firm’s first fund, Eir Partners Investment Program I LP, closed in 2021 with $255 million in capital.

The Miami-headquartered firm was founded in 2015 and takes its name from Eir, the Norse goddess of healing. Eir is also considered one of the Valkyries, the warrior maidens who select slain warriors and take them to Valhalla.

Lazard Frères & Co. was engaged as the placement agent on this fundraise and Kirkland & Ellis provided legal services.

© 2024 Private Equity Professional | May 30, 2024

Life Outside the Forties: Navigating Political Risk

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If you studied corporate finance or portfolio management 20 years ago, “political risk” tended to refer to a country’s stability in government and the transparency/integrity of its capital markets.

Those considerations still matter, but the deep polarization of government in the United States and other industrialized economies has given added weight to another kind of risk.

Business managers, investors and analysts now must assess the optionality of radically different standards in law, regulation and administration based on who is in power in a given jurisdiction.

THE PROBLEM

An article in The New York Times last month made the case well, at least as it relates to environmental policy:

“Government policies have always shifted between Democratic and Republican administrations, but they have generally stayed in place and have been tightened or loosened along a spectrum, depending on the occupant of the White House.

But in the last decade, environmental rules in particular have been caught in a cycle of erase-and-replace whiplash.

“In the old days, the regulatory days of my youth, we were going back and forth between the 40-yard lines,” said Douglas Holtz-Eakin, who directed the nonpartisan Congressional Budget Office and now runs the American Action Forum, a conservative research organization. “Now, it’s back and forth between the 10-yard lines. They do it and undo it and do it and undo it.”

Economists and business executives say this new era of sharp switchbacks makes it difficult for industries to plan. If there is anything that companies like less than government regulation, it is an unstable business climate…

In the past four months, the Biden administration has strengthened or restored rules that Mr. Trump had deleted, including regulations to cut greenhouse emissions from cars and oil and gas wells; to limit the pollution of toxic coal ash; to protect the habitat of the sage grouse and other endangered species; and to tighten safety controls at chemical plants. All of these rules are likely to be weakened or rolled back once again under a new Trump administration.”

This volatility is of course not limited to the environmental arena. Federal tax and regulatory policy have always featured some oscillation between Democratic and Republican administrations, but the pendulum swings are more pronounced than ever.

For clients of my M&A firm and other private business owners, there is always sentiment in favor of lower taxes and less regulation, but the strongest sentiment may be for greater certainty.

THE DATA

Measuring political risk is big business, but it’s difficult to find metrics that drill in on volatility, as opposed to the stability and functionality of political institutions and capital markets.

The World Bank’s Worldwide Governance Indicators (WGI) project “constructs aggregate indicators of six broad dimensions of governance.” One of the six – government effectiveness – “reflects perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies.”

Here is the data for the world’s 15 largest national economies at five-year intervals through 2022, the most recent year for which data is publicly available. Estimates of government effectiveness range from approximately -2.5 (weak) to 2.5 (strong). Green denotes positive movement from 2012 to 2022, red negative movement.

Over the 2012-2022 period, Canada, Australia, the United Kingdom, Germany, the United States, France, and Spain maintained positive scores but saw a decline in government effectiveness. Among countries with 2012 scores above 1.0, only Japan, South Korea, and Australia improved their positions.

Policymaking Volatility Becomes a Macroeconomic Burden

The New York Times article goes on to cite Costa Gavriilidis, a Scottish researcher who developed a U.S. Climate Policy Index after watching the United States join, leave, and rejoin the Paris climate agreement in just over five years.

“[Gavriilidis’] research shows that whenever the index shoots up to about 50 points, it creates an economic shock of such magnitude that it leads to a 1.5 percent decrease in industrial production, a 0.4 percent increase in unemployment, a 2 percent increase in commodity prices and a 0.4 percent increase in consumer prices, reflecting the fact that producers incorporate the risk of higher production costs associated with uncertain climate policy into their prices.”

This, of course, is a non-diversifiable market risk.

Non-diversifiable Market Risk Translates into Higher Required Returns

Let’s take electric vehicles as an example. Over the next few years, will the United States continue to incentivize their production and purchase? Will there be a return to support for fossil fuels? What will be the federal government’s position on domestic mining of the rare earth minerals that go into lithium-ion batteries? The answers to all three questions depend on political outcomes.

Here are the current five-year Betas for two traditional car manufacturers looking to evolve into battery-operated vehicles, and the two principal electric vehicle market entrants.

Setting aside Tesla, the spread in Beta between GM/Ford and Rivian is about .35. Considering that market-neutral beta is 1.0, that is a substantial swing. The prospect of binary political outcomes is not the only factor contributing to the marked difference in perceived volatility – and thus in required return – but it is clearly one factor dampening the valuations of the publicly traded OEMs concentrated in a new and politically contentious industry.

THE IMPACT ON PRIVATE COMPANIES

Privately owned businesses are not subject to daily public valuation, but they are subject to the same valuation methods. Public comps come into play even more directly if a company’s owner is a private equity fund or other investment company required to do quarterly “mark-to-market” valuations.

What is the impact on private investment activity in businesses affected by policy volatility? There can only be two answers. First, if the impact on required return is moderate, valuations in a given sector decline; and second, if the impact is greater, investors wait until policy direction clarifies.

Between now and the November election, in politically contentious sectors like electric vehicles, the sidelines will be a popular place.

About the Author
Andy Greenberg is CEO of Greenberg Variations Capital, a mergers & acquisitions advisory firm based in suburban Philadelphia devoted to one-off or targeted transactions. Mr. Greenberg was founder and CEO of GF Data©, the M&A data tracking service, prior to its acquisition by the Association for Corporate Growth in 2022. For more information, visit www.greenbergvariations.com.

© 2024 Private Equity Professional | May 23, 2024

GHK Banks Big Exit on Sale of Supreme Cabinetry

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Publicly traded MasterBrand has agreed to acquire Supreme Cabinetry from GHK Capital Partners for $520 million in cash.

GHK Capital acquired Supreme Cabinet (then Dura Supreme Cabinetry) in October 2019 from the company’s second-generation founding family. The company was founded in Minnesota by Donald Stotts in 1954 and operated a 220,000 sq. ft. manufacturing facility in Howard Lake, Minnesota.

Source: Supreme Cabinet

GHK Capital expanded its cabinet platform in January 2021 with the acquisition of Bertch Cabinet Manufacturing, an Iowa-based manufacturer of premium, semi-custom kitchen and bath cabinets. In April 2023, the company further expanded by opening a new 300,000 sq. ft. manufacturing facility in North Carolina.

Today, Supreme Cabinet is led by CEO Tony Sugalski and goes to market under the Dura Supreme and Bertch brands. The company is headquartered 40 miles west of Minneapolis in Howard Lake, Minnesota, with two additional manufacturing facilities in Iowa and North Carolina.

Source: Supreme Cabinet

According to MasterBrand, the purchase price for Supreme Cabinet is equal to 8.9x Supreme’s TTM Adjusted EBITDA through March 2024; and if anticipated procurement, facility optimization, and overhead cost synergies of $28 million are realized, the valuation multiple is 5.9x.

MasterBrand (NYSE: MBC) is the largest manufacturer of residential kitchen and bathroom cabinets in North America. The company’s framed and frameless, stock, semi-custom and premium cabinet products are available in a variety of designs, finishes and styles, and are sold through a distribution network of over 4,400 dealers, major retailers and builders.

MasterBrand was previously part of Fortune Brands Home & Security (which had spun out of Fortune Brands in 2011). In 2022, Fortune Brands Home & Security separated into two publicly traded companies: MasterBrands and Fortune Brands Innovations. Today, MasterBrand is led by CEO Dave Banyard and had revenues in 2023 of more than $2.7 billion and more than 12,000 employees located in 20 manufacturing facilities and offices.

Greenwich, Connecticut-based GHK invests in companies with $15 million to $40 million of EBITDA that are active in the manufacturing, building products and services, business services, distribution and logistics, packaging, and general industrial sectors.

Jefferies and Harris Williams are the financial advisors to Supreme Cabinet, and Rothschild & Co is advising MasterBrand.

The closing of this acquisition is expected to be completed during the third quarter of 2024.

© 2024 Private Equity Professional | May 23, 2024

American Securities Exits Acuren via Admiral SPAC

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American Securities has agreed to sell Acuren, a provider of nondestructive testing services, to Admiral Acquisition Limited at an enterprise valuation of $1.85 billion.

Acuren is a provider of conventional, advanced, and tech-enabled nondestructive testing (NDT) services – including examination, inspection, engineering, rope access, and monitoring services – to companies operating in the refinery, chemical, pipeline, power generation, aerospace, automotive, and pharmaceutical sectors.

Source: Acuren

Acuren was founded in 1974 and is headquartered northwest of Houston in Tomball, Texas. The company has 135 locations and more than 5,500 employees throughout the United States, Canada, and the United Kingdom.

American Securities acquired Acuren in December 2019 and during its ownership term closed 12 add-on acquisitions which expanded the company’s services and geographic footprint. Most recently, in April 2024, Acuren acquired Advance Coating Solutions, an Edmonton, Alberta-based provider of industrial sand blasting, Laser ablation, and coatings services to companies operating in the mining, refining, and processing, storage, and pipeline sectors.

“We have had a phenomenal partnership with American Securities and their support has enabled Acuren to further its leading brand within inspection services,” said Talman Pizzey, the CEO of Acuren. “We are at an important and exciting inflection point of the company, and we are excited at the opportunity to continue growing our market leading position with our new partners.”

“As first-time institutional owners of Acuren, it has been important to us to build on the success of founder Peter Scannell and support Acuren’s continued long-term growth,” said Michael Fisch, the founder and CEO of American Securities. “We are incredibly proud to have achieved that goal.”

“Acuren’s growth is a testament to the resilience and tireless efforts of Acuren’s employees, from CEO Tal Pizzey to the company’s more than 5,000 technicians,” said Michael Sand, a managing director at American Securities. “We are proud to have been able to support Acuren’s profitable growth through the pandemic and recent inflationary period, all while maintaining the company’s world-class culture of safety, quality and professionalism.”

American Securities invests in businesses with $200 million to $2 billion of revenue and $50 million to $250 million of EBITDA. Sectors of interest include industrial manufacturing, specialty chemicals, aerospace and defense, energy, business services, healthcare, media, restaurants, and consumer products. The firm has more than $26 billion of capital under management and has offices in New York City and Shanghai.

Source: Acuren

Admiral Acquisition Limited (LSE: ADMR) is a special purpose acquisition vehicle formed in May 2023 to undertake an acquisition of a target company or business.

Baird and Harris Williams were the financial advisors to Acuren and American Securities.

This transaction is expected to close early in the third quarter of 2024.

© 2024 Private Equity Professional | May 23, 2024

Goldman Pro Forms Invidia Capital to Invest in Healthcare Sector

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Former Goldman Sachs partner Jo Natauri has launched Invidia Capital Management in New York City to invest in upper-middle market healthcare companies. In tandem with the launch, Invidia has received an investment from GCM Grosvenor.

Ms. Natauri has more than 25 years of healthcare investing, operating, and investment banking experience. She joined Goldman Sachs as a vice president in 2006, was promoted to managing director in 2008, and was made a partner in 2012. Most recently, Ms. Natauri was the firm’s global head of private healthcare investing, a member of its Corporate Investment Committee, Sustainable Investing Investment Committee, and Life Sciences Investing Committee. Ms. Natauri earned her undergraduate degree in economics and biology from the University of Virginia.

From left: Alice Kennon, Vince Cuticello, Jo Natauri, Jason Dunn, and Kieran Storch. Photo credit: Dennis Kwan

Joining Ms. Natuari at Invidia is Vince Cuticello as the firm’s chief administrative officer and chief compliance officer, Alice Kennon as head of operations and capital formation, Vice President Jason Dunn, Associate Kieran Storch, and Associate Thomas Ryan.

“We are thrilled to unveil Invidia and our vision to build a differentiated healthcare investment platform that will offer comprehensive and thoughtful solutions to founders and management teams as they endeavor to grow their businesses and best serve their stakeholders,” said Ms. Natauri. “As the healthcare industry becomes increasingly complex, we believe we are well-positioned by virtue of our expertise, networks, and experience of investing in the sector to deliver unique value to our CEO partners and investors.”

“Jo has been such an important leader in growing Goldman’s healthcare franchise in the private equity group and that’s a testament to her passion for the sector,” said David Solomon, CEO of Goldman Sachs. “I’m excited to see her new journey with Invidia. She’s well-positioned to lead next-generation healthcare investing and to have an impact on the direction of healthcare. We wish her the best and look forward to continuing to work with her as the business grows.”

GCM Grosvenor’s investment in Invidia was made through its Elevate strategy which was launched in 2023 to invest in and provide operational, legal, and compliance support to small, emerging, and diverse private equity firm founders. The Elevate strategy is led by Elizabeth Browne and Kevin Nickelberry and is backed by a $500 million commitment from CalPERS.

“Jo and her partners are emblematic of the quality, integrity, and depth of expertise we seek when establishing strategic partnerships,” said Ms. Browne. “We are confident that Invidia is building something special in the healthcare sector and are humbled to have the opportunity to be a part of their story.”

GCM Grosvenor (NASDAQ: GCMG) is a Chicago-headquartered alternative asset management firm with more than $79 billion in assets under management. The firm invests in private equity, infrastructure, real estate, credit, and other specialty strategies. GCM Grosvenor was a portfolio company of Hellman & Friedman from 2007 to 2020 before going public in 2020. GCM Grosvenor has additional offices in New York, Toronto, London, Frankfurt, Tokyo, Hong Kong, Seoul, and Sydney.

“Jo’s career experience, domain expertise, and network have uniquely prepared her to build and lead a world-class healthcare investment firm successfully,” said Mr. Nickelberry. “We are excited to partner with her and the Invidia team to support their vision.”

“We are fortunate to have GCM Grosvenor as a strategic partner at launch, given their track record of success in identifying and supporting world-class investment talent, and we are committed to making Invidia a leading force in healthcare innovation,” concluded Ms. Natuari.

As of March 2024, GCM Grosvenor had approximately $20 billion of assets under management (AUM) invested with small and emerging managers and $16 billion of AUM with diverse managers.

© 2024 Private Equity Professional | May 23, 2024

Quantic Continues Acquisition Spree

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Quantic Electronics, a portfolio company of Arcline Investment Management, has acquired M-Wave Design.

M-Wave is a supplier of ferrite-based radio frequency (RF) and microwave components used in aerospace, defense, and quantum computing applications. In electronics, ferrite refers to ceramic-like magnetic materials made from iron oxides mixed with other metal oxides including manganese, zinc, and nickel.

Source: M-Wave

M-Wave’s products include passive waveguide and coaxial components such as isolators, circulators, adapters, and terminations. Its passive waveguide components are used to guide microwaves or radio waves through a specific path without adding energy to them, while its coaxial components are used to manage electrical signals that travel through coaxial cables, a type of cable with a center wire, an insulating layer around it, and an outer metal shield. Many of M-Wave’s products can perform at cryogenic temperatures used in quantum computing applications.

M-Wave, led by CEO Ken Boswell, was founded in 1988 and is headquartered near Los Angeles in Simi Vally, California. “We have proudly served the RF and microwave industry for almost forty years,” said Mr. Boswell. “As part of Quantic, we are excited to further advance our product, technology, and growth goals to better support our customers.”

Source: M-Wave

Arcline formed Quantic in January 2021 as a platform to consolidate its investments in the electronics components sector and now, including M-Wave, has acquired nine companies.

The eight earlier buys were Evans Capacitor, a Rhode Island-based designer and manufacturer of capacitors made from corrosion-resistant metals tantalum and ruthenium (November 2020); Ohmega Technologies, a California-based maker of thin-film electronic resistive materials (January 2021); TRM Microwave, a New Hampshire-based maker of RF and microwave components used in the military, space and commercial markets (January 2021); BEI Precision, a maker of sensors used in space, land, air, and sea applications (August 2021); X-Microwave, a Texas-based provider of modular RF and microwave (RFMW) components (September 2021); ECI Transcon, a Massachusetts-based maker of passive magnetic components used in aerospace, automotive, avionics, and other applications (September 2021); Microwave Dynamics, a California-based maker of microwave and millimeter wave components (June 2022); and Eulex Components, a California-based maker of ceramic capacitor components used in high-frequency, microwave, millimeterwave and 5G applications (June 2022).

“We are delighted to add M-Wave to the Quantic portfolio of businesses,” said Ross Sealfon, the chief executive officer of Quantic. “The M-Wave product portfolio perfectly complements our current product line up. Additionally, M-Wave’s deep expertise in quantum computing and long history supporting military and space programs further enhances our ability to solve our customers’ difficult design challenges.”

Arcline makes control investments in companies with recurring revenue business models in the defense and aerospace; infrastructure services; industrial and medical technology; life sciences and specialty materials sectors. Arcline’s targets will typically have from $10 million to $100 million of EBITDA and enterprise values up to $1 billion. The firm closed its third fund in March 2023 with total capital commitments of $4.5 billion. Arcline’s earlier fund closed in January 2021 with $2.75 billion of capital commitments.

Arcline is headquartered in Nashville with additional offices in San Francisco and New York City.

© 2024 Private Equity Professional | May 21, 2024

Specialty Investor Avathon Forms CPE Platform

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Avathon Capital, an education and workforce sector focused private equity firm, has acquired Summit Professional Education.

Summit is a provider of more than 1,500 in-person and online continuing and professional education courses for physical therapists and assistants, occupational therapists and assistants, and speech language pathologists. Since its founding in 2004, Summit has educated over 400,000 health care professionals.

Source: Summit Professional Education

According to Avathon, the $4.7 billion healthcare continuing professional education (CPE) sector is large and economically durable driven by licensure mandates and ongoing training requirements needed to maintain one’s license. The market of providers of CPE is highly fragmented and its participants are often under-resourced, which provides compelling opportunities for consolidation.

“Our acquisition of Summit was driven by a meticulous research-first and executive-first strategy that identified Summit as a high-potential platform aligned with our investment criteria,” said Brian Schwartz, a managing director at Avathon. “This approach, combined with our deep understanding of the market’s nuances developed through our executive engagements, ensured a well-prepared and timely execution of this investment.”

“Summit’s established market position and scalable business model make it an ideal platform to advance our presence in the professional education sector,” said Nishaad Balachandran, a principal at Avathon. “Our strategic investment underscores our commitment to fostering growth and enhancing educational outcomes across the healthcare industry.”

Post-closing, Avathon will assist Summit with building its go-to-market strategy, organically expand its course library, and has already begun pursuing several add-on acquisitions in the healthcare and financial services sectors.

Avathon Capital, led by managing partners Shoshana Vernick and Jason Rosenberg, makes control or minority equity investments of $10 million to $50 million in education and workforce-focused companies. Avathon is part of Chicago-based Sterling Partners which makes control, non-control, and preferred equity investments in a variety of companies in various stages of growth from early-stage, high-growth businesses to mature, profitable companies.

Sterling’s education and workforce investment strategy was launched in 2015 through its Education Opportunity Fund and was formalized in 2019 with the launch of Avathon Capital. The acquisition of Summit is Avathon’s fourteenth platform investment.

Monroe Capital (NASDAQ: MRCC) backed Avathon’s buy of Summit both as the sole lead arranger and administrative agent on a senior credit facility, and as an equity co-investor. Monroe Capital provides senior and junior debt financing to middle-market businesses, special situation borrowers, and private equity sponsors. Investment types include unitranche financings; cash flow, asset-based, and enterprise value-based loans; and equity co-investments. The firm was founded in 2004 and is headquartered in Chicago with 10 additional offices throughout the United States and Asia.

Houlihan Lokey was the financial advisor to Summit on this transaction.

© 2024 Private Equity Professional | May 21, 2024

Bain Builds Dessert Platform with Kenny’s Buy

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Dessert Holdings, a portfolio company of Bain Capital Private Equity, has added on with the buy of Kenny’s Great Pies from Kaho Partners.

Kenny’s Great Pies is a manufacturer of branded and private label pies and pie fillings sold through grocery stores, distributors, chain restaurants, and convenience stores. The company’s products come in a variety of flavors including key lime, lemon, mango, coconut cream, peanut butter, and chocolate silk.

Source: Dessert Holdings

Kenny’s Great Pies, led by CEO Gary Muter, makes and sells more than 2.5 million pies per year that are sold nationally and internationally in more than 6,000 stores. The company was founded in 1989 by Kenny Burts and operates a state of the art, purpose-built facility with newly installed automated mixing and filling lines, located northwest of Atlanta in Smyrna, Georgia.

Kaho Partners acquired Kenny’s Great Pies from Mr. Burts in April 2020. Under Kaho ownership, the company tripled revenue and quadrupled EBITDA.

“We are very fortunate to have partnered with Gary Muter and the entire Kenny’s team. Together, we dramatically grew the company and significantly professionalized its operations, all while improving product quality, on time delivery, and safety,” said Griffin Horter, the chairman of Kenny’s and a co-founder of Kaho. “We thank the Kenny’s team for their hard work and dedication to continuous improvement, which resulted in a fantastic outcome for everyone involved. We look forward to watching Kenny’s continue to thrive in its new partnership with Dessert Holdings.”

“Kenny’s achieved great things during our partnership with Kaho Partners,” said Mr. Muter. “We transformed the business by implementing a continuous improvement mindset rooted in the principles of Kaizen, instilling a culture of rigorous metric-based management, and professionalizing our operations – all of which paved the way for remarkable growth. As we embark on our next chapter, we are excited and confident that our partnership with Dessert Holdings will propel the company to even greater heights.”

Source: Dessert Holdings

Dessert Holdings was formed by Gryphon Investors in 2015 as a platform for its investments in British Columbia-based The Original Cakerie, a maker of frozen desserts, which was acquired in December 2015; Texas-based Lawler’s Desserts, a maker of cheesecakes, cakes and pies, which was acquired in July 2016; and Georgia-based Atlanta Cheesecake Company which was acquired in December 2017.

In June 2021, Gryphon sold Dessert Holdings to Bain Capital and under its ownership has added-on twice with the buys of Colorado-based Steven Charles, a maker of layer cakes, cheesecakes, and pies, in January 2022; and Massachusetts-based Dianne’s Fine Desserts, a maker of cheesecakes, layer cakes, specialty pies and tarts, in October 2022.

Today, St. Paul, Minnesota-headquartered Dessert Holdings goes to market under six premium dessert brands: Steven Charles, The Original Cakerie, Lawler’s Desserts, Atlanta Cheesecake Company, Dianne’s Fine Desserts, and now, Kenny’s Great Pies. The company’s products are sold to more than 250 customers in the United States, Canada, Mexico, the Caribbean, South America, and Asia.

“Kenny’s clean label, flavorful pies are complementary to our portfolio of premium desserts,” said Paul Lapadat, the chief executive officer of Dessert Holdings. “Kenny’s has established a distinctive market position, fostering a number of long-standing relationships with leading foodservice and retail operators, and major clubs in North America, earning a loyal consumer following. Dessert Holdings is excited to supplement these relationships and expand the company’s distribution network.”

“Since our initial investment in Dessert Holdings, the business has grown tremendously,” said Adam Nebesar, a partner at Bain Capital. “We are very pleased with the Desserts Holdings performance to date and look forward to partnering with Gary and the Kenny’s team to support their growth ambitions.”

Bain Capital Private Equity was founded in 1984 and invests in the consumer and retail; financial and business services; healthcare; industrials; and technology, media, and telecommunications sectors. The firm has a team of approximately 250 investment professionals with 23 offices on four continents including offices in Boston, Chicago, New York, San Francisco, Dublin, London, Munich, Melbourne, Mumbai, Hong Kong, Shanghai, Sydney, and Tokyo.

Kaho Partners specializes in acquiring family and founder-run businesses with greater than $2 million in EBITDA. The firm has an extended investment horizon and is backed by long-term investors who invest in businesses with the intention of holding them forever. Kaho Partners was founded by Max Katzenstein and Griffin Horter and is based in New York City.

Integris Partners was the financial advisor to Kenny’s Great Pies on this transaction.

© 2024 Private Equity Professional | May 21, 2024

Eric Korsten Rejoins the Team at Branford Castle

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Branford Castle Partners has announced that Eric Korsten is rejoining the firm as a senior managing director and investment committee member.

Mr. Korsten has been active in private equity for nearly 20 years and has experience identifying, investing in, advising and growing middle-market companies. Mr. Korsten joined Branford Castle in September 2011 and left to join Soundcore Capital as a partner in March 2022. He left Soundcore in March 2023 and joined Argand Partners as a managing director.

“Eric is a proven leader in private equity, and we are delighted that he has returned to Branford,” said John Castle, the president and CEO of Branford Castle. “We welcome Eric back with open arms and look forward to working closely with him.”

When asked for the reason for his return to Branford Castle, Mr. Korsten said, “I like the people whom I have known for decades. I like the work environment, which is always warm, welcoming, and focused on outstanding investment performance. And, most of all, I have long admired and respected the firm’s high standards of professional excellence. In short, I’m very happy to be home again.”

Branford Castle invests in companies that have enterprise values of up to $100 million and EBITDA of less than $15 million. Sectors of interest include industrials and specialty manufacturing, consumer products and services, commercial distribution, business services, and logistics.

The firm was founded in 1986 and for the past 16 years has been led by President and CEO John S. Castle and Managing Partner David Castle. In addition to its New York City headquarters, the firm also has an office in Boca Raton, Florida.

© 2024 Private Equity Professional | May 21, 2024

One Sweet Deal! Shore’s Sweetmore Buys Sweet Eddie’s

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Sweetmore Bakeries, a portfolio company of Shore Capital, has acquired Sweet Eddie’s, a wholesale manufacturer of cinnamon rolls and other baked goods.

Sweetmore Bakeries was launched by Shore through the September 2019 acquisition of Main Street Gourmet (MSG), an Akron-based wholesale bakery with a 68,000 sq. ft. manufacturing facility and 160 employees located near Akron in Cuyahoga Falls, Ohio.

Following the buy of MSG, Sweetmore closed two add-ons with the 2020 acquisition of Pennsylvania-based Biscotti Brothers with a 60,000 square foot manufacturing facility and 60 employees; and the 2021 buy of Wisconsin-based Meurer Brothers Bakery with a 20,000 square foot manufacturing facility and 50 employees.

Today, Sweetmore provides private label, branded, custom, and stock products to the retail in-store bakery and national restaurant channels, including cookies, muffins, biscotti, Danish, brownies, granola, and icings. The company is headquartered near Chicago in Park Ridge, Illinois, and has more than 300 employees and three operating facilities in Ohio, Pennsylvania, and Wisconsin with a total of 148,000 square feet of manufacturing space.

Sweet Eddie’s is an SQF-certified wholesale bakery specializing in branded, private label, and co-packed cinnamon rolls, almond brioche, and other yeast-raised sweet goods including cookies, cakes, and pastries. The company’s products are sold to retail chains across the United States.

Source: Sweet Eddie’s

Sweet Eddie’s was founded in 1998 by President Ed Allen and operates a 36,000 square foot production facility located near Atlanta in Smyrna, Georgia. The acquisition of Sweet Eddie’s will add additional baked goods to Sweetmore’s product line and provide additional manufacturing capacity.

Shore Capital invests in lower middle-market healthcare, food and beverage, business services, industrial and real estate-related companies that have $5 million to $100 million of revenue and $1 million to $10 million of EBITDA.

In April 2019, Shore closed its third healthcare-focused fund, Shore Capital Healthcare Partners Fund III LP, with $293 million of capital, and its inaugural food and beverage fund, Shore Capital Food & Beverage Partners Fund I LP, with $148 million of capital.

Shore Capital is headquartered in Chicago with an additional office in Nashville.

© 2024 Private Equity Professional | May 16, 2024

Silver Oak Launches New Commercial Landscaping Platform

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Silver Oak Services Partners has acquired Beary Landscaping in partnership with the company’s founder and senior management team.

Beary is a provider of landscaping and snow removal services to a range of commercial end markets, including utilities, multi-family living communities, office buildings, and municipalities. The company serves more than 1,200 customers across Illinois, Indiana, Pennsylvania, Michigan, and Wisconsin.

Source: Beary Landscaping

Beary was founded by CEO Brian Beary in 1985 and is headquartered 35 miles southwest of Chicago in Lockport, Illinois. The existing management team of Beary will continue in their current roles with Mr. Beary retaining a significant ownership stake in the business.

“For more than 35 years, Beary has served as a trusted partner to our customers, maintaining best-in-class landscapes that enrich the environment,” said Mr. Beary. “We are excited about our partnership with Silver Oak, which provides us with additional capital and expertise needed to significantly grow the company, while continuing to provide high-quality service to our customers.”

Source: Beary Landscaping

Silver Oak’s interest in Beary Landscaping is part of the firm’s broader investment strategy in the facilities services sector that is characterized by recurring revenue, low cyclicality, and high fragmentation.

“We are very excited to partner with Brian and the Beary team,” said Andrew Gustafson, a partner at Silver Oak. “We believe the company is a strong platform from which to grow due to its excellent reputation, tenured employee base, service-oriented culture, and experienced management team. We look forward to leveraging the company’s strengths while further investing in people, infrastructure and sales as Beary continues to grow in new and existing markets.”

In addition to Mr. Gustafson, the Silver Oak transaction team included Managing Partner Greg Barr and Vice President Biren Bhansali. The firm is actively seeking add-on acquisition opportunities for Beary Landscaping.

Silver Oak makes control investments in companies with revenues from $15 million to $150 million and EBITDAs from $4 million to $25 million. As the firm’s name implies, sectors of interest include business, healthcare, and consumer services. In August 2019, Silver Oak closed its fourth fund, Silver Oak Services Partners Fund IV LP, at its hard cap of $500 million. The firm’s third fund closed in March 2016 at its $335 million hard cap. Silver Oak was founded in 2005 and is based in the Chicago suburb of Evanston.

Silver Oak’s acquisition of Beary Landscaping closed in December 2023

© 2024 Private Equity Professional | May 16, 2024