Pacific Avenue Capital Partners has acquired the North American Flooring Business of H.B. Fuller Company for $80 million. The acquired business will now operate as TEC Specialty Products, a provider of flooring repair and installation products.
TEC Specialty Products manufactures adhesives, grouts, mortars, and specialty surface preparation solutions for both commercial and residential applications. The company owns several brands, including TEC, Parabond, Fortane, and ProSpec, which are distributed through retail and distributor networks across the United States and Canada.
Headquartered near Chicago in Aurora, Illinois, TEC operates six manufacturing facilities and three warehouses across the United States and is led by CEO Mike Leuschner.
“The team at TEC Specialty Products is very excited to partner with Pacific Avenue,” said Mr. Leuschner. “For over 65 years, TEC has been synonymous with innovation, quality, and exceptional support for our customers’ flooring installation needs—a legacy that will persist. This collaboration opens new doors to improve service for our customers, empower our team, and fuel growth for TEC and our industry overall. I look forward to working alongside the Pacific Avenue team as we build toward our shared vision for the future.”
The global flooring adhesives market is projected to grow at a compound annual growth rate (CAGR) of 4.2% through 2028, driven by increased construction activity and advancements in adhesive technologies. Industry reports estimate the market will reach $6.5 billion by the end of the decade.
“We are thrilled to announce the TEC Specialty Products investment,” said Chris Sznewajs, the founder and managing partner of Pacific Avenue. “We have strong conviction in the company’s ability to consistently deliver innovative, high-performance flooring solutions to its customers. We look forward to investing the necessary resources and collaborating with the management team to support TEC’s continued growth and success in this industry.”
According to H.B. Fuller, the sale of its flooring business will reduce the company’s annual revenue by $160 million and adjusted EBITDA by $15 million. Based on the $80 million purchase price, this reflects a 5.3x EBITDA valuation multiple.
H.B. Fuller’s sale of its flooring business aligns with the company’s strategy to consolidate its building and construction segments into a newly formed insulated glass and composite adhesives unit named Building Adhesive Solutions (BAS). BAS is projected to generate revenues of $850 million for the full year 2024.
“This move is consistent with our strategy to drive our portfolio and capital allocation to the highest margin, fastest-growing segments of the $80 billion global adhesives industry,” said Celeste Mastin, the president and CEO of H.B. Fuller. “With Pacific Avenue, we have found the right home for our talented flooring team and brand-recognized products.”
Pacific Avenue Capital Partners specializes in middle-market corporate divestitures, carve-outs, and other complex transactions. The firm targets North American-focused companies with up to $1 billion in revenue and up to $50 million in EBITDA. As a control investor, Pacific Avenue acquires both performing and underperforming businesses across various industries, making the firm effectively industry agnostic.
In May 2023, Pacific Avenue held a final, oversubscribed close of its first fund, Pacific Avenue Fund I LP, at its hard cap of $500 million in capital commitments. The fund was backed by a range of investors, including insurance companies, consultants, endowments, foundations, funds of funds, family offices, and individuals. Today, Pacific Avenue manages over $1.2 billion in assets.
© 2024 Private Equity Professional | December 10, 2024
