New State Capital Partners has acquired KMS, one of the nation’s largest wholesalers of consumer product closeouts.
KMS is a wholesale distributor of closeout, overstock, and factory refurbished merchandise, including clothing, hardware, housewares, and small appliances. KMS’ services allow brand name manufacturers to monetize overstocked products and other non-standard inventory without disrupting traditional sales channels.
Wichita-based KMS, founded in 1976, distributes its products through both leased and third-party operated distribution centers throughout the US.
Members of the KMS management team, including CEO Tom George, will remain with the company and have retained a minority equity interest in the business. “New State will be an invaluable partner as we seek to expand on what we do well,” said Mr. George. “We plan to leverage New State’s resources to help KMS build out our logistics, sales and purchasing teams and capabilities, and to invest in technology that will enhance our market-leading competitive position.”
“We are excited to announce our partnership with KMS,” said Kurt Lentz, a principal at New State. “Consumers are increasingly hunting for bargains within the off-price retail channel, and we see those habits firming and accelerating regardless of underlying economic factors. KMS can build on its broad array of longstanding relationships in product sourcing and wholesale channel delivery, and we also see great potential for growth within the company’s direct-to-consumer business.”
Backcast Partners provided senior secured debt and made an equity co-investment to support the buy of KMS by New State.
“KMS has a leading market position in a highly fragmented industry, is a valuable supply chain partner to both manufacturers and retailers, is generally focused on recession resilient products, and possesses a highly capable senior management team,” said Mark Gudis, a managing partner at Backcast. “We are thrilled to once again support New State, whom we view as an ideal owner for KMS due to their well-deserved reputation for building scale by aligning interests with their management partners, utilizing technology to create efficiencies and developing additional sales channels to drive growth.”
Backcast invests from $10 million to $100 million in companies with EBITDA of $10 million to $50 million that operate in a wide range of industries. Typical investments include senior and junior secured and unsecured debt, unitranche facilities, mezzanine debt, preferred equity, and common equity co-investments. Backcast has offices in New York City; Millburn, New Jersey; and Los Angeles, California and has a strategic relationship with Centre Partners which provides administrative and other resources.
New State invests from $10 million to $50 million of equity in companies with $8 million to $30 million of EBITDA that are active in the business services, healthcare services and industrial sectors. New State closed its second fund, New State Capital Partners II LP, in 2018 with $255 million in capital. The firm was founded in 2013 and is headquartered in Larchmont, New York.
© 2020 Private Equity Professional | December 10, 2020
