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Arbor Continues Bakery Build Up

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The Bakery Companies, a portfolio company of Arbor Investments, has acquired the Smyrna, Georgia facility of Specialty Bakers.

The Bakery Companies (TBC) manufactures fresh and frozen breads, baked goods and dough products for foodservice, food manufacturing and retail customers in both the United States and the Caribbean. The company operates sixteen baking lines at six facilities, with more than 500 employees, and produces over six million baked goods daily including buns, English muffins, rolls, biscuits, frozen dough, artisan breads, and pastries.

TBC was founded in 1996 by Cordia and Tom Harrington and is headquartered in Nashville. Arbor acquired TBC in partnership with CEO Cordia Harrington in September 2019.

The acquired Smyrna facility is located less than 20 miles from TBC’s existing operations in Norcross, Georgia (acquired by TBC in 2016 through the buy of Masada Bakery) and produces and distributes laminated dough items including croissants and Danish, as well as sweet baked goods – brownie bites and tea cakes – for in-store bakeries at grocery retailers.

“We are thrilled to be welcoming the team of associates in Smyrna to our Bakery Companies family,” said Ms. Harrington. “Their product and customer portfolio complements our existing business and will enable us to offer a broader range of unique, high-quality baked goods across both sweet and savory categories.  Bringing differentiated products that meet both the changing tastes of consumers and the evolving needs of our customers is critical, and Smyrna addresses both.”

Specialty Bakers, a producer of Ladyfingers and other baked goods, is headquartered in Marysville, Pennsylvania and has been a portfolio company of White Plains-based Stonebridge Partners since 2010.

“Smyrna adds a sixth facility to our platform, brings exciting new manufacturing capabilities and is a highly attractive fit in terms of geographic location and proximity,” said Chris Tuffin, a partner at Arbor. “This is our second acquisition for TBC in just two months, we are exceptionally pleased to further grow and will continue to seek opportunities to add complementary businesses to our expanding group of passionate bakers.”

In March 2020, TBC acquired Steck Wholesale Foods, a South Dakota-based baker and distributor of English muffins and buttermilk biscuits to foodservice, self-distributing retailers, and wholesale distributors nationwide.

Arbor invests in the food, beverage, and related industries. Typical targets will have annual revenues of up to $300 million and EBITDA from $5 million to $50 million. Since founding in 1999, the firm has acquired or invested in over 80 North America-based food, beverage, and related companies. In July 2016, Arbor closed its fourth equity fund, Arbor Investments IV LP, with $765 million of capital and its first subordinated debt fund, Arbor Debt Opportunities Fund I LP, with $125 million of capital. Arbor is headquartered in Chicago with an additional office in New York.

Private Equity Professional | May 22, 2020

Eberhart Buys Another Equipment Rental Biz

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Eberhart Capital has acquired The Equipment Source, a tool and equipment rental company serving both contractors and consumers.

Eberhart Capital has prior experience in the equipment rental sector through the acquisition of Contractor Sales & Service (CSS) in July 2014.

CSS rents and offers for sale single man lifts, scissor lifts, boom lifts, forklifts and other industrial construction equipment to contractors. The company was co-founded in 2006 and is headquartered in Des Moines with an additional location in Omaha, Nebraska.

“In the best and worst of times, The Equipment Source has been a reliable partner to help their customers run a smooth worksite,” said Dan Eberhart, founder and managing director of Eberhart Capital. “Today, when reliability is needed more than ever, The Equipment Source is reinforcing everything that they’ve stood for. This acquisition gives us another incredible team focused on helping America rebuild.”

Scottsdale, Arizona-based Eberhart Capital invests in companies that are active in the construction, real estate development, transportation and logistics, manufacturing, and oil and gas sectors.

Naples, Florida-based Equipment Source was founded in 1999 by Billy Martinez.

Private Equity Professional | May 14, 2020

CD&R to Buy to Radio Systems

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Clayton, Dubilier & Rice has agreed to acquire Radio Systems Corporation, a maker and retailer of pet supplies and accessories.

Radio Systems designs and manufactures more than 2,000 pet products under such brand names as Invisible Fence, PetSafe, and SportDOG. The company’s products include pet training and containment systems, food and water dispensers, and bedding for both dogs and cats.

Radio Systems’ products are widely distributed across numerous channels including e-commerce, bricks & mortar retail, and the company’s own direct-to-consumer portal. Radio Systems holds the #1 market position by sales in many of the pet categories it serves. The company, with more than 800 employees, was founded in 1991 by Chairman Randy Boyd and is headquartered in Knoxville, Tennessee.

Post-closing, Mr. Boyd will continue to be active with the company as a member of its board of directors. “With the backing of CD&R and the talented team at Radio Systems, I’m confident the company will continue to deliver the best solutions and services available to its customers,” said Mr. Boyd. “I’m excited for Radio System’s future growth and the success and benefits it will bring to our employees, pet owners, and our local economy.” In March 2020, Mr. Boyd, a 2018 candidate for the governorship of Tennessee, was named the next president of the University of Tennessee. He had been serving as the university’s interim president since November 2018.

“The market for pet care is large and growing with attractive long-term secular tailwinds and demonstrated recession-resilience. We believe Radio Systems’ business model and channels align well with our experience with similarly positioned consumer companies,” said Kenneth Giuriceo, a partner at CD&R. “We look forward to supporting the company’s continued innovation and exciting growth plans.”

At closing, which expected in June 2020, John Compton, a CD&R operating partner, will become the chairman of Radio System’s board of directors. Mr. Compton is the former president of PepsiCo and serves as chairman of three other CD&R portfolio companies including American Greetings, Drive DeVilbiss Healthcare, and TruGreen.

“Radio Systems is a differentiated market leader with a talented management team, dedicated, hard-working employees, a product portfolio that pet owners truly value, and a three-decade track record of product-driven innovation and strong overall results,” said Mr. Compton. “We believe Radio Systems is a great fit with CD&R’s experience helping businesses prosper over the long term.”

New York and London-based CD&R invests in European and US-based businesses. Since founding in 1978, the firm has invested $30 billion in 90 companies across a range of industries including numerous consumer health and medical device businesses.

UBS Investment Bank, BMO Capital Markets, BNP Paribas Securities, and Fifth Third are serving as financial advisors to CD&R.

Private Equity Professional | May 13, 2020

CenterOak Forms SurfacePrep

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CenterOak Partners has formed SurfacePrep as a new platform to combine its investments in GNAP and 10 add-on acquisitions completed over the past 18 months. CenterOak acquired GNAP, a specialty distributor of industrial products, from Frontenac in November 2018.

GNAP is a national distributor of industrial abrasive products, equipment, specialty ceramics and provides ancillary services to more than 5,000 companies – from local industrial end-users to Fortune 500 manufacturing companies – that are active in investment casting, metal stamping, machining, forging, remediation, coating and paving. The company was formed in 2005 through a merger between Grand Northern Products and Abrasive Products and is headquartered near Grand Rapids in Byron Center, Michigan.

Included in the 10 add-on acquisitions is today’s buy of Sacramento, California-based Temple Associates (DBA The Grit Guy), a distributor of loose abrasives and blast equipment.

With its formation, the SurfacePrep network now includes 36 distribution branches, process development labs and production finishing centers located in major manufacturing hubs across the United States and Canada.

“Since partnering with CenterOak 18 months ago, SurfacePrep has been actively expanding to better serve its customers in key manufacturing regions throughout North America,” said Jason Sutherland, a partner with CenterOak. “Through organic growth and strategic acquisitions, SurfacePrep has doubled EBITDA and significantly expanded its distribution footprint to become the leading distributor of specialty abrasives, ceramics, and surface enhancement equipment in North America.”

Dallas-headquartered CenterOak makes equity investments of $20 million to $90 million in companies with enterprise values of $50 million to $250 million. Sectors of interest include industrial manufacturing and distribution, business services, and consumer products and services.

“The formation of SurfacePrep is an important milestone in building the market-leading provider of surface enhancement solutions in North America,” said Mike Currie, CEO of SurfacePrep. “Our recent acquisition efforts enable us to offer significant industry expertise, geographic reach and technical capabilities to our customers and our global supply chain partners.”

CenterOak continues to seek add-on acquisitions of companies that distribute industrial abrasives or specialty ceramics or provide finishing services to aerospace or medical device manufacturers.

Private Equity Professional | May 12, 2020

Lindsay Goldberg Expands EMS Platform

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Creation Technologies, a portfolio company of Lindsay Goldberg, has acquired Applied Technical Services (ATS).

ATS is a provider of electronic manufacturing services (EMS) including design, printed circuit board assembly (PCBA), cabinet assembly, system integration, and testing. The Everett, Washington-based company was founded in 1984 and has about 500 employees with additional facilities in Totem Lake, Washington and Hermosillo, Mexico. ATS is owned and led by its CEO George Hamilton.

This add-on acquisition expands Creation’s capabilities in the aerospace & defense, medical, and tech industrial markets. It also adds locations in Washington State and Mexico that each offer three automated state-of-the-art surface-mount technology (SMT) lines as well as automated through-hole, in-circuit testing (ICT), flying probe testing, and functional test capabilities.

Creation Technologies is a provider of electronic manufacturing services including design, rapid prototyping, manufacturing, testing and fulfillment services to original equipment manufacturers in the aerospace and defense, medical, and technology industrial markets. The company, led by CEO Stephen DeFalco and headquartered near Vancouver in Burnaby, British Columbia, has approximately 2,700 employees and operates eight manufacturing locations, two design centers, and a rapid prototyping center located in the US, Canada, Mexico and China.

“We are investing to broaden our capabilities and reach with the addition of the ATS team, who share our values of providing exceptional customer service and outstanding quality,” said Mr. DeFalco. “We are delighted to welcome ATS’ talented employees and loyal customers to our Global team.”

Lindsay Goldberg manages $13 billion of equity capital and is focused on partnering with family-owned and entrepreneur‐led businesses seeking a partner to help actively build their businesses. The firm is based in New York City.

Lindsay Goldberg acquired Creation Technologies in July 2019 from Birch Hill Equity Partners.

Private Equity Professional | May 12, 2020

Norwegian Cruise Lines Builds Liquidity with L Catterton

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L Catterton has provided $400 million in exchangeable notes to NCL Corporation (NCLC), a subsidiary of publicly traded Norwegian Cruise Lines (NCL).

Norwegian Cruise Lines (NYSE: NCLH) is a global cruise company which operates the Norwegian Cruise Line, Oceania Cruises and Regent Seven Seas Cruises brands. The company’s cruise itineraries range from a few days to 180-days calling on various locations, including destinations in Scandinavia, Russia, the Mediterranean, the Greek Isles, Alaska, Canada and New England, India and the rest of Asia, Tahiti and the South Pacific, Australia and New Zealand, Africa, South America, the Panama Canal, and the Caribbean. Norwegian Cruise Lines was founded in 1966 and is headquartered in Miami.

In addition to the new funds from L Catterton, NCL announced this morning that it has raised an additional $1.8 billion of capital comprised of $400 million in new equity and $1.4 billion in new bonds. NCL now has more than $3.5 billion of liquidity, which is enough for it to last for more than 12 months of voyage suspensions.

Norwegian Cruise Lines is the smallest of the big three cruise operators – behind Carnival Cruise Lines and Royal Caribbean Cruises – and suspended its operations in mid-March due to the COVID-19 pandemic. The Centers for Disease Control and Prevention last month extended its No Sail Order until July 24. Many cruise companies are now considering resuming North American cruises on a limited basis beginning August 1.

“The cruise industry has been very resilient over a long period of time, driven by strong secular tailwinds and a high level of guest satisfaction. People enjoy cruising, with many guests taking multiple voyages over time,” said Scott Dahnke, the global co-CEO of L Catterton. “The industry has overcome numerous challenges in the past, and we expect that the industry will rebound and prosper with even further enhancements to their already rigorous health and safety protocols in place in the future.”

The newly issued notes purchased by L Catterton are senior unsecured obligations of NCLC, guaranteed by NCLH, and are exchangeable at any time into preferred shares of NCLC and are automatically exchangeable into ordinary shares of NCLH. The notes are due in 2026 and accrue payment-in-kind interest of 7.0% for the first year; payment-in-kind interest of 4.5% and cash interest at 3.0% for the next four years; and cash interest at 7.5% in the final year.

“We are pleased to execute this agreement with L Catterton, the largest and most global consumer-focused private equity firm in the world,” said Frank Del Rio, president and chief executive officer of Norwegian Cruise Lines. “L Catterton is the ideal partner for our company as they recognize the remarkable resilience the cruise industry has demonstrated over the past 50 years, appreciate the long-term global demand for cruise vacations, and value our company’s long track record of growth, execution and success.”

Norwegian Cruise Lines has a combined fleet of 28 ships with more than 59,000 berths. The company has nine new ships on order which are scheduled for delivery through 2027, however the company expects delivery of the new vessels to be delayed as a result of COVID-19.

“Within the industry, the three brands of Norwegian Cruise Lines have carved out distinctive leadership positions in their respective markets, guided capably by Frank Del Rio and his exceptional management team,” added Mr. Dahnke. “We couldn’t be more excited to support the team at Norwegian as they work through this suspension of travel and begin to commence operations after their voluntary suspension of voyages.”

L Catterton invests from $50 million to $400 million of capital in consumer-focused companies. Areas of specific interest include food and beverage, retail and restaurants, consumer products and services, consumer health, and media and marketing services. The firm was founded in 1989 and has raised over $20 billion of equity capital across seven funds. L Catterton has 17 offices globally and is headquartered in Greenwich, Connecticut.

Goldman Sachs & Co. was the placement agent to Norwegian Cruise Lines on this transaction.

Private Equity Professional | May 7, 2020

Falfurrias Now Popcorn Seasoning King

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Sauer Brands, a portfolio company of Falfurrias Capital Partners, has acquired Chicago Custom Foods from Highlander Partners. Highlander acquired the company in January 2018 from VMG Partners.

Chicago Custom Foods (CCF) is a maker of branded popcorn seasonings, a category it created in 2000 with the introduction of Kernel Season’s which, according to the company, is America’s number one selling brand with more than 20 popcorn flavors ranging from simple butter and white cheddar to garlic parmesan and cheesy caramel corn.

CCF’s products are sold through more than 22,000 retailers in North America and internationally. The company’s popcorn seasonings are also available in movie theaters that operate more than 32,000 screens in more than 30 countries. CCF, led by CEO Jason Roy, was founded in 2000 and is headquartered near Chicago in Elk Grove Village.

“We are excited about the new opportunities with Sauer Brands, and also very appreciative of the support that Highlander provided during our tenure,” said Mr. Roy. “We are ready for the future and the team is energized by the possibilities and new opportunities. Our Kernel Season’s brand has exceptional consumer awareness and we are equally excited about our new brands and product offerings, too.”

Sauer Brands was formed by Falfurrias in June 2019 to acquire the food business assets of The C.F. Sauer Company. Sauer manufactures a line of condiments, spices, seasonings, and extracts, including well-known brands such as Duke’s Mayonnaise, The Spice Hunter, Sauer’s, Gold Medal, and BAMA. The company’s regional brands and private-label products are sold through the retail and foodservice channels.

Sauer, founded in 1887 by Conrad Frederick Sauer, has more than 850 employees and manufacturing facilities in Richmond, Virginia (headquarters); Mauldin, South Carolina; New Century, Kansas; and San Luis Obispo, California.

During Highlander’s ownership, CCF expanded its product line with the introduction of Tasty Shakes oatmeal mix-ins, Veggie Season’s vegetable seasonings, and Truffle Season’s truffle-flavored popcorn seasonings which is set for release later this year.

“This sale marks the culmination of a very deliberate strategy of broadening the product line through additional flavors to existing products and introducing new seasoning offerings for use with other product categories,” said Jeff Hull, president and CEO of Highlander. “The management team, led by CEO Jason Roy, has driven tremendous growth through innovation, new customer penetration and increased consumer awareness.”

Highlander makes investments in middle-market businesses in targeted industries in which the principals of the firm have significant operating and investing experience. Sectors of interest include manufacturing, consumer products, industrial goods, automotive accessories, packaging, food and beverage, and specialty chemicals. The firm has over $2 billion in assets under management and is based in Dallas.

Falfurrias makes equity investments in growth-oriented middle-market companies that have revenues in excess of $10 million and EBITDAs in excess of $2 million. In February 2019, Falfurrias closed its latest fund, Falfurrias Capital Partners IV LP, at its hard cap of $500 million. The firm’s earlier fund closed with $275 million of capital in March 2017. Falfurrias was founded in 2006 by Hugh McColl Jr., former chairman and CEO of Bank of America, and Marc Oken, former CFO of Bank of America, and is based in Charlotte, North Carolina.

BlackArch Partners was the financial advisor to CCF on this transaction.

Private Equity Professional | May 7, 2020

Cove Hill Makes the Outdoors Safer

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Kalkomey Enterprises, a portfolio company Inverness Graham, has been acquired by Cove Hill Partners.

Kalkomey is a provider of online recreational safety education, certifications, and cloud-based agency management services. The company’s customers include outdoor enthusiasts and state and local government agencies in all 50 US states, as well as Australia, Canada, Guam, Mexico, New Zealand, Puerto Rico, and the United Kingdom. The company, led by CEO Jason Alexander, was founded in 1995 by Kurt and Cindy Kalkomey and is headquartered north of Dallas in Farmers Branch, Texas.

Through Kalkomey’s online learning systems, the company provides regulatory-approved safety education courses and certifications for outdoor recreational activities, including boating, hunting, snowmobiling, off-roading, and scuba diving. Each year, the company trains and certifies nearly one million outdoor enthusiasts. Kalkomey’s agency management services are provided to state agencies to manage licensing and registration, certification, and event management compliance and reporting.

Inverness Graham acquired Kalkomey in December 2015. “We are thrilled with what the team at Kalkomey has been able to accomplish during our hold,” said Michael Morrissey, a managing principal at Inverness Graham. “Kalkomey’s investment in software and content greatly expanded the company’s addressable market while also delivering tremendous value to its partners and customers.”

During Inverness Graham’s just over four-year hold period, Kalkomey closed three add-on acquisitions with the buys of Dive RAID Training, a provider of online dive training courses (April 2018); Fresh Air Educators, a provider of online safety training courses for boating, hunting, and snowmobiling (August 2017); and Outdoor Roadmap, a provider of online hunting safety and education courses (April 2016).

“In addition to our organic growth strategy, these three add-on acquisitions expanded our e-learning solutions in both existing and new vertical markets,” added Mr. Morrissey. “Through these initiatives and other key investments, we were able to triple both revenue and EBITDA during our hold period.”

“Inverness Graham was a true partner from the start,” said Mr. Alexander. “They worked shoulder-to-shoulder with us to put together a laser-focused strategy that laid out a roadmap of a combination of key strategic acquisitions and organic initiatives that allowed us to become a leader in our industry. We look forward to building on this momentum and are excited for what the future holds at Kalkomey.”

Inverness Graham manages $500 million in capital and was formed by senior executives of the Graham Group, an industrial and investment concern with interests in plastics, packaging, recycling, building products and outsourced manufacturing. The firm is based near Philadelphia in Newtown Square, Pennsylvania.

Boston-based Cove Hill makes control and influential minority investments in North American-based consumer and technology companies that have enterprise values of up to $800 million. The firm was founded in September 2017 when it closed its $1 billion first fund. Cove Hill intends to build a portfolio of up to eight companies and will focus on longer-term investments with an average duration of eight or nine years.

“This partnership with Cove Hill will help Kalkomey not only in maintaining its leadership status in safety education and agency management but also in continuing to make innovations in the outdoor recreation industry,” said Mr. Alexander. “We look forward to continuing to grow and evolve with Cove Hill.”

Twin Brook Capital Partners, the middle-market direct lending arm of Angelo Gordon, served as administrative agent on debt financing to support the acquisition of Kalkomey by Cove Hill.

Chicago-based Twin Brook focuses on loans to private equity-owned companies with EBITDA between $3 million and $50 million, with an emphasis on companies with $25 million of EBITDA and below. The firm targets senior financing opportunities up to $200 million, with hold sizes across the platform ranging from $25 million up to $150 million. Twin Brook’s products include opportunistic investments in second lien, mezzanine, and equity co-investments.

Harris Williams was the financial advisor to Kalkomey on the transaction.

Private Equity Professional | May 7, 2020

Jerky Maker Returns Home

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Sonoma Brands has acquired KRAVE Pure Foods from Amplify Snack Brands, a business unit of The Hershey Company.

KRAVE Pure Foods is a producer of gourmet meat, poultry, and plant-based protein snacks. The company was founded in 2009 and is headquartered in Austin, Texas.

Sonoma Brands invests in high-growth consumer brands. The firm was founded in 2016 by Managing Partner Jon Sebastiani and is headquartered in Sonoma, California. Prior to founding Sonoma Brands, Mr. Sebastiani was the founder and CEO of KRAVE until its sale to The Hershey Company in 2015.

“I have always had a great relationship with The Hershey Company and watched them grow KRAVE,” said Mr. Sebastiani. “From expanding KRAVE’s product offerings to dipping into the plant-based category and increasing worldwide distribution, KRAVE is in a great spot to come back home to Sonoma where we can continue the brand’s fantastic momentum as a category leader.”

“KRAVE is a great brand with a loyal fanbase who appreciate its innovative gourmet flavors and culinary roots tracing back to its origins in Sonoma, California,” said Hector de la Barreda, the president of Amplify Snack Brands. “We look forward to its success with a different go-to-market model under the guidance of founder Jon Sebastiani.”

Amplify Snack Brands is a “better-for-you” snack brand company based in Austin, Texas. Company-owned brands include SkinnyPop, Paqui, Oatmega, KRAVE, and Pirate’s Booty. The company went public in 2015 and was acquired by Hershey in December 2017 for $1.6 billion.

The Hershey Company (NYSE: HSY) is one of the largest chocolate manufacturers in the world and it also produces a multitude of candy, baked products, syrups, and beverages. The Hershey Company was founded in 1894 and is headquartered in Hershey, Pennsylvania.

© 2020 Private Equity Professional | May 5, 2020

Artemis Closes Adcole Maryland Exit

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Artemis Capital Partners has closed the sale of Adcole Maryland Aerospace to AE Industrial Partners.

Adcole Maryland Aerospace (AMA) is a manufacturer of guidance, navigation, and control components used in low-earth orbit and geosynchronous satellites, and interplanetary spacecraft. The company’s key products include sun sensors (a navigational instrument used by satellites and spacecraft to detect the position of the sun); and star trackers and cameras (used to determine the orientation of a satellite and spacecraft with respect to the stars).

AMA’s components have been used on numerous space missions including voyages to Mercury, Mars, Jupiter, Saturn, and Pluto, and its customers include the Department of Defense as well as other government agencies, and private companies in the aerospace and defense sectors. AMA, led by General Manager Don Wesson Jr., was founded in 1957 and is headquartered 30 miles west of Boston in Marlborough, Massachusetts.

Artemis acquired Adcole in May 2014 and in April 2017 spun out the company’s aerospace division and merged it with Maryland Aerospace to form Adcole Maryland.

“We’re very proud of what we have accomplished in partnership with the talented AMA team,” said Peter Hunter, the founder and managing partner of Artemis. “As a result of the company’s industry-recognized commitment to innovation and quality, AMA is uniquely well-positioned to meet the growing demand for high reliability, mission-critical satellite components and subsystems.”

Artemis Capital Partners invests in companies with revenues of $5 million to $50 million and EBITDA of $1 million to $10 million. Sectors of interest include manufacturers of differentiated industrial technologies, including aerospace, automotive, defense, energy, industrial automation, scientific and research, and medical sectors. The firm was founded in 2010 and is based in Boston.

“We have been impressed by AMA’s tenure, reputation, and respected flight heritage in the space industry, and we are excited to partner with a truly premier supplier of mission-critical technologies,” said Kirk Konert, a partner at AE Industrial Partners. “AMA represents the first company for our space technology platform, which will serve the growing demand from both the U.S. Government and the commercial market for space and satellite vehicles.”

Boca Raton-based AE Industrial Partners invests in the aerospace and defense, power generation, and specialty industrial sectors with a specific focus on technical manufacturing; distribution and supply chain management; maintenance, repair and overhaul; and industrial service-based businesses. Typical company targets will have from $50 million to $500 million of revenue. In July 2018, the firm held a final hard-cap closing of its second private equity fund, AE Industrial Partners Fund II LP, with $1.36 billion in commitments.

Mesirow Financial was the financial advisor to Artemis Capital Partners on this transaction.

Private Equity Professional | May 1, 2020

Kinderhook Closes Fifth All States Add-On

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All States Ag Parts, a portfolio company of Kinderhook Industries, has acquired H&R Construction Parts & Equipment.

Kinderhook acquired All States Ag Parts (ASAP), a supplier of used, rebuilt and aftermarket parts for all makes and models of tractors, combines and other farm machinery, in May 2018. The buy of H&R is the fifth add-on acquisition for ASAP under Kinderhook’s ownership.

H&R is a value-added dismantler and supplier of new, used, reconditioned, and rebuilt heavy equipment parts to OEM dealers, wholesalers, and retailers.

H&R purchases used machinery from auctions, equipment dealers, and direct from end-users, and then disassembles and reconditions parts for resale. The company specializes in heavy equipment parts for excavators, wheel loaders, bulldozers, and articulated trucks.

“This is a great acquisition for us,” said John Dyke, CEO of All States Ag Parts. “The acquisition of H&R puts us in a stronger position to serve the construction industry. ASAP customers will have access to many additional products in the near future, not only related to agriculture parts, but also a greatly expanded selection of construction equipment parts.”

H&R is headquartered in Buffalo, New York with additional facilities in Lawrenceville, Georgia, and Riverside, California. These three locations aggregate to over 165,000 square feet of warehouse space and over 45 acres of land for outside storage.

ASAP is the largest supplier of used, new and remanufactured tractors, combines and other farm machinery in North America. The company has more than 850,000 aftermarket parts – with over 50,000 parts available for same-day shipping – and carries parts for all makes including John Deere, Case IH, New Holland, Ford, International, Allis Chalmers, Caterpillar and many others. ASAP has more than a dozen facilities, some of which have multiple functions, located in Wisconsin, Minnesota, Iowa, Missouri, Nebraska, South Dakota, Georgia, New York and California. The company’s catalog and e-commerce call center is based in De Soto, Iowa. ASAP, led by CEO John Dyke, is headquartered 28 miles east of Minneapolis in Hudson, Wisconsin.

“With this acquisition, All States Ag Parts becomes a one-stop-shop for agriculture, industrial, and heavy construction equipment parts,” said Paul Cifelli, a managing director at Kinderhook. “We look forward to the future success of ASAP and H&R as they operate as leaders in the industry.”

New York City-based Kinderhook makes control investments in companies with transaction values of $25 million to $150 million in which the firm can achieve financial, operational and growth improvements. The firm makes investments in non-core divisions of public companies, management buyouts of entrepreneurial-owned businesses, troubled situations, and existing small-capitalization companies lacking institutional support. Sectors of interest include healthcare services; environmental and business services; and automotive and light manufacturing.

In January 2020, Kinderhook held a final closing of its sixth fund, Kinderhook Capital Fund VI LP (along with a parallel fund, together “Fund VI”), at its hard cap with $1 billion of limited partner commitments. Fund VI was oversubscribed and is the largest fund ever raised by Kinderhook.

Private Equity Professional | April 21, 2020

H.I.G. Sells Conferencing Business to Marlin

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H.I.G. Capital has sold AVI-SPL, a provider of audiovisual and video conferencing services, to Marlin Equity Partners.

AVI-SPL is a provider of enterprise-class audiovisual (AV) and video conferencing (VC) services. The Tampa-based company, led by CEO John Zettel, is active in the design, procurement, engineering, integration, installation, and servicing of AV and VC systems for corporate office spaces, control centers, convention centers, stadiums, and educational facilities.

As part of this transaction, Marlin has merged AVI with its portfolio company Whitlock, also a provider of AV and VC services. Marlin acquired Richmond, Virginia-based Whitlock in October 2019. With this merger, the combined companies now have more than $1.3 billion of annual revenue. H.I.G. is maintaining a minority stake in the newly combined company.

“The digital workplace services industry has an incredible amount of untapped potential,” said Alex Beregovsky, a managing director at Marlin. “The combined company significantly benefits from deeper resources and enhanced local presence that will fuel communication and collaboration, while offering a world-class experience for remote working, distance learning, meeting rooms, and more. We look forward to bringing together two highly synergistic industry leaders to help them fully reach their potential and accelerate the combined company’s growth.”

AVI-SPL was formed in 2008 by Silver Lake Partners through the merger of Audio Visual Innovations (AVI) and Signal Perfection Ltd. (SPL). H.I.G. acquired AVI-SPL in April 2016 and completed five add-on acquisitions during its ownership term.

“We have established a terrific relationship with the AVI-SPL management team and are proud of the accomplishments made to position the company for continued success,” said Ricky Stokes, a managing director at H.I.G. “AVI-SPL has never been stronger and the combination with Marlin and Whitlock is an exciting new chapter for the company.”

H.I.G. specializes in providing debt and equity capital to small and medium-sized companies and invests in management buyouts, recapitalizations and corporate carve-outs of both profitable as well as underperforming manufacturing and service businesses.

In November 2019, H.I.G. held a final and above target close of H.I.G. Middle Market LBO Fund III LP with $3.1 billion of capital commitments. H.I.G.’s earlier mid-market fund, H.I.G. Middle Market LBO Fund II LP, closed at its hard cap of $1.75 billion in February 2014. H.I.G. was founded in 1993 and is headquartered in Miami with 15 additional offices across the US, Europe, and South America.

Marlin invests in businesses that have revenues of $10 million to $2 billion and are active in the software, technology, healthcare, services, and industrial technology sectors. The firm, with $6.7 billion of capital under management, is headquartered in Los Angeles with an additional office in London.

Private Equity Professional | April 14, 2020

LFM Buys Control Panel Maker

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LFM Capital has acquired PSI Control Solutions, a manufacturer and assembler of custom electrical control panels and emergency power products.

PSI’s products include control panels, low and medium voltage starters, variable frequency drive (VFD) panels, power-metering equipment, transfer switches and generator tap boxes used by original equipment manufacturers. A generator tap box is a device that is installed outside of a building to connect a businesses’ emergency portable generators to its electrical system.

The company’s emergency power products are sold to and through electrical distributors, electrical contractors, hospitals, data centers, and retailers. PSI is headquartered in Charlotte, North Carolina and has a total of 70,000 square feet of manufacturing space in two facilities – its second facility is in Mayfield, Kentucky – that make more than 13,000 control panels annually. The company, with 75 employees, was founded in 1961 by the Pickens family and is today led by third-generation owner and CEO David Pickens.

“For nearly six decades, our family has grown PSI by producing reliable, high-quality solutions for our customers,” said Mr. Pickens. “Our exceptional employees take great pride in PSI’s reputation for quality and outstanding customer relationships. We are excited about the partnership between PSI and LFM and look forward to leveraging their manufacturing and operational expertise during the next stage of the company’s growth.”

At the closing of this transaction, Mark Todd was hired by PSI as its new president. Mr. Todd joins PSI from Kaman Industrial Technologies, a publicly traded (NYSE: KAMN) industrial parts distributor, where he was a business unit general manager. In August 2019, Littlejohn & Co. acquired the distribution business of Kaman for $700 million. Earlier in Mr. Todd’s career, he spent more than 20 years at Rockwell Automation.

“PSI is highly regarded for the outstanding quality and performance of its products,” said Steve Cook, LFM’s executive managing director. “We have enjoyed getting to know David and PSI over the past year, and we look forward to investing in and working alongside the team to expand and grow the business by pursuing the many opportunities available in the company’s core segments.”

LFM invests in US-based manufacturing and industrial services companies with at least $3 million of EBITDA and enterprise values from $15 million to $125 million. LFM was formed in May 2014 by Steve Cook, Rick Reisner, and Dan Shockley and is headquartered in Nashville.

© 2020 Private Equity Professional | April 10, 2020

Mill Point Adds Another to KKSP

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KKSP Precision Machining, a portfolio company of Mill Point Capital, has acquired Prime Engineered Components, a maker of metal parts used in the defense, medical, automotive, and aerospace sectors.

Prime’s capabilities include screw machining, CNC machining, engineering, cleaning, and assembly of brass, aluminum, stainless steel, steel, nickel alloys, bronze, titanium, and certain plastics including acetal, nylon, and teflon.

Prime, led by President Mark Izzo, was founded in 1967 and is headquartered in Watertown, Connecticut.

KKSP is one of the largest manufacturers of machined metal components produced on automatic screw machines. The company has more than 425 screw machines in four locations in the US and Mexico and machines over 220 million parts annually. The company’s brass, stainless steel, steel, aluminum, bronze, and copper products are used by its customers in a wide range of applications in the HVAC, fire suppression, appliance, automotive, heavy truck, plumbing, medical and marine industries.

KKSP, led by President Dave Dolan, was founded in 1968 and is headquartered near Chicago in Glendale Heights, Illinois. Mill Point acquired the company from CapitalWorks in December 2017.

“We are extremely excited to join forces with the Prime organization and leverage the unique strengths of both organizations to broaden our product offerings to KKSP and Prime customers alike. Prime has built a very stable and capable business over three generations of family ownership and we are honored by the trust they have placed in KKSP to protect and continue to build upon those resources, and in particular, to have Mark Izzo as part of the KKSP Leadership Team going forward,” said Mr. Dolan.

The buy of Prime is the second add-on acquisition completed by KKSP under Mill Point’s ownership. In August 2019, the company acquired Grove Industries, an Illinois-based manufacturer of brass machined metal hose fittings and adapters.

Mill Point makes control-oriented investments of $15 million to $80 million in business services and industrial companies that have enterprise values of $50 million to $250 million. Mill Point closed its inaugural institutional fund, Mill Point Capital Partners LP, at its hard cap of $450 million in May 2018. The firm was founded by Managing Partner Michael Duran and is based in New York City.

© 2020 Private Equity Professional | April 3, 2020

Arbor’s Steelite Adds Homer Laughlin Foodservice Divisions

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Steelite International, a portfolio company of Arbor Investments, has acquired the foodservice divisions of sister companies Homer Laughlin China Company and Hall China Company (together HLC). Arbor acquired Steelite from PNC Riverarch in December 2019.

Steelite is a designer, manufacturer, and distributor of dinnerware, glassware, flatware and other tabletop products to restaurants, hotels, casinos, cruise lines and other foodservice operators. The company’s products are made from china, metal, glass, wood and melamine.

Steelite also considers itself a world leader in the manufacture and distribution of tabletop ranges used by many of the largest international restaurant and hotel chains, and independent restaurants. Steelite, led by CEO John Miles, was founded in 1983 and is co-headquartered in New Castle, Pennsylvania and Stoke-On-Trent, UK. The company has a 500,000 square foot manufacturing facility that enables it to service its customers located in more than 140 countries.

The Homer Laughlin China Company (HLC) – headquartered in Newell, West Virginia – was founded in 1871 by Homer and Shakespeare Laughlin and was acquired in 1897 by William Wells and Louis Aaron. The business is owned by third, fourth and fifth-generation members of the Wells and Aaron families.

HLC’s existing Fiesta retail tableware business is not part of the sale, and Fiesta’s headquarters and manufacturing – now renamed The Fiesta Tableware Company – will remain in Newell, West Virginia. Steelite will take over the manufacturing and sales of HLC’s foodservice product lines and will become the exclusive seller of Fiesta brand products to the foodservice market.

Elizabeth Wells McIlvain, president of HLC, said that the Wells family entered into the sale of the foodservice divisions in order to focus exclusively on Fiesta brand of retail dinnerware which was launched in January 1936 at the Pittsburgh China & Glass Show.

“The decision to sell the foodservice division was very difficult for the Wells family, and we deliberated and considered it thoughtfully,” said Ms. McIlvain. “We wanted to find a home for our foodservice customers with a manufacturer who could take on the reputation for excellence and the beloved shapes and patterns that we’ve been proud to manufacture for more than 60 years. Steelite is that company.”

“We are very pleased to acquire the HLC brands for the hospitality market,” said Mr. Miles. “In working with the Wells family, we understood we needed a creative solution since we were only acquiring a portion of the business. We took a step back to analyze the situation and came up with an imaginative and collaborative plan that achieved both parties’ goals, which were for Steelite to acquire and sell HLC and Hall China brands to the Americas foodservice market and for Fiesta’s production to stay in America at the current HLC facility on the Ohio River.  As we take over the manufacturing of the foodservice ranges, our number one priority at Steelite will be to supply HLC and Hall China customers with the same quality, durability, and body composition the brands are known for in our industry.”

Arbor invests in the food, beverage and related industries. Typical targets will have annual revenues of up to $300 million and EBITDA from $5 million to $50 million. Since founding in 1999, the firm has acquired or invested in over 70 North America-based food, beverage and related companies. In July 2016, Arbor closed its fourth equity fund, Arbor Investments IV LP, with $765 million of capital and its first subordinated debt fund, Arbor Debt Opportunities Fund I LP, with $125 million of capital. Arbor is headquartered in Chicago with an additional office in New York.

© 2020 Private Equity Professional | March 27, 2020

Coping with Coronavirus: How Private Equity Firms Can Focus on What Matters Most

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PE leaders are scrambling to keep up with the Covid-19 crisis. What they need is a practical way to assess risk company by company and prioritize the most effective response.

By Marc Lino, Hubert Shen, Andrei Vorobyov and Hao Zhou; partners with Bain & Company’s global private equity practice

As fast as the Covid-19 crisis is unfolding, leaders of private equity firms have to move faster.

While it is impossible to gauge the outbreak’s ultimate impact, efforts to contain the virus have already ground broad swaths of economic activity to a halt, generating widespread ripple effects across global financial and consumer markets.

By now, most firms have set up an emergency response team, have implemented measures to take care of their people and are communicating with investors. They are paying more and more attention to determining the outbreak’s potential impact on portfolio companies and developing a clear, decisive action plan to mitigate the damage.

By definition, there is no universal playbook. The outbreak affects every portfolio company uniquely, requiring a tailored plan for each. Tactics like drawing down credit lines or aggressively managing working capital might work across the portfolio. But those are table stakes, not strategies.

The real question is what to do next. Given limited time and resources, it is essential to triage portfolio companies by identifying the most pressing threats and drawing clear priorities. Fund managers need a rapid and logical way to:

  • Assess specific risks to individual portfolio companies;
  • Prioritize companies with the greatest potential to affect fund performance; and
  • Develop a customized action plan for each priority company.

Assessing portfolio company risk
To navigate the swirling uncertainty presented by the coronavirus outbreak, PE firms should start by modeling the most likely impact scenarios and determining the signposts that will signal new developments. Firms then can make a rapid risk assessment of each portfolio company in light of those evolving scenarios. Conditions will differ based on everything from geography to government response. What’s critical is to identify the most pressing challenges first, allowing the firm to direct its limited time and resources toward the companies with the most immediate and consequential issues.

We’ve developed an interactive survey tool that serves as a useful triage mechanism. It helps fund managers quickly gauge each portfolio company’s vulnerability based on four areas of potential exposure: reduced demand, supply chain or operational interruptions, workforce issues and financial stability. Is revenue set to fall off a cliff, or is the company’s position more resilient? Is your supply chain secure, or has the global run on toilet paper suddenly disrupted your deliveries of pulp-based packaging? Do you need to raise new debt in the short term, or has the turmoil in the bond markets foreclosed that? Can you operate in a way that ensures the safety of staff and customers? If not, do you have the flexibility to adjust?

A uniform assessment process makes developing a response as straightforward as possible. Using the findings, firms can plot portfolio companies on a matrix based on how much risk each faces, whether that risk is addressable and how much value is at stake for the fund. By aligning companies this way, firms can build an action plan that shifts more effort and resources to portfolio companies with the highest vulnerability and the highest controllable value (see Figure 1).

Figure 1

Firms can triage their response based on individual portfolio company risk and “controllable value at stake” for the fund

Building a customized agenda
A strong, customized plan identifies a tactical set of initiatives the company can launch immediately. For each prioritized portfolio company, it lays out a phased execution roadmap that mobilizes the resources―opex/capex injections, project staff and outside expertise―these critical initiatives require. The most effective firms also establish a structure for learning, continuously following up on initiatives and sharing best practices across the portfolio.

While different companies may share similar risks, no two plans will look alike. Consider a hypothetical chain of retail health clinics focused on primary care. Having spent the previous two years implementing a strategy to roll up smaller provider groups, it currently has 50 clinics in three European countries and is still integrating several of those acquisitions. Its balance sheet is leveraged but in relatively good shape. From a commercial standpoint, it has developed a strong franchise and growing “same-store” sales.

A full government lockdown in its core markets, however, has put heavy strain on the company’s short-term outlook. Although health clinics are allowed to remain open, this company faces issues across all areas assessed: demand, supply chain, workforce and financial. On the demand side, fear of contracting the virus could drive down retail traffic for a period of time, raising the real risk of a cash crunch. Staying open at all will depend on maintaining staff safety and coping with a dwindling inventory of clinical supplies across the company and its geographies.

These risk factors pose immediate danger and require a rapid response. The first priority is to identify the clinical supplies critical to staying open safely and searching for alternative sources. Second, the company must implement specific protocols to protect clinical workers from Covid-19 infection, while drawing up a dynamic plan to reallocate workers as necessary to cope with gaps in coverage. If demand drops far enough, the company might also need to generate cash by trimming part-time or nonessential workers and adjusting salaries.

Supporting revenue calls for an immediate campaign to tell customers when clinics are open and communicate the steps the company has taken to ensure their safety. It will also involve implementing a plan to switch over to telehealth, using video conferencing tools to screen patients and give nonemergency medical advice from a safe distance. The company will want to explore what Covid-19-specific offerings it might be able to develop, including testing support. And while all of that is in motion, the finance team will have to develop clear plans for improving cash generation while maintaining a close eye on debt obligations.

Now contrast that scenario with the situation faced by a hypothetical US-based software company. This firm builds solutions for retail customers and is well on its way to transitioning to a SaaS subscription model. While a total clampdown in many states is no less alarming for the leadership of this company, it has more time to form a response. That’s because its products are mission-critical for customers and generate a recurring stream of predictable revenue. It is also lucky that not all of its retail clients are in markets that have been shut down. Like any company in this environment, this one has to scramble to make sure its employees are safe. But even that is made easier by the fact that many of them work remotely already.

The software company’s big issue is what happens as the virus-related economic disruption spreads and deepens. While a SaaS model creates revenue resilience, retailers struggling to stay open will eventually ask for relief or simply stop paying. The top priority, then, is to devise a plan to help these customers weather the storm while deepening the company’s relationship with them.

That effort should start with an assessment of the company’s own financial situation. How much financial leeway does it have to offer customers relief? The next step is to assess the impact of the Covid-19 crisis on key customers, from those that are severely distressed and unlikely to recover to those that are actually experiencing a bump in demand (or better). By layering on an analysis of the company’s engagement with those customers (deal in the pipeline, just sold something, renewal upcoming, no current activity), sales leadership can map out a customer-by-customer path forward and offer tailored win-win solutions. One example: Offer a holiday from subscription payments in return for an early renewal or longer-term contract.

As our dedicated coronavirus page demonstrates, the outbreak poses myriad different issues for each industry, company and CEO across the global economy. What makes the private equity challenge uniquely difficult is the range of risks presented by a complex portfolio of companies spanning a number of industries and geographies. Generalized playbooks don’t add much value at a time when a global crisis affects each portfolio company differently. What’s critical is developing a practical plan to assess risk, prioritize action and execute quickly.

About the Authors
Marc Lino, Hubert Shen, Andrei Vorobyov and Hao Zhou are partners with Bain & Company’s global private equity practice. They are based in Amsterdam, Los Angeles, Copenhagen and Hong Kong, respectively.

Bain’s private equity practice is the leading consulting partner to the private equity industry and its key stakeholders, with a global practice more than three times larger than any competitor. Bain’s network of more than 1,000 experienced professionals serves private equity and institutional investor clients across the investment life cycle, from deal generation and due diligence to portfolio value creation and exit planning.

Bain & Company is a global consultancy that helps the world’s most ambitious change-makers define the future. Across 58 offices in 37 countries, the firm works alongside its clients as one team with a shared ambition to achieve extraordinary results, outperform the competition and redefine industries. Bain & Company was founded in 1973 and is headquartered in Boston.

To access a copy of Bain’s report “Coping with Coronavirus: How Private Equity Firms Can Focus on What Matters Most” click HERE.

The reprinting of this article was done with permission from Bain & Company.

Private Equity Professional | March 26, 2020

Sterling Continues Tangent Build

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Tangent Technologies, a portfolio company of The Sterling Group, has acquired Bedford Technology from Hillcrest Capital Partners and its founder Brian Larsen.

Bedford is an extruder of plastic lumber used in structural and semi-structural products in marine infrastructure projects, boardwalks, fencing, and other industrial applications. The company products are made from high-density polyethylene (HDPE) recycled plastic from post-industrial and post-consumer waste.

Bedford was founded in 1992 and is currently led by CEO Jeff Breitzman, who was promoted to the position in March 2017 as part of a long-term succession plan led by Mr. Larsen. Mr. Breitzman joined Bedford in 2010 as the company’s chief operating officer. The company is headquartered 175 miles southwest of Minneapolis in Worthington, Minnesota.

Tangent is a manufacturer of high-density polyethylene (HDPE) lumber used for outdoor furniture, structural applications, and marine decking. In recent years, HDPE lumber has become a substitute for traditional building materials in outdoor furniture and other applications given its durability and aesthetics. Tangent uses post-consumer recycled milk bottles (more than 175 million bottles each year) as a primary raw material along with many other post-industrial recycled waste streams. Customers of Tangent include original equipment manufacturers, municipalities and businesses including restaurants, hotels and country clubs.

Tangent, led by CEO Guy DeFeo, is headquartered in a 200,000 square-foot facility near Chicago in Aurora, Illinois. “We are excited to partner with Bedford and expand the combined plastic lumber product lines and solutions,” said Mr. DeFeo. “With the addition of Bedford, we will build a broader facility footprint across North America as well as build one of the best alternative material innovation organizations for our customers.”

The Sterling Group acquired Tangent through its fourth fund in 2018. Last September, Tangent closed two add-on acquisitions with the buys of Home & Leisure, a Brantford, Ontario-based extruder, fabricator, and assembler of plastic lumber furniture sold to the mass market casual furniture industry; and Vinyl Tech, a Millersburg, Ohio-based provider of furniture and playground fulfillment services to Tangent. Sterling continues to actively seek add-acquisitions of wood-alternative material manufactures.

Houston-based The Sterling Group invests in manufacturing, industrial services and distribution companies that have enterprise values from $100 million to $750 million. The firm emphasizes an operational approach in partnership with management teams to grow and improve the companies it acquires. Since its founding in 1982, The Sterling Group has sponsored the buyout of 56 platform companies and numerous add-on acquisitions with a total transaction value of over $10 billion.

© 2020 Private Equity Professional | March 25, 2020

Quad-C Buys Specialty Weaver

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Quad-C has closed its acquisition of Textum Weaving, a producer of advanced and high-performance textiles.

Textum products include fabrics, solid blocks and near net shape preforms, made using specialty yarns including carbon, ceramics, refractory metal (resistant to heat and wear), and aramids (high strength synthetic fibers including DuPont’s “Kevlar”).

Textum’s capabilities include uni-directional fabrics, two-dimensional fabrics, three-dimensional weaving, knitting and spiral fabric formation in a range of widths and constructions. The company is headquartered in Belmont, North Carolina.

The company’s products are used in thermal protection systems, antenna windows, nose tips, rocket nozzles and reentry systems in the aerospace and defense, industrial, energy and infrastructure industries.

Family-owned Textum was founded in 1996 and is led by CEO Aaron Feinberg who will continue in his current position and will own a significant stake in the business in partnership with Quad-C.

“We are excited to partner with Quad-C to accelerate our growth at Textum,” said Mr. Feinberg. “We were looking for a partner with a track record of working with owner/operators to invest in growth and build businesses for the future.  We intend to continue to expand our technical and production capabilities at Textum, both organically and through strategic acquisitions, and we believe that this partnership with Quad-C will provide us with experience and resources to enhance our capabilities for the benefit of our customers.”

Quad-C invests from $35 million to $125 million of equity in companies with enterprise values of $75 million to $400 million. Sectors of interest include business services, consumer, general industrial, healthcare, specialty distribution and transportation and logistics.

“Quad-C is very excited to partner with Aaron and his excellent team,” said Tom Hickey, a partner at Quad-C. “Textum is a great fit for Quad-C, as we are very focused on the industrial technology and specialty materials sectors and we have a long history of successfully partnering with owners of family businesses.  Aaron and his team have built a terrific business that represents an ideal platform in the technical weaving and specialty composites space.”

Quad-C was founded in 1989 and is headquartered in Charlottesville, Virginia.

© 2020 Private Equity Professional | March 25, 2020