The roll-up of the mechanical insulation distribution industry continues but the players names have changed as Audax Private Equity and The CapStreet Group have agreed to sell the majority of their shares in Distribution International to Advent International. Audax will retain a minority equity position in the company and remain on the Board of Directors.
Distribution International (DI) is a distributor of thermal and acoustical insulation and related supplies. The company has 64 branch locations and serves customers in the commercial building, chemicals, energy, power, railcar and marine end markets. Most of DI’s sales are derived from ongoing maintenance and repair spending in industrial installations and commercial buildings. DI was founded in 1986 and is headquartered in Houston (www.distributionintl.com).
Audax and Capstreet acquired DI in August 2010 from Grey Mountain Partners. During their term of ownership, DI’s EBITDA grew more than 3.5 times driven by market growth, share gains, and add-on acquisitions. Organic growth was spurred by a new executive management team that drove operational improvements through pricing, procurement, and sales force optimization initiatives. Eleven add-on acquisitions helped to solidify DI’s competitive footprint in the Gulf Coast and expand its reach into the Northeast, Midwest and Western US and Eastern and Western Canada.
“DI is the leader in the mechanical insulation market, which is poised for continued strong growth, as it benefits from a nascent recovery in commercial construction and significant planned capital investments in the downstream petrochemical industry,” said Stephen Hoffmeister, a Managing Director at Advent. “In addition to taking advantage of the market growth, the Advent team is excited to support DI’s ongoing acquisition program and expansion into complementary products offerings and new geographies.”
Upon closing of the transaction, Advent is adding two of its industry advisors, Wes Clark and Chip Hornsby, to the DI Board of Directors. Mr. Clark is the former President of W.W. Grainger, and presently Chairman of Morsco and Director of ABC Supply. Mr. Hornsby is the former CEO of Wolseley, Plc and current CEO of Morsco.
Advent International focuses on buyouts and strategic restructuring opportunities in five sectors: business and financial services; healthcare; industrial; retail, consumer and leisure; and technology, media and telecom. Advent has offices in 16 countries and employs 170 investment professionals across Western and Central Europe, North America, Latin America and Asia. Founded in 1984 and headquartered in Boston, Advent has $34 billion in assets under management and has completed more than 290 buyout and private equity transactions (www.adventinternational.com).
The Audax Group makes control investments of $10 million to $100 million in middle market companies with transaction values of $25 million to $500 million. Audax has over $5 billion in assets under management in its private equity, mezzanine, and senior debt businesses. The firm was founded in 1999 and has offices in Boston and New York (www.audaxgroup.com).
CapStreet makes control investments in privately held, lower middle market companies that are headquartered in Texas and surrounding states. CapStreet targets industrial and diversified business service companies that have annual EBITDA between $5 million and $20 million. Since the firm’s founding in 1990, CapStreet has invested in 35 platform companies. The firm is headquartered in Houston (www.capstreet.com).
Harris Williams & Co. (www.harriswilliams.com) was the exclusive financial advisor to Distribution International. The transaction was led by Bob Baltimore, Tim Webb, Chris Williams, Marshall Croft and Taylor Morris of Harris Williams & Co.’s Richmond office.
“Audax Private Equity, CapStreet and DI’s management have built an exceptional platform with an industry leading product offering and a demonstrated resiliency across economic cycles,” said Mr. Baltimore, a managing director at Harris Williams & Co. “It was an absolute pleasure working with the management team, and we look forward to watching the company’s continued success.”
“We are thrilled to have Advent as our equity sponsor, as we continue to invest for growth and expand our industry-leading position,” said Celeste Mastin, Chief Executive Officer of DI. “DI has grown significantly over the past several years and the added resources and industry experience the Advent team brings to bear will help us to accelerate our growth ambitions.”
2014 PEPD • Private Equity’s Leading News Magazine • 12-16-14
