Private equity groups appear to be on a mission through the first four months of 2011. This surge has been inspired by an improving economy, increasing volume of quality acquisition opportunities and, lastly, the growing availability of debt as banks have conservatively returned to lending.
This has led private equity groups to deploy capital in order to raise new funds while continuing to mend portfolio companies in order to attract limited partners to invest in those new funds.
In an effort to provide much anticipated returns to investors and further support fundraising efforts, private equity groups will look to divest portfolio companies throughout 2011. Considering the improving merger and acquisition market and the re-entry of strategic players to the buyout world, many private equity groups are positioned for divestitures in the very near future. In fact, there are several Cleveland-based private equity groups that have exited investments during the month of April.
Linsalata Capital Partners Inc. and Resilience Capital Partners announced the sale of Lund International Holding Co. on April 28 to an affiliate of Highlander Partners LP. It was 2007 when the two private equity groups acquired the assets of Lund International, a designer, manufacturer and marketer of branded accessories for the automotive market.
Resilience Capital Partners also divested Steel Parts Manufacturing Inc. as it was purchased by Monomoy Capital Partners. Steel Parts is a manufacturer and supplier of close-tolerance precision metal stampings and components in automatic transmission systems. The acquisition of Steel Parts by Resilience in 2006 provided a 51 percent gross internal rate of return.
Morgenthaler Partners also participated in the divestiture of one of its portfolio companies. Ryan Herco Flow Solutions, a distributor of products used in the flow of purified water, was acquired by Greenbriar Equity Group LLC from Morgenthaler’s Venture Partners Fund VII LP. Ryan Herco sells more than 70,000 products that are used in a variety of industries.
Albert D. Melchiorre is the president of MelCap Partners LLC, a middle-market investment banking firm. He is also a director on the ACG Cleveland board. For more information on MelCap Partners, please visit www.melcappartners.com. For more information about the Association for Corporate Growth, please visit www.acg.org/cleveland.
Deals of the Month
The first recognition goes to The Riverside Co. with its acquisition of The Ostomy Center. The add-on acquisition to its platform company, ActivStyle, will be Riverside’s 54th health care transaction over its history and the sixth transaction for Riverside already in 2011. The Ostomy Center services mostly Illinois patients with incontinence, enteral, urology, ostomy and wound care products for conditions such as ostomy status, autism, spina bifida, cerebral palsy and Down syndrome. The acquisition will allow ActivStyle to diversify its demographics with products targeted toward younger patients.
Garfield Heights-based Chart Industries Inc.’s acquisition of CFIC also receives recognition this month. CFIC manufactures thermoacoustic technology, which converts acoustic sound waves into energy to heat or cool products. The acquisition should help enhance the global portfolio of Chart Industries’ biomedical segment. In December, Chart Industries also spent $40 million to acquire SeQual Technologies for its biomedical segment. Chart Industries has been performing very well as of late, with its stock price increasing more than 1,000 percent from $5.26 in March 2009 to $55.04 in March 2011.