When Buy and Build Works
A recent Audax deal depicts the perfect illustration of the modern middle-market private equity model in play
Every now and then I come across a deal that strikes me as the perfect illustration of the modern middle-market private equity model in play. In August, one such transaction caught my eye, when Winchester Electronics Corp., a portfolio company of Audax Group that makes connectors and cable assemblies for products in the medical, military, energy, broadcast and ruggedized industrial sectors, bought Bomar Interconnect Products, which makes connectors for the radio frequency, video, broadcast, wireless and related markets.
What impressed me wasn't just that the two companies appeared to be a good fit, with Ledgewood, N.J.-based Bomar's diversifying Middlebury, Conn.-based Winchester's customer base and product offerings. Of more significance, in terms of watching private equity in action, was that the transaction marked Winchester's sixth acquisition since Audax bought the company in 2006.
Previous purchases included (in reverse chronological order): Continental Connector Company of Hatfield, Pa., in May; Clements National Co. of Broadview, Ill., and Electrical Specialty Products Inc. of Spartanburg, S.C., in 2012; and Kings Electronics Corp. Inc. of Rock Hill, S.C., and Advanced Interconnect Inc. of Franklin, Mass., in 2007.
And Audax, which has offices in Boston and New York, expects to back Winchester in more deals, with Audax managing director Oliver Ewald saying the firm will continue to work with Winchester CEO Kevin Perhamus "to build the business through new product introductions, global expansion, and strategic add-on acquisitions."
Another company I've enjoyed watching grow through acquisitions is Royal Adhesives and Sealants LLC. In July, the Peabody, Mass.-based provider of custom packaging services for adhesives, sealants and resins completed its purchase of Adco Global, a Lincolnshire, Ill.-based supplier of adhesives, sealants, tapes and coatings for the construction, transportation and industrial markets.
Royal Adhesives has picked up nearly a dozen companies since CEO Ted Clark bought it in 2003 with the help of private equity investors. Royal Adhesive's current PE backer is Arsenal Capital Partners, which added the company to its portfolio in 2010.
Clark puts it well. "There's a tremendous amount of financing work and all kinds of stuff that has to go on behind the scenes to get these deals done," he explains. "I couldn't have done what I wanted to do without that private equity support, which goes well beyond just writing a check and having a relationship with the lenders."
Visit www.themiddlemarket.com to watch my video interview with Clark and to read more examples of the model in our 2012 roundtable, "Buy to Build," sponsored by business law firm, Benesch.
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