EXCLUSIVE: Sun Capital Buys The Uniform Place
The PE firm’s CEO Marc Leder shares details of the bolt-on acquisition for Life Uniform
Private equity firm Sun Capital Partners Inc. has purchased family-owned The Uniform Place, a Milwaukee-based apparel retailer for undisclosed terms, Mergers & Acquisitions has learned.
The Uniform Place is a bolt-on acquisition for portfolio company Life Uniform, a retailer of hospital scrubs and other specialty healthcare apparel, Sun Capital co-chief executive Marc Leder tells Mergers & Acquisitions in an exclusive interview. This is the 32nd deal of the year for the Boca Raton, Fla.-based firm.
The disclosure comes on the heels of the firm’s promoting five executives to the position of managing director. Paul Daccus, Scott Edwards, Anthony Polazzi, Brian Urbanek and Aaron Wolfe are now part of Sun Capital’s global senior management team, boosting the number of managing directors to 22.
Prior to joining Sun Capital, Daccus was with audit firm Deloitte and Touche LLP, and before that accounting firm Arthur Andersen LLC. Edwards had previously worked as a principal with Henderson Private Capital in London and as an associate with GE Equity and private equity firm Advent International.
Polazzi spent more than a decade working in private equity as an associate of CIBC World Markets. Urbanek was a banker with Stephens Inc. and, before that, Bear, Stearns & Co. Inc. before joining Sun Capital. Meanwhile, Wolfe joined Sun Capital from boutique investment bank Harris Williams & Co.
Here are excerpts from our conversation with Leder.
M&A: As 2011 comes to a close, what is Sun Capital’s outlook on dealmaking in 2012?
Leder: Our view on 2012 is very positive because of the type of deals we do. Since we buy troubled companies, in this soft economy there are more opportunities that fit our acquisition criteria. Our niche is to find market leaders that are not performing well. In a good economy there aren’t not as many, but a slow economy is ideal for us. Between the U.S., Europe and Japan, those nations are going to have slow to no growth. Our business model is typically taking a company whose Ebitda margins are well below where they should be and -- without growing sales-- getting them back to where profitability should be.
M&A: So, if the economy improves, does that mean Sun Capital will do fewer deals?
Leder: No, because there are cyclical industries that may be facing a downturn. You’ve got companies with liquidity issues, or those that have done a poor job consolidating facilities. Maybe they stumble when it comes to upgrading their IT system, or they may do a poorly-conceived add-on or acquisition. There are a lot of reasons why a company, although a good business, could be distressed and meet our criteria. We closed 32 acquisitions this year including one yesterday—Uniform Place—an add-on for our Life Uniform portfolio company. There’s one more that’s going to close this year, maybe two. We’ll end the year with roughly 34 acquisitions.
M&A: Is that better than 2010?
Leder: No, in 2010 we did 37, and our average over the last seven years is 29. We’ll have a pipeline going into 2012 and expect to close seven or eight deals in the first quarter. That’s consistent with our steady pace of investment. It includes 2009 when we did only 11 deals. If you exclude that one year, our average is 33 deals a year.
M&A: In the January issue of Mergers & Acquisitions, senior reporter Tamika Cody explores the reasons behind Chinese investors becoming more cautious about U.S. targets. What insight can you provide on the challenges Sun Capital faces in its Shanghai and Shenzhen offices?
Leder: Our two offices in China are operating offices. They’re there to support companies to source raw materials and finished gods in lower-cost countries. We do the occasional acquisition in Asia including China but it’s typically an add-on. The vast majority of our acquisitions are in the U.S. and Europe.
We have not really seen a change in the appetite on the part of Chinese buyers or vice versa. What I can tell you is that most well-run companies are focused on selling in China. It is not easy but it’s doable. Take Performance Fibers, for example. When we bought the company, they were primarily in North America and Europe with 70 percent of a joint venture in China. We bought out the 30 percent we didn’t own and by the end of 2012, China will be two-thirds of our Ebitda. We bought the company with less than 20 percent being sold into China.
M&A: Sun Capital recently promoted five partners in its North American and European offices. Was this pace typical of a Sun Capital year?
Leder: We have promotions every year but when we started growing the firm aggressively in 1999, and given the amount of time it takes to get associates to managing directors, typically we have two promotions a year. We had three promotions in 2006 and then in 2009 we had one, but none last year. This is the most managing directors we’ve ever promoted in one year. It’s a bit of a milestone.
Anthony Noto reports for Mergers & Acquisitions
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