Compass Diversified Holdings, a listed Westport, Conn.-based private equity firm, sold Silvue Technologies to Mitsui Chemicals for $95 million.

Silvue is a developer and manufacturer of coating systems for polycarbonate, glass, acrylic, metals and other materials used in the premium eyewear, aerospace, automotive and industrial markets.

The sale of Silvue is the second sale since Compass’ 2006 IPO. In January 2007, the company sold Crossman Acquisition, with a net gain of $36 million.

Compass chief executive Joe Massoud said the company has a very different operating model for financing structure compared to other private equity firms. Massoud, speaking to MergersUnleashed, said, “We have our own debt line, so we are able to take a loan on our current holdings, which are cash-flow positive,” as opposed to seeking financing for each new acquisition that is unproven and often does not yet generate substantial revenue.

The firm has another $700 million of debt line. “We have our own debt line, so we are able to take loan on our current holdings,” Massoud said. Each of the firm’s holding generate around $10 million to $40 million in cash flow, about $125 million in sum.

Massoud said that Compass “invented” this type of structure for PE firms, though he believes many other firms are looking to replicate the model. “It makes a lot more sense now, than when the markets are gung ho,” he said.

Massoud compares the unique structure to the first instance in which a SPAC was used to fund an acquisition. “I never thought [a SPAC] structure would work,” he said, referring to the current popularity of the special purpose acquisition corporations structure.

Compass focuses on middle market businesses with cash flows between $10 million and $40 million.



Financial services industry