Corporations looking to conduct carve-outs would do well to consider Nova Capital as a buyer. The London investment firm, which opened a North American office in Chicago in 2013, specializes in buying portfolios of companies from large, publicly traded organizations, as well as from private equity firms. The firm's pitch to sellers is that they can "succcessfully unlock their holdings in a portfolio of companies" in a single transaction.
The strategy has proved successful over the years in Europe, says investment partner David Jacobs. In more recent years, the company has begun focusing on North America.
In September, Nova completed the purchase of a suite of hardware businesses owned by Newell Rubbermaid Inc. (NYSE: NWL) for $214 million. The deal includes five home improvement and hardware brands: Amerock, Ashland, Bulldog, Drapery Hardware and Shur-Line. Newell, which owns many well-known brands including Caphalon, Graco, Lenox, Paper Mate, Sharpie and Rubbermaid, put the hardware division up for sale in May, as part of a restructuring plan to boost profitability.
Nova faced competition for Newell's hardware line but prevailed, in part, because of its approach to pricing, Jacobs explains. "Rather than taking a discount approach to the whole suite, which is the way others typically price carve-outs, we value each business separately."
"In every one of these transactions, there are non-performing businesses. Otherwise, why are they for sale in the first place? But we value the lemons appropriately."
Nova continues to view each business individually post-purchase.
"After we close the deal, we run the companies separately," says Jacbos. "We capitalize, restructure and put management teams into each company and have a strategic plan and separate plans for exits."
Nova also takes an individualistic approach to financing deals. Rather than the classic private equity method of raising a general firm fund from a range of limited partners (LPs) and then making investments in deals from it, Nova raises a specific fund for each transaction it conducts. The Newell hardware purchase was funded through a newly established fund with equity provided by limited partners, including Nova and secondary funds managed by HarbourVest Partners LLC and Landmark Partners.
Over the past few years, Nova has scooped up two other corporate carve-outs in North America. In 2012, the firm bought five U.S. industrial businesses from Latshaw Enterprises Inc. In 2011, Nova bought five Canadian industrial businesses from Amalgamated Metal Corporation Plc. Nova has already sold some of the companies from these transactions. The firm recently sold Wilkinson Steel and Metals Inc., one of the Amalgamated Metal businesses, to Samuel Son & Co.
The firm is looking to do more deals. Jacobs wants to get the word out: "If you're the CEO of a large company with non-core assets that you don't know what to do with, we'll buy them from you quickly and efficiently at fair prices."