For the past decade, Vector Capital has kept a keen focus on seeking public companies that were under appreciated and taking them private. In 2013, the approach bore fruit when the firm exited four investments and recapitalized two others, making it one of the most active PE sellers in the middle market.
"Since 2002, we have done approximately a dozen acquisitions of public companies as new platforms or add-ons," says Amish Mehta (pictured), managing director. "All of these companies typically had under $300 million in revenue and weren't getting the attention from public markets. At the same time, they had members of management who were willing to embark on a new strategy with us."
The new strategies employed by Vector paid off. In 2013, Vector generated about $1 billion from the exits and recapitalizations it was able to complete. Vector achieved a return of three times or greater on each of its exits.
"2013 was our best year ever. We had other times when we had a lot of exits, but we are bigger now and have more dollars invested. We have to generate greater returns and we succeeded," says Mehta.
Certara was a company Vector Capital took private in 2007. Vector sold the drug development and data company in December 2013. After Vector had taken St. Louis-based Certara private, the firm executed on a rollup strategy, buying four companies to add to Certara. When Vector put Certara on the selling block, it was a highly sought-after asset. New York-based Arsenal Capital ultimately won the competitive process.
Dr. James Rothman, a recipient of the 2013 Nobel Prize in Physiology or Medicine, who evaluated the Certara acquisition in his role in Arsenal Capital Partners' Healthcare Group, said Arsenal was interested in the acquisition because of Certara's ability to increase both the effectiveness and efficiency of the drug development process.
"Certara was a forward-looking company with a great future," says Mehta. "Arsenal competed with strategic buyers, and having a team of operators including a Nobel Prize winner on their team certainly helped them greatly."
Vector's portfolio company Printronix was nearly the opposite of Certara in that it was an old technology company developed in the 1970s. The company makes line matrix printers. "It was a $150 million business. Line matrix printers were the best for high volume printing of forms that needed multiple copies printed quickly," says Mehta.
The technology is all but obsolete in the U.S. today, but it's still used in China and India. It also still works well on factory floors, because it's one of the cheapest ways to print. "We saw a business we could really improve. We moved the company from Irvine, Calif., to China and then we bought its largest competitor and merged them. We refocused the larger company on printing needs in emerging economies," say Mehta.
Printronix was bought by Corona Investment Partners for undisclosed terms in September 2013.
Other 2013 achievements for Vector included two recapitalizations: of Corel, a global packaged software company that sells products, such as CorelDraw, WinZip and WordPerfect; and Gerber Technology, which provides software and equipment for designing and cutting soft goods, such as leather.