SouthPointe Ventures and Source Capital Team Up To Acquire Aerial Access Equipment

In May 2003 I received a visit from Tom Harbin, a managing director at Source Capital. Tom and I had known each other through the Atlanta community, and I had recently sponsored Tom when he joined ACG Atlanta. Source Capital was in negotiations with the owner of Aerial Access Equipment (AAE) in Baton Rouge, La., and was looking for a co-investor partner to help underwrite the acquisition. AAE provides long-term rentals of aerial lift platform equipment to the shipbuilding, oil and gas, plant maintenance, and general construction industries in the Louisiana Gulf Coast region. I knew that Tom has great deal instincts so if he liked the deal, it was probably an interesting opportunity. Our two firms had pursued another acquisition together previously, and we both were comfortable jumping into a new deal together. “We were already working with SouthPointe on an another opportunity and knew that they brought a lot of experience to the table,” said Harbin. Our two firms made a joint offer for AAE and we were told we had lost the deal to a strategic bidder from Houston. However, the indication from the seller’s agent was that they were unsure about the Houston bidder’s capabilities. Source and SouthPointe stayed in touch, and our hunch paid off. In January 2004 AAE’s owner re-contacted Harbin and me, said his letter of intent was to expire at the end of the month, and were SouthPointe and Source still interested? As soon as the prior standstill expired, a new LOI was executed in early February, and Source and SouthPointe started due diligence. The deal called for an $8.5 million senior credit facility and a $2 million mezzanine loan. To finance the transaction, Source Capital and SouthPointe once again tapped the ACG network. Calling on a previous ACG relationship, Tom Harbin contacted Mike Ehlert at Fifth Third Bank in Dallas. Harbin said, “Mike and his group were able to move quickly with a creative approach that gave us significant liquidity for future growth.” According to Ehlert, an ACG Dallas/Fort Worth officer, “We were familiar with Source Capital and SouthPointe Ventures through our association with ACG Atlanta. Since the transaction was in Louisiana, it made sense for our Dallas office to work with Tom and Ed, and we liked the deal from the start.” To fund the $2 million mezzanine piece, Source and SouthPointe turned to CapitalSouth Partners, in Charlotte, N.C. CapitalSouth is active in ACG Carolinas. “We spend a lot of time at ACG events and as a result have developed a strong relationship with both Source and SouthPointe. We looked at several of their deals and were eager to partner with them. We pushed hard to win the AAE business,” said Joe Alala, President of CapitalSouth. The deal finally closed in June 2004, 13 months after the initial offer! The strength of the ACG network initiated the transaction and allowed all of the pieces to come together to close the deal. The network value continues: SouthPointe partner John Dalton recently attended ACG Louisiana’s monthly luncheon and introduced AAE’s CEO to the lunch speaker – a potential customer. Our focus on smaller acquisitions in the Southeast is significantly facilitated by the relationships and contacts we generate from our ACG membership. As our AAE deal exemplifies, the ACG network pays big dividends in connecting the right resources from multiple ACG chapters for executing our strategy. >> Ed Fisher Managing Partner, SouthPointe Ventures ACG Atlanta [email protected] Tom Harbin Managing Director, Source Capital ACG Atlanta [email protected] Mike Ehlert Vice President, Fifth Third Bank ACG Dallas/Fort Worth [email protected] Joe Alala President, CapitalSouth Partners ACG Carolinas [email protected] Copyright 2005 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com