Axial Lower Middle Market Digest: The Biggest Stories & Closed Deals from April

Nick Coetzee | May 10, 2019
Welcome to the Third Edition of Axial’s Lower Middle Market Digest, your source of news and deal announcements featuring boutique investment banks, family offices, private equity-backed portfolio companies, and lower middle market businesses.

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It’s no secret – investment firms across the country are continuing to explore strategies to differentiate their brand identity.

As we’ve seen, two of the leading strategies have been:

  1. Develop sector specializations or more granular investment theses
  2. Build a robust network of Operating Partners to provide additional support and expertise to portfolio companies.

In April, we continued to see evidence of these trends. Two examples stand out:

 

Hunter Trust

Hunter Trust is an investment firm that funds and partners exclusively with search funds as their form of a differentiated strategy. In April, Hunter Trust announced that it hired Byron Evans as an operating partner, who spent several years in investment management and was subsequently a CFO for a health care services company. Evans was brought on to utilize his experience to support Hunter’s Search Fund portfolio with finance and growth operations activities, as well as identify new search funds to partner with.

Edgewater Capital Partners 

Edgewater is an Ohio-based PE firm focusing exclusively on the the performance materials space. In April, the firm announced that Dr. Rakesh Kapoor had joined the team as an Operating Partner. Kapoor, who began his career at Saint-Gobain and since has been consulting and serving on boards of middle market materials companies, will be working with Edgewater’s portfolio companies in the advanced materials and components spaces, assisting them with strategic and value creation activities.

 

Why should companies and investment banks care about an investment firms’ operating partners?

  • They are typically proven business leaders whose focus is accelerating the value creation of portfolio companies and playing an active role through the lifetime of a given investment.
  • They integrate themselves fully within a platform investment, often taking on the role of an active chairman or board member.
  • They spend a significant amount of time on-site, work closely with management teams, give high-level guidance, and help to identify and implement growth strategies, involving themselves in the day-to-day operations of a company.

 

Are you marketing a new investment thesis or building out your network of operating partners? Shoot us a reply, we’d love to hear about it.

We had 20 new buy-side members and 46 new sell-side advisory firms participating on the platform for the first time in April.

Highlights included:

–  Family Offices: 7 Branches LLC, Honor Equity, Eden Capital

–  PE firms: American Securities, Chicago Pacific Founders, Acacia Partners

–  Corporations: KKR-backed Blue Sprig Pediatrics, Aircraft Component Design, Oetiker

–  Investment Banks: Farlie Turner & Co, G.C. Andersen Partners LLC, RC Advisory Services

 

Another interesting month of Private Equity exits from Axial members. Nexphase Capital, Encomer Consumer Capital, One Equity, Brook Venture Partners, and Strength Capital Partners all announced sales of portfolio companies across healthcare, technology, consumer products and industrials sectors.

 

Arch Global: Growing through Acquisition

Birmingham-based Strength Capital Partners had a particularly interesting story. They announced the sale of ARCH Global Precision to The Jordan Company, a global PE firm investing out of a $3.6B fund raised in November 2018. Arch Global is a diversified manufacturing platform focused on cutting tools, medical instruments and high precision components for aerospace & defense.

The ARCH platform was formed by Strength in 2011 with the acquisition of three business units from Tri-Mas Corporation.  At that time, the platform was ~$45M in revenue split between precision automotive components (55%) and cutting tools (45%).  The platform was formed with the vision of performing a series of strategic acquisitions to grow the Company into a more diversified platform.

From 2011 through 2015, the Company completed eight add-on acquisitions in the precision components and cutting tool sectors.  One of those add-ons was a business that Strength capital sourced through Axial:

Arch Global acquires Valley Machine Precision Manufacturing

In January 2015, ARCH Global Precision acquired Valley Machine based in Northplains, OR. Valley Machine was represented by a boutique Northwest based investment bank who identified Arch Global through Axial.

 

 

The acquisition strategy, coupled with organic growth initiatives, resulted in exceptional growth over that timeframe with revenue increasing by over 2.5x and EBITDA increasing nearly 3x.

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Shoutouts

  • Arsenal Capital Partners Closes Fund V at $2.36 Billion. Read More
  • Bregal Partnerss Closes on their second fund of $650M Fund. Read More
  • Martis Capital Closes Oversubscribed Fund III at $545 Million. Read More
  • FirePower Capital ranks in top 20 North American lower mid-market investment banks. Read More
  • Hilliard Lyons becomes part of Baird. Read More

Thought Leadership

  • Strategic Buyer Fort Dearborn publishes insights on 2019 trends in the Packaging Industry.Read More
  • Private Credit Firm Old Hill’s Jeff Haas comments on Private Credit Fund Structures. Read More
  • Berkery Noyes Investment Bank publishes an Overview of M&A in the Healthcare / Pharma Information and Technology Industry. Read More
  • Holding Company TriVista publishes an analysis Assessing the Impact of the Potential US-Mexcio Border Closing on Private Equity Backed Companies. Read More
  • Davidson Capital Advisors publishes their US Private Equity Middle Market 2018 Annual Report. Read More
  • BDO Capital Advisors publishes Private Equity’s Guide for Software Companies Evaluating Whether to Partner with PE. Read More
  • RSM Canada announces a new publication to help middle market participants anticipate economic trends. Read More

People Moves

  • Karen Mou Joins Perella Weinberg Partners As Managing Director And Head of Compensation.Read More
  • Compass Diversified Holdings Announces Promotion of Pat Maciariello to Chief Operating Officer. Read More
  • Current Capital Appoints Kenneth Siegel, Another Proven Senior Executive, to Its Advisory Board. Read More
  • Joe Millo Joins Skyway Capital Markets as National Sales Director. Read More

Deal News from Sell-Side Members

  • DBO Partners represents ClearStory Data in its sale to Alteryx. Read More
  • Three Twenty-One Capital Partners Announces the Sale of Parker Boats to Correct Craft. Read More
  • Clear Capital advisors represents Quality Built in a Majority Recapitalization Transaction led by Gallant Capital Partners. Read More
  • Quarton International, a Cowen company exclusively advises Twinner GMBH on a capital increase for a double-digit million euro amount. Read More
  • Croft & Bender Serves as Financial Advisor to The Merit Distribution Group, a portfolio company of Centre Lane Partners, in its Sale to Center Rock Capital Partners. Read More
  • Plante Moran Corporate Finance Advises Great Lakes Trim, Inc. in Sale to GLT GLIF, Inc. Read More
  • Rogerson Business Services Successfully Closes the Sale of a Tree and Landscaping Business. Read More
  • Slate Partners advises Rocky Mountain excavating on its merger with PLM Asphalt & Concrete. Read More
  • Brampton Capital affiliate Sources $5 Million Senior Financing For Consumer Products Company For Acquisition And Working Capital. Read More
  • Niles MI-Based Sheet Metal Manufacturer C.N.C. Products, Inc. Acquired by Parker Holding. Calder Capital Served as the Exclusive M&A Advisor to C.N.C Products. Read More
  • Hinge Brokers represents a Chicago Market School in its sale to a National Operator. Read More
  • Lingate advises GMI in sale to Prestige Global Meeting Source. Read More

Deal News from Buy-Side Members

  •  Capital Partners Portfolio Company Parkway Products acquires ITECH Plastics. Read More
  • Load King, a Custom Truck One Source Company, Buys Boom Truck, Truck Crane, and Crossover Product Lines from Terex. Read More
  • Kettle Cuisine, a Portfolio Company of Kainos Capital Announces Acquisition of Harry’s Fresh Foods. Read More
  • Eye Health America, Established by LLR Partners, Acquires Carolinas Centers for Sight. Read More
  • PPS, Founded by Mangrove Equity Partners and Sunlake Capital Makes First Investment in U.S. Contract Security Industry with Acquisition of JBM Patrol and Protection Additional Acquisitions Planned Throughout the U.S. Read More
  • Wedriveu announces strategic investment from National ExpressRead More
  • One Equity Partners’ PS Logistics Completes Acquisition of Celadon Logistics Services. Read More
  • Rockwood Equity portfolio company BJG Electronics, INC. acquires Connector Tech LLC. Read More
  • Soundcore-backed PumpMan acquires ABC Electric Corp. Read More
  • WebBank subsidiary of Steel Partners Holdings completes acquisition of National Partners. Read More
  • Paradigm Announces Acquisition of Restore Rehabilitation. Read More
  • Sunshine Fitness (backed by TSG Consumer Partners) Acquires 13 Additional Planet Fitness Clubs Across The Southeast US. Read More
  • Quala Expands Their Chemical Cleaning Capabilities In The Gulf Region. Read More
  • Infiltrator Water Technologies Acquires Presby Environmental Inc. Read More
  • Authority Brands Welcomes the Clockwork Brands into its Family. Read More
  • Sallyport Commercial Finance Supplies a Multi-Million Dollar Credit Facility to a Company Serving the Manufacturing Industry. Read More
  • White Oak Global Advisors Completes $30M Loan for Danimer Scientific Holdings. Read More
  • Great Point Partners completes growth recapitalization of Little Spurs Pediatric Urgent Care. Read More

 


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