Advent’s Laundry Gets Bulkier –

Advent International continued to pump dollars (hopefully not in quarters) into its Brazilian laundry platform, Central Lav, and in early June completed its second add-on for the company with the purchase of Tillimpa. Terms of the deal were not disclosed.

Erwin Russel, a partner in Advent’s San Paulo office, said, “When we started this platform it was always part of the plan to do a rollup, and we had identified Tillimpa before we even completed our acquisition of Central Lav.”

The purchase of Tillimpa will help round out the offerings of the combined company, giving Central Lav exposure to all three segments of the laundry services sector. Tillimpa’s industrial focus will balance Central Lav’s existing presence in the commercial and hospital industries, and the combined company will operate under the Atmosfera brand.

Advent has dedicated $20 million in total to the Central Lav investment. The firm started the platform with the February 2002 acquisitions of Central Lav and Aqualimp Higienizacao Textil, two deals that cost the firm roughly $10 million. Russel noted that the company has not taken on any debt to assist in financing the transactions, with the equity coming out of Advent’s $265 million Latin American Private Equity Fund II. Advent’s stake in the investment has grown from 67% when the firm first acquired Central Lav and Aqualimp to around 75% today, following the buyout of minority stakeholders.

The thesis behind Advent’s investment rests on the assumption that the Brazilian laundry market will follow the path taken by the U.S. and European markets. “Brazil is today where the U.S. and European markets were about 10 years ago,” said Russel. “There are basically two things we’re seeing: The first is the consolidation of laundry services, as companies recognize the benefits of scale, and the second is that the underlying market is very healthy and the drivers are growing as well.”

Russel went on to say that seven years ago there was not a single hospital that outsourced the cleaning of its linen, but today 30% of the hospitals are doing it. The outsourced laundry space is expanding in Brazil by roughly 10% each year, versus the 1% to 3% growth seen in the more mature U.S. and European markets, according to numbers presented by Advent.

The platform has already experienced significant growth, although much of that is the result of the acquisitions. When Advent acquired Central Lav and Aqualimp in 2002, the company was showing revenue of roughly $20 million. With the addition of Tillimpa, as well as the smaller add-on buy of Astaral in 2003, the combined company posts revenue of more than $50 million.

The Tillimpa deal represents Advent’s fourth Latin American deal so far this year, following the buyout of surety bond provider J. Malucelli Seguradora SA, the purchase of duty-free retailer Dufry Group and the acquisition of S.A. OCA, an Argentina-based private courier. Russell said the current Latin American fund is between 70% to 75% invested, but he could not comment on when a new, follow-up fund would be launched. .

Snapshot

Buyer: Advent International

Target: Tillimpa

Legal Counsel: Advent: Souza Cescon LLP

Accountant: Advent: Deloitte & Touche