American Capital Strategies acquired Precitech Inc. this month for $21.5 million. The publicly traded buyout and mezzanine fund won an auction for Precitech, an ultra-precision machining system company. Precitech’s previous owners were the Permira Funds, as well as affiliates and certain mangers of Taylor Hobson Ltd.
American Capital Strategies found Precitech attractive because the company fits the buyout fund’s focus, said Robert Klein, a principal with the fund. “This is right in our sweet spot. We are focused on manufacturing companies of this size,” he added.
American Capital looks to invest between $5 million and $35 million in companies with Ebitda of $3 million and more, he said. The fund’s portfolio companies generally have enterprise values between $15 million and $200 million – although for deals above $100 million in size, American Capital Strategies is generally providing mezzanine capital to another firm’s buyout, he explained.
Precitech is essentially a machine tool company serving niche markets in the defense industry, high tech areas including telecom and consumer areas with excellent long-term growth prospects, Klein said. “The company has grown its sales and profits nicely at the bottom of a business cycle, so we are excited for what they can do when the economy is good,” he added.
There will be no changes to Precitech’s senior management team, as the senior managers are a better team than one would expect for the size company they are running, Klein said.
American Capital Strategies aims to support management’s growth plans and expects to provide additional capital to fund strategic acquisitions, he added. “The company has not really had the capital to follow up on acquisitions previously, so now they will have more of a green light to do this,” he said.
American Capital Strategies’ investment is in the form of a senior credit bridge facility, senior term loan and senior subordinated notes with warrants and preferred and common equity. The fund refers to this approach as a one-stop buyout, because it allows American Capital Strategies to fund an entire balance sheet by itself. “This is a very powerful tool for us, because most firms doing a deal still have to go and raise the bank debt, raise the mezzanine debt. We can do it all,” he said.
This deal is American Capital Strategies’ fourth one-stop buyout of 2002. Over the last 12 months, the fund has invested approximately $500 million in total into middle-market companies.