Bring Trivest A Deal, Drive Home A Mercedes

Trivest Partners LP has hit on a novel way to avoid auctions.

In addition to the usual success fees, the Miami-based LBO shop rewards business brokers who bring it successful deals directly by leasing them a Mercedes S-Class sedan for three years once the deal closes. “We want those brokers to be thinking about deals for us every morning when they turn that key,” said Chip Vandenberg, a partner with Trivest.

The strategy appears to be working. A broker alerted Trivest to the availabilty to ATX Networks Inc., provider of products and services to cable TV operators, after a busted auction and now the car is on the way.

Financial terms of the deal, announced August 25, weren’t disclosed. On its Web site, however, Trivest lists a number of criteria for its transactions, including an overall value of up to $250 million, revenue of more than $25 million, minimum of $5 million in EBITDA, operating margins of 10 percent or higher. The firm concentrates on founder buyouts.

Vandenberg told Buyouts that both the deal value and revenue figures for ATX Networks are within Trivest’s “sweet spot” of $50 million to $250 million and that the opportunity came to the firm after the credit crisis derailed the original auction process last year. The firm teamed with ATX’s management team, led by President and CEO Ken Wildgoose, to acquire the company from its non-active founder.

“We don’t like to chase deals,” said Vandenberg. “We’d much rather keep the bankers out of it. The companies themselves may not be scrubbed up the way they are when the banks get done with them but the prices we pay reflect that.”

ATX Networks provides network and in-home components for cable operators that enable digital services such as video on demand, HDTV, high-speed data/Internet delivery and voice over Internet protocol services. The Ajax, Ontario-based company appealed to Trivest in part because it’s a niche manufacturer whose founder had recently retired, Vandenberg said. ATX Networks has “great margins and great growth prospects,” according to Vandenberg, who added that he sees a number of possibilities for add-ons from the deal as well as the opportunity for further expansion into Europe.

Specifically, he pointed to the government-mandated switchover for television stations to broadcast solely in digital that’s set to happen in mid-February 2009 as a driver for demand. ATX Networks’s customer list already includes every major cable operator in the United States and Canada.

The deal is the second for the Trivest Fund IV and the firm’s seventh in Canada. Financing was led by CIBC Leveraged Finance, CIT Capital Ltd. and Bank of Nova Scotia. Vandenberg told Buyouts that Trivest has yet to close on Fund IV although he does expect an announcement to come “shortly.” The fund has a target of $300 million and a hard cap of $400 million.

Other Trivest portfolio companies include Twin-Star International, a Delray Beach, Fla., maker of electric fireplaces and bathroom vanity products with annual sales of about $100 million; Directed Electronics, a supplier of car security and convenience systems based in Vista Calif., with annual sales of about $140 million; and Allegiance Security Group, a provider of security guard services based in Morehead City, N.C. with annual sales of about $21 million.