Cambridge Capital Partners acquired Academy Tent and Canvas and Event Technical Services (ETS) in two separate recapitalizations. Upon the completion of the deals, Cambridge merged the two companies, creating a major player in the event equipment and services industry. The deals closed simultaneously in the week ending Oct. 5.
Cambridge used its Cambridge Capital Partners L.P. fund for the purchase, and while the financial terms were not revealed, Managing Director David Posner indicated that the fund generally contributes between $10 million and $20 million in equity for its investments and targets companies that have an enterprise value of between $40 million and $50 million. Further, he noted Cambridge typically spends less than five times EBITDA for the companies it acquires. American Capital Strategies was tapped to supply $27 million of debt, which takes the form of a revolving loan facility, senior term loans, a senior subordinated loan and warrants and preferred and common stock. The deal represents the first transaction between Cambridge and American.
Tom Shapiro will head the merged company, which will be known as Academy Event Services. Posner extolled Shapiro’s experience and reputation, noting that he was recently inducted into the inaugural class of the Special Event Industry’s Hall of Fame and was formerly the head of the industry’s trade organization. Chris Coe, who founded ETS, will be the chief operating officer of the new company. Posner also added that Cambridge Partner Shell Ausman would take over the chairman duties going forward.
Academy Tents and Canvas manufactures and leases a wide variety of tenting and structure solutions, while Event Technical Services provides customized temporary power and electrical distribution for special event applications. Posner noted that the two companies operated as sister firms historically, and a merger between the two makes sense, as it creates a one-stop shop for customers’ high-end tenting needs. Academy’s revenue grew by well over 20% last year, according to Posner, and since its founding in 1981 the company has logged uninterrupted annual sales growth in the double digits.
“The combination of the two companies should result in substantial cost savings as well as efficient and better focused marketing of products and services, which, along with management’s and Cambridge’s leadership, will drive growth,” American Capital Strategies Principal Mark Schindel said in a statement.
Cambridge Capital Partners specializes in value-added deals in the manufacturing, distribution and service companies. The firm is partnered with the Cambridge Group, which provides strategic management consulting services for companies looking to implement demand-driven growth strategies. Posner cited this relationship as one of the drivers in Cambridge winning its bids for Academy and ETS, noting that the firm did not submit the highest offer in the auction.
Cambridge will look to expand Academy’s geographic reach, the products it offers and the customer segments it sells to, Posner said. He explains that while the company does provide services throughout the U.S., its operations are conducted from California and Kentucky. Transportation of equipment and labor represent the highest costs for Academy, so through expanding to other parts of the country the company will be able to reduce its operating expenses in areas currently outside of its base. Additionally, Posner sees a number of untapped markets for Academy, citing casinos, universities and farm shows as customer segments that are underserved.
Cambridge will rely on add-on acquisitions to help facilitate Academy’s growth going forward and Posner attests that a number of companies have already expressed an interest in “getting involved” with Academy.
Posner cites the management and the consistency of the businesses as what attracted Cambridge to Academy Tent and ETS. “The event services industry has shown resilience in the face of the current economic downturn, thanks in part to its predictable cash flows,”he said He said the strong demand for high-end tenting and structure needs is fairly consistent, as the business typically works with long-term contracts. Posner added that the event services industry is fragmented, which should also abet Academy as it looks to gain additional market share.
Chicago-based Cambridge Capital Partners has completed five acquisitions in the past 12 months, including the Academy Tent and ETS purchases. The firm has invested over $100 million in total capital during that time, adding National Container Group, Return Logistics and Excelline Foods to its portfolio. Going forward, Posner said the firm is currently looking at an acquisition of a Midwest manufacturing company and is also reviewing an unsolicited offer from a strategic buyer for one of its portfolio companies.