Charlesbank Ends Deal Flurry With 3x Exit

Charlesbank Capital Partners capped a busy three-month stretch in November with the sale of a staffing agency, a deal that netted a 3x return for the firm. The Boston-based buyout shop sold Technisource to strategic bidder Spherion Corp. for $140 million.

The Technisource deal completes an active period for the firm in which it exited two companies, bought a minority stake in an asset manager and acquired control of two other businesses. “It looks like they all happened in a 12-week period, but there’s a lot that went into it,” said Andrew Janower, a managing director.

In addition to Technisource, Charlesbank Capital also exited the majority of its investment in GSI, an agricultural-equipment company, notching a 5x return in a sale to Centerbridge Partners. Meantime, it took a minority equity stake in StoneCastle Partners, an asset management company; it bought water ski boat company MasterCraft from U.S. Equity Partners, the LBO firm run by Bruce Wasserstein; and it recapitalized Horn Industrial Services, a company that makes environmental upgrades to power plants and handles their outsourced maintenance.

Technisource is a Little Rock, Ark.-based company that provides temporary staffing to the information technology industry. When Charlesbank Capital bought the company with $20 million in equity in November 2000, Technisource was a division of a public corporation that had jammed together 20 badly integrated acquisitions, said Brandon White, the Charlesbank Capital managing director who led the deal. Technisource was generating ample cash flow but needed organizational restructuring and a new strategy. Charlesbank Capital focused first on integrating the various units and later added two companies, in 2003 and 2005, to double Technisource’s customer base.

Charlesbank Capital’s latest batch of deals started in August, when the firm sold the majority of its position in agricultural equipment maker GSI to buyout firm Centerbridge Partners. After buying the company in 2005, Charlesbank Capital brought in a new CEO from the automotive industry, overhauled a plant that Janower said was “nice if you were living in 1979,” and instituted a lean-manufacturing model to cut costs. In two years of ownership, Charlesbank Capital doubled GSI’s earnings. It retains a 20 percent stake in the company.

At about the same time the firm exited GSI, Charlesbank Capital bought into Horn Industrial, a company that’s poised to take advantage of the coming wave of environmental upgrades to aging power plants. There aren’t many companies like Horn Industrial, and its squad of specialized, skilled workers provides a natural barrier to entry, said Mike Choe, the managing director who led the deal. The company still doesn’t operate far beyond its home in Kentucky, and Choe said Horn Industries should hit a growth spurt through geographic expansion and through a trend in which utilities are outsourcing repair and maintenance of their plants to third parties.

At the end of September, Charlesbank Capital closed its purchase of MasterCraft, which Janower called “the Porsche” of water ski boats. Charlesbank Capital had earlier looked at MasterCraft in 2004 when the company was last on the auction block. At the time, Janower said, Charlesbank Capital declined to bid, thinking the valuation was too high and based on unattainable sales projections. “MasterCraft exceeded both,” he said.

Transportation Resource Partners, the fund managed by automotive legend Roger Penske, joined Charlesbank Capital on the MasterCraft deal. The partnership is poised to bear fruit, Janower said, because Penske’s team identified organic growth opportunities during due diligence.

In October, Charlesbank Capital injected an unspecified amount of equity into StoneCastle Partners and provided capital for the asset-management firm to expand its offering of structured products. StoneCastle Partners was founded by an ex-Citi banker who created a method of securitizing bank trust-preferred securities. The proprietary deal fits with several similar minority investments Charlesbank Capital has made in specialty financial services companies.

Charlesbank Capital is investing out its sixth fund, a $900 million vehicle closed in 2005.—J.H.