Deals of the Year: Honorable Mentions –

Editor’s Note: The Buyouts’ staff looked through hundreds of deals, these were deals that didn’t win, but we wanted to highlight.


Advent Gets 8.2x Cost With Moeller

In under two years, Advent International succeeded in turning around German electronic components maker Moeller Group, which it sold for o1.1 billion to U.K.-based Doughty Hanson to get back a whopping 8.2x cost.

At the time of the sale, Moeller had been crippled by over-diversification and a failure to catch up with outsourcing trends, and its current lenders would not extend their financing. It was near bankruptcy when Advent invested in 2003. It had had an unsuccessful search for a buyer two years earlier. Twenty bidders in all had looked at the company before Advent decided to shock the short-fused company back to life.

On taking control, Advent in 18 months reduced factory count from 25 to 10, cut back the number of legal operating entities from 110 to 60 and reduced staff from 12,000 to 8,000, through both job cuts and management buyouts.

Advent didn’t stop there: it also shook up the geographic distribution of the company. It closed a money losing division, it moved low end production to low cost countries while keeping high end production in Western Europe. During the first year of ownership, Advent’s “strategic disposal” program delivered o100 million in cash proceeds and returned it to profitability.

The business is now growing at a 14% clip, compared with an industry average of 5%, according to Advent, which exited in August. The deal was executed in Germany, where Advent has shined-it has completed eight deals there in the last year and one half, including distressed German stationary group Herlitz.

Moeller, which was founded in 1899 and whose products are sold in over 80 countries, now has what Advent calls sustainable EBITDA of o120 million and sales of o800 million.

-Mark Cecil

KPS Tunes Up Auto Parts Maker

In the chaotic, deep suffering automotive space, KPS Special Situations Fund acquired the assets of auto parts makers Iron Mountain Industries and Jernberg out of bankruptcy in September. 2005 and helped it turn profitable and generate more cash in the first month out of bankruptcy than it had in the previous year.

The companies broke down due to high raw materials prices and an uncompetitive cost structure. But during the bankruptcy process, KPS worked with lightning speed, breaking out its vise and nutdriver to bring the autoparts supplier out of Chapter 11 in a mere 55 days. KPS did all of its work in five weeks, erasing $40 million in liabilities in the process. The firm invested $23 million in equity and $8 million in interim financing to help pay for manufacturing equipment.

During the process, KPS negotiated 30 separate agreements with customers, vendors, lenders and lessors, including three collective bargaining agreements with the steelworkers’ union. KPS also got a loan from LaSalle Bank worth $37 million. It then KPS also secured a new CEO, COO and CFO for the company, which it renamed Hephaestus Holdings. KPS brought in former Metaldyne executive George Thanopoulos to lead it going forward.

The company was profitable within the first month of operations after the deal, generating more cash than the assets had in the previous 12 months. KPS’s Michael Psaros went on record in this publication at the time of that deal saying about the deal, “We believe that in chaos there is opportunity.”

He added, “We see this as an opportune time to make targeted investments in the right areas of the automotive parts industry. The company is the third largest competitor in the North American forged parts industry.” Psaros said the size and the complexity of the parts Hephaestus provides helps insulate the industry from offshore competition.

New York-based KPS still holds the company.

-Mark Cecil


Going Pirate: Blackstone Builds Up Legoland

Blackstone’s Merlin Entertainment bought 70% of four Legoland amusement parks for $460 million in August. It didn’t waste any time in improving its target.

The deal represented a sale of a non-core asset by parent Lego Co. of Denmark, which has been struggling, but recently posted a return to profitability thanks to the sale. It started looking for a buyer for Legoland with advisor Morgan Stanley in 2004.

Blackstone has already made an impact on its target, adding new rides and a “pirate theme.” In Carlsbad, Calif., for example, by early this year, Blackstone was underway with a $10 million plan to build the pirate-themed addition to the park there. The “Pirate Shores” addition will have new rides and a “4-D” movie. The expansion is the largest in that park’s history.

Legoland now plans to open a fifth park and 2005 was the all time best year for it in terms of revenue. Blackstone is planning to make 2006 the biggest year for growth in the company’s history.

With the deal, Blackstone became the second largest theme park operator in Europe, behind The Tussauds Group, and the ninth largest worldwide. Merlin operates parks in eight European countries. The deal boosted Merlin’s annual attendance to 12 million visitors per year, with EBITDA of about $70 million and sales of $235 million in 2004. Legoland contributed $43.5 million in EBITDA and about 5.6 million visitors. The somewhat lofty multiple of 13x EBITDA was paid for out of Blackstone Capital Partners IV. Blackstone put in 40% equity and leverage at 5.3x EBITDA.

-Mark Cecil


Golub Capital Has A Year To Remember

The fierce competition that defined 2005’s lending market could end up being one of the events that ultimately separates the winners from the losers. And if that ends up being the case, then one will be sure to find Golub Capital standing among the winners.

Last year, in addition to completing 44 investments-more than double the amount completed in 2004-the firm was busy raising about $340 million for its first international fund (which has yet to close), hiring five new employees, opening a new office in San Francisco and beginning the fundraising process for its fifth fund. That’s not to mention how just last May Golub closed its fourth fund with capital commitments of $800 million, easily surpassing its target of $400 million.

Additionally, the firm expanded its investment range to facilitate initial investments of up to $50 million per transaction, which is an increase from the $35 million cap the firm would initially commit in 2004. But even though the New York-based firm is willing to finance larger deals, it has not ceased to do smaller financings, as well. These include the $5.75 million in subordinated notes and common equity it provided for The CapStreet Group LLC’s investment in WorldWise Inc. and the $7 million of sub debt facilitated for Global Power Systems’s sale to Industrial Growth Partners.

“We are vigilant to avoid the potential mistakes of losing our culture and growing too fast. With our team, we will maintain the credit quality in our portfolio, our reliability with sponsors and our integrity,” said Golub President Lawrence Golub told Buyouts in January. “If the credit markets change and it makes sense to shrink assets, that’s what we’re going to do. We don’t want a gun to our head. We’re proud of growth but aren’t driven by it.”

And Golub certainly has a lot to be proud of. The firm’s total capital under management in 2005 increased to an amount significantly over $1 billion from $500 million in 2004 and $250 million in 2003. Golub typically invests in deals with leverage levels between 3.75x and 4.75x EBITDA-rarely exceeding 5x.

-Ari Nathanson


Peterson Partners Builds Checkbook With Scrapbooking

When Peterson Partners acquired scrapbooking company Making Memories Inc. three years ago, it knew it was buying into something good, but just how good came as a surprise. The buyout came in two waves. First, the Utah-based private equity firm acquired 80% of Making Memories in Jan. 2003 from its founder Bridgette Server, who partnered with Peterson and retained the remainder of the company for herself.

After the buy, Peterson immediately made its mission the institutionalization of the company-increasing its customer base and adding an infrastructure necessary to facilitate rapid growth. Ultimately, what began as a mom-and-pop shop now sells its products to retailers like Target, Michaels, Jo-Ann Fabric & Crafts, Office Depot and Staples.

In 2004, Peterson bought the remaining 20% of Making Memories from Server and brought in Steve Ruelle, a veteran with experience from international craft tool maker Fiskars Brands Inc., to run the company.

“Bridgette [Server] actually made more money selling the remaining 20% of Making Memories than she did on the original 80 percent. That’s how much and how fast the company was growing,” Peterson Partner Rick Stratford told Buyouts.

Although Stratford could not discuss specific terms of Making Memories, he did confirm that sales during Peterson’s two and a half year ownership of the company grew from $19 million annually to $45 million, and EBITDA expanded by a vigorous 350 percent.

Far exceeding Peterson’s expectations, the company opted for an exit before the traditional five-year holding period comes to an end. In May 2005, Making Memories was sold in a sponsor-to-sponsor transaction to Advent International for an undisclosed amount.

Due to a one-year confidentiality agreement with Advent that expires this May, Stratford could not disclose how much Peterson was able to profit on the sale of Making Memories. He did, however, indicate that the investment yielded a more than triple-digit IRR and that the return multiple was “a lot more than 10x” the investment.

The U.S. scrapbooking market is a $2.6 billion industry that’s had double-digit growth per annum for more than 25 years. “With one in four households actively participating in scrap booking, it now surpasses the golf industry,” according to a statement released by Peterson Partners at the time of the sale.

-Ari Nathanson