Private equity firm Equity Capital Partners acquired two companies in the textile industries this quarter for approximately $30 million. The two companies, Lanscot-Arlen and Wilmington Piece Dye will continue to operate under their own names but will be under the same management.
The transaction was financed with senior bank financing from Congress Financial Corp., seller financing and an equity commitment from the firm’s $10 million ECP Horseshoe Fund.
The deal marks the largest ever for the Atlanta-based firm, which typically seeks to invest in companies that generate between $1 million to $4 million of operating cash flow.
Equity Capital Partners owns approximately two-thirds of the company with the management team retaining the other third. Equity Capital controls the majority of the board.
“This transaction was, for us, even larger than our usual range and so having the seller buy into us as partners and providing some very attractive seller financing was a real key to pulling off the transaction,” said David Felts, managing director of the firm.
The sellers, Saul Nulman and Glenda Kirby, were advised by Chicago-based Dresner Investment Services Inc.
Lanscot-Arlen is a supplier of fabrics and novelty constructions to the drapery fabrics, bedding, furniture, table linen and apparel industries. The company has annual sales of more than $50 million. Its sales and customer service operations are in New York, with converting operations and distribution facilities in Concord, N.C.
Delaware-based Wilmington Piece Dye provides dyeing, finishing and embossing services for the apparel and home furnishings industries.
Felts covered the home textile industry during his tenure at Prudential Securities Inc., and considers it to be an attractive space for investment, particularly now that drapery trends are turning toward heavier fabrics. “They have what is called in the industry the cocooning of America’,” said Felts. “That 45- to 54-year-old bracket really spend a disproportionate amount of their income inside the home. So plays involving remodeling, redecorating, there’s a large portion of the population in that sector now and we’re optimistic that this sector has a lot of growth potential.”
The firm was also attracted to the company’s management team which Michael Cochran, managing director of Equity Capital, describes as “immensely industry knowledgeable, very technically knowledgeable and very entrepreneurial.”
Clement Ramdin, chief operating officer; Robert Woodcock, president; and Mike Sider, chief financial officer, will lead the combined company.
Initially, Equity Capital plans to enhance the company with the addition of technology and public marketing to their strategy. Although the immediate concern will be internal growth, the company does expect to make some acquisitions in the future. “Our industry contacts and our view of the industry tell us that over time an acquisition strategy on a rational basis could very well bolster our investment and we will look to be an opportunistic buyer for this company,” said Cochran.
ECP Horseshoe Fund, which was raised two and a half years ago, is nearing full investment. Equity Capital Partners plans to raise a successor fund to be invested in the same market sector.