Graham Partners Builds On Eldorado –

Almost one year since its last add-on, Graham Partners last month acquired Tempe Stone, the stone manufacturing assets of Nesco Manufacturing Inc., for an undisclosed sum. The company is an add-on to Graham Partners’ stone veneer producing platform, Eldorado Stone. The deal will be financed with Eldorado’s existing senior debt facility led by CIBC World Markets.

Nesco Manufacturing is Eldorado’s third largest independent franchisee. By taking ownership of Tempe Stone, Eldorado will gain an important geographic market in the Southwest, said Joseph May, a managing partners at Graham Partners. It also presents the businesses as a “unified front” to its customers, he said.

Since Graham’s initial purchase of Eldorado Stone in February 2001, the company has doubled its sales through organic growth and the acquisition of L&S Stone in July 2001. The L&S acquisition gave Eldorado a presence on the East Coast to complement its already established presence on the West Coast.

While Eldorado and Graham Partners are continuing to look for new acquisitions, May said, the company is currently growing at 20% annually through organic growth and Graham Partners is happy to let that continue.

Presently Eldorado is in discussions with several of its other franchise businesses for possible acquisitions. “There’s an embedded pipeline of add-on opportunities because of the franchise network,” said May. Eldorado is in an excellent position to source its own add-ons due to the management team’s long-standing relationships with its franchise partners. Meanwhile, Graham Partners is looking at businesses outside the franchise network as acquisition targets, but has yet to strike any deals.

Graham Partners’ February 2001 investment in Eldorado Stone was financed with $30 million in equity from the firm’s $227 million fund. This fund was the firm’s first to include capital from outside investors. In 2000, Eldorado Stone had approximately $32 million in revenue. After the acquisition of L&S Stone five months later, combined revenue for the companies jumped to $70 million.

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