GTCR buys back Cole-Parmer in $2 bln-plus deal, producing 3x return for Golden Gate

In today’s competitive healthcare environment, the chance to invest in a company you’ve had success with in a prior life might be a no-brainer in certain instances.

Take the example of Cole-Parmer, which makes laboratory and industrial-fluid-handling products, instrumentation, equipment and supplies. The company’s management team reached out to GTCR this summer to solicit interest in a potential transaction, only two years after the Chicago PE firm exited its investment in the company, GTCR Managing Director Sean Cunningham said.

“Our activity in this space, domain knowledge in life sciences and our history with this asset put us in a position to move quickly,” Cunningham said.

Buying back the company wasn’t something GTCR had planned on, Cunningham said, but the firm was “thrilled about the opportunity to back [Cole-Parmer] again” when the phone rang in late July. “We know this management team extremely well … And the business had always been on our radar screen.”

GTCR on Sept. 26 announced its agreement to reinvest in Cole-Parmer, taking a majority stake in the Vernon Hills, Illinois, company. Golden Gate Capital, which bought Cole-Parmer from GTCR in mid-2017, will retain a significant minority investment alongside management, the announcement said.

Jefferies advised the company, while Baird advised Golden Gate.

In connection with the transaction, San Francisco’s Golden Gate is set to generate a return of approximately 3x, taking into account realized proceeds and equity rolled over, a source familiar with the matter said.

Financial terms weren’t disclosed; however, the deal was valued north of $2 billion, representing a mid-teens multiple of Cole-Parmer’s approximately $140 million in pro forma LTM adjusted Ebitda, two other sources told Buyouts.

Golden Gate and GTCR declined to comment on financial details of the transaction. Cole-Parmer is led by CEO and Chairman Bernd Brust.

Goldman’s role

The deal was not the result of a formal auction process. Rather, Goldman Sachs Merchant Banking—the firm’s private investing arm—was said to have expressed interest in the company, prompting deal discussions, two of the sources said. It is unclear whether the company engaged with additional parties, however the company over the years has regularly fielded interest from PE firms, family offices and strategic buyers, a fourth source said.

Interestingly, Cole-Parmer and Goldman Sachs also have a longstanding relationship. Goldman Sachs’s investment banking division, alongside Jefferies, advised Cole-Parmer on its March 2017 sale to Golden Gate, according to an announcement at the time.

Goldman Sachs also advised Cole-Parmer in 2014, when Thermo Fisher Scientific divested the unit to GTCR in a $480 million deal, two of the sources said.

Interestingly, Jo Natauri, now a partner within Goldman Sachs Merchant Banking Division and head of global healthcare investing, was on the investment banking side of Goldman Sachs during the prior processes.

Having initially joined the firm’s investment banking division in 2006, working within both the healthcare and consumer groups, Natauri, now a partner, moved over to the Merchant Banking Division about a year to 18 months ago, a fifth source said.

GTCR declined to comment on other parties that may or may not have expressed interest in Cole-Parmer. Cunningham said the firm was first introduced to Cole-Parmer’s chief back in 2009, when Brust was holding the COO post at Life Technologies.

Brust subsequently worked as CEO of Qualicaps, a provider of capsule manufacturing for pharmaceutical companies. After Qualicaps was acquired by Mitsubishi Chemical Holdings in 2013, the executive partnered with GTCR to seek a new platform investment. The partnership ultimately led to GTCR’s initial 2014 investment in Cole-Parmer.

GTCR during its prior investment in Cole-Parmer focused on shifting its product mix to proprietary equipment and supplies, away from third-party products. It also made a big push into particular end-markets, Cunningham said.

While Cole-Parmer’s products and services served various end-markets when under the Thermo Fisher umbrella, GTCR prioritized growing its life sciences and environmental segments, he said. GTCR also helped support the company’s five add-on acquisitions and installed a new management team.

Geographically speaking, Cole-Parmer has the runway and financial wherewithal to continue to expand beyond its current footprint in the U.S. and Europe, Cunningham said.

The newly-capitalized company will consider a broad range of M&A opportunities, he said, evaluating both smaller tuck-in transactions and larger, transformative deals in the several-hundred-million to billion-dollar range, Cunningham said.

GTCR, known for its executive-driven strategy, joined forces earlier this year with with Gregory Lucier, former CEO of Life Technologies and NuVasive, to form Corza Health. The company will pursue an initial platform within the life sciences and medical technology arenas.

GTCR-backed Resonetics has also remained active on the M&A front this year. In its fourth acquisition this year, the medical device contract manufacturer snapped up Tru Tech Systems in September.

Goldman Sachs has also proven an aggressive buyer of healthcare assets. The firm, via a private investment vehicle called West Street Capital Partners VII, struck a deal in June acquire Capital Vision Services, the management services company of MyEyeDr. Financial terms weren’t disclosed, but a source told Buyouts the deal commanded a valuation of approximately $2.7 billion—representing the largest sponsor-backed transaction in vision-care history.

Golden Gate, Goldman Sachs and Cole-Parmer declined to comment.

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