Harvest Partners acquired Communications Supply Corp. (CSC), buying the communication equipment distributor from UBS Capital II LLC in a deal that closed in the first week of May. Terms of the transaction were not disclosed.
CSC, based in Illinois, operates a network of more than 30 locations that distribute over 95,000 networking products, including cable system components, network application supplies and low-voltage products. The company, which competes against industry rivals Anixter International and Ingram Micro, took in nearly $500 million of revenue last year. And while the CSC’s enterprise value was not disclosed, Harvest Senior Managing Director Stephen Eisenstein did say the transaction fit within Harvest’s typical price range of $100 million to $500 million.
“The management team is really strong here,” Eisenstein said of the Steven Riordan-led company. “We’ve watched CSC outperform their peers during the latest down cycle [in the industry], and we think the company is very well positioned for the future, especially now that the industry is starting to turn around.”
Harvest is anticipating a bump in CSC’s end markets, which has been negatively impacted by a retrenchment in corporate IT spending the past few years. “CSC primarily distributes wire and cable to Fortune 1000 companies,” Eisenstein said. “IT spending has been depressed in the past couple years, but we feel that should bounce back along with an improvement in the economy.”
To help spur growth, Harvest expects to make a few “tuck-in” acquisitions through the platform, although Michael DeFlorio, a managing director at Harvest, stressed, “We’re not approaching this solely with an acquisition strategy per se, but we will look at deals that expand CSC’s regional presence.”
Harvest used its 2002-vintage, $558 million Harvest Partners IV L.P., to provide equity in financing the transaction, while GE Commercial Finance and Antares Capital were tapped as the leads on the senior debt provision. Oaktree Capital, meanwhile, led the subordinated debt portion of the financing arrangement. With this deal, Harvest’s Fund IV has now deployed roughly half of its available capital.
Even as Harvest hesitates to discuss an exit plan for the investment, Eisenstein did say he expects the company to grow large enough for an IPO to emerge as a possible outcome. He noted it is also likely that the firm will eye other traditional exits as well, such as a sale to a strategic or financial buyer, but noted that at this point it is still too early to tell.