Heritage Partners Clock Advance Watch Co. Deal –

Heritage Partners of Boston closed its first investment of the year Feb. 12, when it acquired Advance Watch Co. of Warren, Mich., for approximately $100 million.

Advance is a family-owned entity that has been in operation for 25 years as a designer and manufacturer of consumer products with precision instruments. Chief Executive Marc Schechter said the company brought in a private equity buyer for three reasons: to provide liquidity to three family members that were retired or semi-retired; to provide some non-family managers with equity in the company; and to take larger risks through aggressive acquisitions.

“I liked the structure of the deal, particularly that there was not big leverage, and that Heritage is extremely aggressive on acquisitions,” Mr. Schechter said.

GMA Capital of Detroit served as Advance’s financial adviser on the transaction.

Fleet Bank was administrative agent and Bank One syndication agent for a $50 million bank loan that was the only debt piece in the recap, said Brook Parker, a partner at Heritage.

Heritage structured the investment as a “Private IPO,” where the firm permits reinvesting shareholders to retain 50% economic control at the time of the deal, while Heritage retains certain rights that are tied to the valuation of the company at the time of its exit. These deals are generally carry a debt-to-equity ratio of 1.2-1.

Advance derives the majority of its $100 million in annual revenue from its watch, pen and clock businesses, where the company has established its presence in the low-end segments of each sector. Advance Watch products are typically sold to mass-market and discount retailers, Mr. Parker said. He added that the company had begun expanding its offerings to include office products and scales, but, as yet, little revenue has been generated from these areas.

Potential acquisitions will be companies that offer complementary products within current and new categories. “The sweet spot for acquisitions will be in the $50 million to $150 million range,” Mr. Parker said.

Heritage has three portfolio companies that operate within the consumer products area and are pursuing consolidation; 20th Century Plastics, American Tack & Hardware and Natural Science Industries.