Monomoy Cranks Up Specialized Vehicle Roll-up

Target: Transeo LLC
Price: Undisclosed
Sponsor: Monomoy Capital Partners

With an eye toward assembling a slate of vehicle manufacturing companies, mid-market turnaround specialist Monomoy Capital Partners has acquired Transeo LLC, a Dayton, Ohio-based builder of armored vehicles used to transport large sums of cash. The fragmented specialty vehicle industry, with its multiple standards, prototypes and engineering protocols, offers fertile ground for expansion, said Stephen Presser, a partner in the Manhattan buyout shop.

Indeed, Presser was skeptical about the company’s prospects at first, questioning the growth potential for armored cars in a world where money is increasingly transferred electronically. Presser became convinced after learning that such vehicles are in demand from big box retailers like Wal-Mart, which use armored cars to transport cash to banks. (The company’s biggest customer, Garda, provides security, pre-employment screening and cash-handling services.) In addition, the firm has a strategy to diversify the company’s product line. “Transeo’s a fantastic platform to add maybe two to four or more of these smaller companies that make ambulances, for example, or security vehicles,” he said.

On the cost-cutting side, Monomoy Capital plans to redesign the company’s supply chain by finding cheaper vendors, overhauling its manufacturing process, and boosting production of the profitable items in Transeo’s product line.

While financial details were not disclosed, a typical Monomoy Capital target generates annual revenue of between $20 million and $200 million and annual EBITDA of up to $20 million. The firm usually invests between $5 million and $30 million in equity for a controlling interest. The Transeo deal fits that model, with Monomoy Capital buying the company outright and granting Transeo’s owners, who are also its managers, a substantial equity stake, according to Presser. The buyout shop plans to hold the company for three to five years. “I’ve always wanted to have a bulletproof deal,” Presser said, praising the company’s management and engineering talent.

Seeds for the deal were planted in late 2006 when Transeo’s owners, who will remain with the company, saw that Monomoy Capital acquired Western Recreational Vehicles Inc., a high-end motor homes manufacturer. Given the current credit climate, Transeo opted for the sale to Monomoy Capital over borrowing the money to expand the business, Presser said. The firm bought Transeo using its debut fund, Monomoy Capital Partners LP, which is roughly one-third invested. The firm has $280 million under management.—J.P.