Norwest scores in Paladin exit

Dover Corp., a manufacturer of industrial products, recently acquired Paladin Brands Holdings Inc. from Norwest Equity Partners for an undisclosed amount.

The sale of Paladin Brands marks the end of a nearly 3-year investment in the construction equipment company. Terms of the transaction were not disclosed, but analyst reports estimate the sale price between $425 million and $500 million.

Norwest acquired Paladin in October 2003. The Cedar Rapids, Iowa-based company, which makes attachments that fit onto construction and forestry equipment, was at the time reporting annual sales of about $75 million.

“We identified the [construction] equipment attachment industry as a highly fragmented, $2 billion market that places a lot of value on brand names,” says Timothy Kuehl, a principal at Norwest. He adds that the market is also attractive for its strong cash flow characteristics.

Norwest acquired Paladin on an add-on binge to bulk up the company’s brand recognition. In all, the firm acquired six additional industry players, including Badger, Harley and Sweepster to add to Paladin’s roster. Today, the company generates annual revenue north of $350 million.

Kuehl credits Paladin’s “supportive balance sheet” for allowing the company to accommodate such a wide breadth of M&A in less than three years. Throughout Norwest’s investment in Paladin, the company was backed by senior notes from Antares Capital Corp. (now GE Antares Capital) and subordinated financing from National City Equity Partners and Norwest Mezzanine Partners.

Kuehl says that there are about 20 product line segments associated with construction equipment attachments and that Norwest’s goal for Paladin was to be the market leader in each one. Today, Paladin is the leader in all but seven of those segments, he says.

“The next phase in Paladin’s growth will be accomplished through Dover’s expertise in driving operational success and its ability to provide management with the wherewithal necessary to continue to grow,” Kuehl said.

Paladin was a portfolio company in Norwest Equity Partners VII LP, which closed in 1999 with an $800 million commitment from Wells Fargo & Co., Norwest’s sole LP. The firm is currently making equity investments from Norwest Equity Partners VIII LP; also an $800 million, Wells Fargo-funded vehicle. —Ari Nathanson