Target: Ellman International Inc.
Sponsors: Baird Capital Partners
Seller: Alan Ellman and Jon Garito
Financial Adviser: Seller: Sokolow & Associates
Legal Adviser: Sponsor: Winston & Strawn LLP; Seller: McDermott Will & Emery
It took 18 months of convincing, but
The buyout firm, part of Robert W. Baird & Co.’s private equity group, acquired the company recently for an undisclosed amount from company CEO Alan Ellman and President Jon Garito. The firm typically invests $10 million to $30 million of its equity in deals ranging in size from $25 million to $125 million.
Baird Capital became familiar with Ellman International through Rick Epstein, an executive-in-residence that the firm hired specifically to court the company’s owners. Epstein knew of Ellman International from his 20-plus years of experience in the health care industry, including stints in executive suites of the V. Mueller division of Cardinal Health, Intuitive Surgical, and Baxter International.
Epstein and the Baird Capital investment team liked Ellman International for a number of reasons, said Gordon Pan, a partner. They thought a surgical cutting device Ellman International specializes in, which minimizes scarring after surgery, could be marketed to a larger audience of physicians. And Baird Capital executives believed they could expand Ellman International’s business in Asia, where the firm has a team of 20 professionals operating out of offices in Shanghai, Beijing and Hong Kong. About 50 percent of Ellman International’s business is international, Pan said.
Once the Baird Capital team zeroed in on Ellman International, the firm hired Tom Harper, former vice president of marketing and business development at V. Mueller, to bolster its pitch to improve Ellman International’s sales, marketing and distribution.
Despite these plans for Ellman International, there was one problem: Ellman and Garito, who had run the company for 25 years, weren’t looking to sell. They were interested, but hesitant, because they were concerned about their legacy and their employees.
“I’ll be frank, we both walked away several times in the transaction,” Pan said. Ultimately, “we were able to say, ‘Listen, this is all about growth. This is not about us taking your business and downsizing.’ It was about us investing in them.”
Ellman did not return calls requesting his take on the deal.
The Baird Capital team prevailed by promising to be good stewards of the business and by retaining Ellman and Garito as consultants. The key was making sure they would still have a role, Pan said.
The firm is now focused on beefing up the company’s sales and marketing force, enhancing its distribution network and expanding internationally, especially in Asia. Ellman International also has a pipeline of other medical devices the Baird Capital team hopes to help bring to market. Epstein is the company’s new CEO, although he will also continue to look for new deals for Baird Capital.
CIT Healthcare has agreed to provide senior debt financing, which accounts for less than 50 percent of the capital structure, Pan said. CIT, Epstein and
Pan said Baird Capital had no difficulty procuring financing. In all, it approached three outlets before ultimately going with CIT Healthcare. The firm made the investment from its $300 million fourth fund, closed last year.—B.V.