Target: Axiom Automotive Technologies
Sponsor: Linsalata Capital Partners
Seller: The Riverside Co.
Financial Advisor: Seller: Harris Williams
Legal Counsel: Sponsor: Calfee Halter & Griswold; Seller: Jones Day
Small-market LBO firm
But the work paid off. After nearly nine years, the company had become formidable enough that Cleveland-based
Riverside, which is based in New York and has a large office in Cleveland, followed its usual strategy of buying up and combining small companies when it merged two auto-parts suppliers, each based on different U.S. coasts, to form what would become Axiom in 1998. The big add-on came in 2000, when Riverside bought ailing supplier ATC Distribution Group. The combined company, which was losing roughly $11 million annually, represented a more unusual challenge for Riverside: a turnaround.
said his firm normally avoids turnaround situations.
As it happens, Ted Kachel, a senior operating partner who performs turnarounds for Riverside, was just completing another assignment. The LBO firm gave him the reins of Axiom and rode out the investment. By the end of 2005, the supplier was pumping out EBITDA of $25 million. For the first quarter of 2007, Axiom reported EBITDA of nearly $8 million, according to Riverside.
Béla Szigethy, Riverside’s co-CEO, said he was pleased with the investment, calling the cash-on-cash return “good” and the IRR “acceptable.” But, he said, the nine-year holding period diluted the IRR figure. “We enjoyed this company, but we moved on because it was time,” Szigethy said.
With the addition of Axiom to portfolio company Transtar Industries Inc., Linsalata Capital now owns a holding company that generates $500 million in annual revenue and employs 1,700 people in 97 locations. Both Axiom and Transtar supply auto-repair shops and auto-supply stores.
Although other U.S. auto-supply companies have taken a beating in recent years, and in some cases dragged down their buyout-firm parents, Linsalata Capital Chairman Frank Linsalata remains upbeat about the combined Transtar. The auto aftermarket grows slowly, he said, but is largely insulated from the tremors in the larger automotive sector since Transtar isn’t a vendor to troubled domestic auto manufacturers. In fact, buying Axiom could be seen as a countercyclical play, since in times of economic retrenchment people tend to hang on to their cars for longer, necessitating repairs, he said. “We don’t like straight automotive companies, but we think the aftermarket is strong,” Linsalata said.
Linsalata Capital purchased Axiom Automotive out of