SKM-led Group Targets Coatings Industry –

New York-based Saunders Karp & Megrue with the Shattan Group LLC and Value Investing Partners this month acquired Kenny Manta Industrial Services LLC, a coatings company and provider of industrial cleaning services for approximately $31 million.

Saunders Karp invested $28 million into the transaction. Kenny Manta was advised by the Shattan Group. No debt was included in the transaction, as the firms made a pure equity commitment.

“It was a geographic play where the company hopes to dominate the Midwest, starting in Chicago and then expanding from there,” said Jamie Dworkin, a general partner at Saunders Karp. “Kenny Manta was looking to raise capital to take out early-stage investors wanting to exit the company, pay off some bank debt in order to prime themselves for growth and increase capital needs, and to create a war chest for acquisitions.”

Dworkin said the transaction was brought to the investors in the form of a negotiated auction.

“A lot of times when management is looking to partner up and not looking to take money off the table, they’re much more intent on targeting the people they feel comfortable with,” he said.

“This was an opportunity for us to team up with world class management in a very large and fragmented industry. Our capital, M&A abilities, debt financing and the raw horsepower that this management team brings in operating in these industries makes for a very nice combination,” Dworkin said.

Kenny Manta is based in Chicago and had revenue of approximately $140 million in 1999. The company provides dry and wet vacuuming, hydroblasting, chemical cleaning, painting, lining and fireproofing for the industrial cleaning and coatings industry.

“Kenny Manta plays in the industrial cleaning business, which is generally an outsource service of vacuuming wastewater, cleaning up grit and grime that may appear in steel mills,” Dworkin said. “The nice thing is there is a whole raft of services that one can provide through purchasing the right kind of equipment and expanding once you gave a captive client.”

Kenny Manta is involved in both the chemical cleaning industry, which is cleaning out chemicals that might accumulate within the equipment, and the industrial coating business, which is anything from fireproofing to painting the insides and outside of equipment to extend the life of the equipment.

“They are slightly different businesses, but it all fits within the industrial cleaning sector,” said Dworkin.

Plans for the company includes solidifying internal growth, cross-selling opportunities, and acquisitions, Dworkin said. “It is not unusual for this company to bid on opportunities in South America, Europe, and the Middle-East,” he said.

Add-Ons Planned

Dworkin also mentioned that Saunders Karp was considering making a strategic investment in a small company that had an estimated $1 million in EBITDA and would be added onto Kenny Manta.

“In general, we like to buy companies in the range of $3 million to $5 million EBITDA that are either doing exactly what we’re doing or can expand our capabilities,” he said.

In other recent deals, Saunders Karp in December decided to divest itself of Wilshire Restaurant Group, selling it to Castle Harlan in a $150 million transaction (BUYOUTS Dec. 6, 1999, p. 18). In January, Saunders Karp teamed up with Banc One Equity Capital, Carlisle Enterprises and Gateway Partners to commit more than $125 million to establish a telecommunications infrastructure platform company, Linc.net (BUYOUTS Jan. 24, p. 12).

Saunders Karp & Megrue is a private merchant bank that invests in and acquires operating businesses in the U.S.