Sterling Nabs Majority Stake In Flow Control Co.

Target: FCX Performance Inc.

Price: Undisclosed

Sponsor: Sterling Investment Partners

Seller: Founder Charles Simon

Advisor: Seller: Robert W. Baird

Sterling Investment Partners, a middle-market firm headquartered in Westport, Conn., has added FCX Performance Inc. to its portfolio, acquiring a majority stake in the Columbus, Ohio-based distributor of flow control products.

Financial terms weren’t disclosed, but M. William Macey Jr., a managing partner, told Buyouts the equity portion of the deal “approached 50 percent,” and in a press release the firm characterized the debt financing of the acquisition as “conservatively structured” in order to support growth plans for FCX Performance. Key members of the management team, including Charles Simon, who founded the company in 1984, took new equity in the transaction. Their collective equity, both purchased and incentive-based, exceeds 25 percent, according to Macey.

Annual sales for FCX Performance are more than $150 million, according to its Web site, and Macey said the company is “highly profitable.” Its products include valves, instrument measurement devices, heating elements as well as pumps and filters with a variety applications. The plan is to grow the business by expanding its technical and customer service capabilities, with Sterling Investment Partners prepared to commit additional undisclosed capital to support growth initiatives.

Financing was provided by GE Antares Capital, Madison Capital Funding, affiliates of Babson Capital and National City Equity Partners. Robert W. Baird acted as FCX Performance’s financial adviser. Macey said Robert W. Baird presented the deal to Sterling Investment Partners over the summer, knowing the niche manufacturing area was an industry in which the firm has a considerable comfort level.

FCX Performance is the fifth investment for Sterling Investment Partners II LP, the firm’s second fund, which closed in December 2005 with roughly $545 million in capital commitments. Limited partners for the fund include the Illinois Municipal Retirement Fund.

The shop’s debut fund closed in December 2001 with $231 million in commitments. Prior to that, Sterling Investment Partners, which was founded in 1991, secured financing on a deal-by-deal basis. Macey said Fund II is roughly 40 percent deployed. He doesn’t expect the firm to embark on another fundraising effort before the end of 2009.

A typical deal for Sterling Investment Partners involves a company with annual revenue of between $50 million and $300 million and EBITDA ranging from $10 million to $40 million. The firm looks for “strong, growing normalized free cash flow” and sustainable competitive advantages, such as a differentiated product or service or a proprietary process or technology.

The sectors that Sterling Investment Partners has extensive experience with include niche manufacturing as well as industrial, energy services, and consumer products and services.