Private equity firm TA Associates is not going to let a little economic downturn keep it from doing technology deals. The firm, which has a strong focus on technology investments, recently purchased a majority stake in Ixion Technologies for $40 million.
TA Associates purchased the New Bedford, Mass.-based company unleveraged using equity from the $2 billion fund TA IX and a companion fund. The management of the company retained a “significant minority interest.” Robinson-Humphrey advised Ixion, which is currently running revenue in excess of $20 million per year.
P. Andrews McLane, a senior managing director at TA, said that although the firm often leverages its buyouts, this deal was a little unusual. “That’s because the growth trajectory of the business is such that we didn’t want to be encumbered by debt,” he said.
Ixion Technologies, a semiconductor packaging manufacturer, came to the attention of TA Associates while the firm was pursuing a different investment opportunity. Kenneth Schiciano, a managing director at TA, was checking references for a fiber optic company they were interested in and placed a call to one of its suppliers, Ixion Technologies. Ixion Chief Executive Officer Jay Greenspan had started an earlier business, Aegis Inc., with financing from TA Associates, and the conversation soon turned to Ixion and the possibility of a sale. McLane, who worked with Greenspan on Aegis, called him earlier this year to say, “Don’t do anything too fast. I’d love to come down and talk to you.” And the rest is history.
“We love managers who operate efficiently and respect capital, which these guys have done,” said McLane. “They’ve done a lot with a small amount of capital – [they’ve] turned it to profitability.”
Besides being familiar with management, TA Associates was encouraged by Ixion’s customer list and the satisfaction expressed by those businesses. “I don’t think I’ve ever made calls to customers and had them so universally positive on the company and the management team,” McLane said.
Ixion’s client base includes Agere, Boeing Satellite Systems, CODEON, Multilink Technology Corp. and the CoreTek division of Nortel Networks. In addition to those customers, Ixion is “working with dozens of smaller, newer, in many cases venture-backed, fiber optic-related businesses, and those are the seeds for their future growth,” said McLane.
“[Ixion Technologies] is attractive to us because it’s a company that supplies product to a large, exciting and rapidly growing industry area optical telecommunications,” McLane said.
Ixion had good reason to partner with TA Associates as well. The firm, which is an old hand in venture and technology investing, is familiar with many of Ixion’s current and potential customers, and therefore has the ability to provide insight and knowledge as it grows. McLane and Schiciano will each take a seat on the company’s board.
Keeping A Distance
TA Associates, which has offices in Boston, Menlo Park, and Pittsburgh, is often categorized as a venture capital firm due to its long history of investing in that arena. However, the firm seems to be making a move to change its definition. “We’re managing right now about $3 billion in recently raised funds, which is what puts us in the category of private equity buyout in many respects, more than venture capital,” said McLane. “Although we’re still viewed by many as a VC firm because we like technology . . . we’re not uncomfortable at all being in a non-control position,” he added.
Indeed, the firm’s LBO activity, which dates back more than a decade, has been creeping to the forefront. Its recent buyout activity has included investments in EYP Mission Critical Facilities, Datek Online Holdings Corp. and Physician’s Specialty Corp. Besides technology, the firm has made investments in financial services, health care, media and other high growth industries.
“There has been a lot of attention in the last few years to technology buyouts as though that were some sort of new concept. It’s not,” McLane said. “We’ve been doing them for many years . . . We’re a buyout firm in many respects.”