Proving that cold call buying can still be effective in today?s contact-driven private equity market, TA Associates recently completed a $57.5 million buyout of EYP Mission Critical Facilities Inc., a company that the Boston-based investor was first alerted to by a mention in the Albany Business Journal.
“We discover a lot of our deals that way,” said Michael Wilson, a principal with TA Associates. “Someone just ripped out a story about them and then we made a cold call to [EYP President] Steve Einhorn.”
The offer itself involved both sellers? paper and subordinated debt, which would be used to help break EYP off of its parent company, Einhorn Yafee Prescott Achitecture & Engineering PC (EYP A&E). The financing, which would give TA Associates an approximate two-thirds stake of the new stand-alone entity, would also provide some additional capital for business expansion purposes.
“We talked to a lot of people ? both private equity firms and large strategic corporations ?who were interested in investing, or flat out acquiring us,” Einhorn recalled. “The TA offer just made the most sense because we wanted to maintain some ownership in the company.”
And it?s not hard to understand why.
EYP Mission Critical is one of those increasingly rare private companies with a profitable balance sheet and a leading market share in a desirable sector. The Albany, N.Y.-based company works with mission critical facilities, such as television studios, data centers and stock trading floors, to minimize electrical interruption. Not only does the company help design the electrical platform infrastructure, but it will use the newfound capital to help branch out into also providing ongoing operations and maintenance services. Currently, the company earns nearly 90% of its revenue from the design side, but hopes to even out the mix within the next two years.
As for why EYP Mission Critical wanted to split off from its parent company in the first place, TA Associates? Wilson suggested it was a question of clashing cultures.
“They had been incubated in one of the largest architecture and engineering firms in the world, but the people that run [EYP Mission Critical] are very different from architects,” Wilson said. “This is especially true in terms of the pace of the work. Mission Critical?s clients have a high sense of urgency, and that?s just not usually the case on the architecture side.”
Some of EYP Mission Critical?s current customers include American Express, AT&T, Exodus Communications, Fidelity Investments, Merrill Lynch & Co., Salomon Smith Barney and Charles Schwab & Co.
Both Einhorn and Wilson said that the company has no foreseeable need for an additional private equity offering, but added that an initial public offering was not imminent either.
Contact Dan Primack: Daniel.Primack@tfn.com