Thayer Taps Vivendi Pipeline With Sunburst Acquisition –

Washington, DC-based Thayer Capital Partners acquired Sunburst Technology from Houghton Mifflin, a division of Vivendi Universal Publishing, in a deal that bolsters the firm’s presence in the educational arena. The financial terms of the transaction, which closed on Oct. 2, were not disclosed.

Sunburst develops and publishes multi-media educational software, videos and printed supplements that are designed for students ranging from kindergarten to 12th grade. The company operates in three divisions, including Educational Resources, which distributes instructional materials through a number of different channels; Sunburst Software, a provider of educational software programs for the kindergarten to eighth-grade market; and Sunburst Health and Guidance, a producer of videos and printed supplements for educators.

Chris Temple, a managing director at Thayer, said the acquisition was an all-equity deal, as time constraints prevented the firm from arranging any financing to support the transaction. Thayer used its $880 million Thayer Equity Investors IV, L.P. to back the deal. The fund closed in March 1999 and has invested between 70% to 75% of the original capital. Temple said the firm would likely refinance Sunburst in the near future, possibly in the fourth quarter of 2002 or the first quarter of 2003, with a more traditional financing arrangement.

In targeting Sunburst, Thayer was attracted to the company in part because of its position as an orphaned unit of a larger conglomerate. Temple explained that as a part of such a large and diverse company, Sunburst did not receive the sufficient attention that was necessary to fully maximize its potential. As the separate divisions, listed above, were continually being acquired, there was a “diffusion of focus,” Temple said, ending with its miniscule role as part of the Vivendi behemoth. With a new, increased focus on the divisions, Sunburst’s results are expected to blossom, Temple said.

Initially, Thayer will take on a “first 100 days” approach with the company, as it evaluates different strategies to best run the business. Specifically, Temple notes, Thayer will use this time to determine if Sunburst works best as one company, bundling the three divisions under one name, or as three separate entities, split up by each respective division. Further, Thayer will be looking at other opportunities to help facilitate Sunbursts’ growth, including the consideration of possible add-on acquisitions, which, Temple said, will be more of a focus when the new company refinances.

The firm installed John Crowley as the new chief executive officer of Sunburst. Crowley previously headed Educational Resources, when it stood as a stand-alone enterprise, and in his time there doubled the company’s sales and quadrupled its profits, Temple attests.

Thayer Capital Partners operates two private funds with more than $1.2 billion in capital, and focuses its investments on growth manufacturing companies, including electronic, industrial component and outsourced manufacturing names, and also the business services sector, consisting of information technology and service and outsourced manufacturing companies. Thayer also has previous experience in the education space, with its investment in corporate training company National Education Corp., which was eventually sold to Harcourt in the late 90s. That investment was led by Blum Capital, while Thayer and Fred Malek contributed as co-investors.