Equity Partners HG brokers sale of Accubuilt, Inc. to SPV Coach Company, Inc. d/b/a Armbruster Stageway
For Immediate Release | August 8, 2017
Accubuilt, Inc. completed a going concern sale, including its two preeminent brands, The S&S Coach Company and Superior Coaches, to Kansas City, KS-based SPV Coach Company d/b/a Armbruster Stageway. Equity Partners HG, a Maryland-based investment banker, served as intermediary for the seller.
Accubuilt, Inc. (“Accubuilt” or the “Company”) is a leading manufacturer of funeral vehicles, including coaches and limousines, utilizing Cadillac and Lincoln chassis. The Company has the most diverse product portfolio in the industry and is one of the industry’s largest producers, completing more than 425 vehicles in 2016. Accubuilt operates out of a leased 180,000 square foot facility in Lima, Ohio and employs over 90 people. Employees have been notified operations will continue in place following the acquisition.
Armbruster Stageway has a rich tradition in the funeral car industry that dates back for over one hundred years and has the distinction of building the first combustion engine limousine. According to Sean Myers, President of Armbruster Stageway, “I am pleased we were able to acquire Accubuilt and its two iconic brands, S&S and Superior. We look forward to working with the employees in Lima to continue manufacturing premier vehicles and serve the customer base they have successfully built over the years. We believe our collective team is the best in the industry and we are excited to carry on the long, rich history of the Accubuilt brands.”
Rob Hubbard, Chairman of the Board and Chief Restructuring Officer for Accubuilt, commented, “This was a great fit all around. Sean’s vision and Accubuilt’s manufacturing capabilities make the combined company the benchmark for all other industry players. Armbruster is getting a tremendous operation with great people, and I know they will have continued success with it.”
In mid-November 2016, Accubuilt retained Equity Partners HG as the exclusive broker for the company. Under Hubbard’s leadership, the Company had completed a successful three year restructuring process to review operational practices and institute cost saving measures to the manufacturing process. Seeing significant improvement from those efforts, ownership felt it was the appropriate time to pursue a sale of the Company.
Matt LoCascio, managing director for Equity Partners HG, said, “Our task was to maximize value and find the right buyer for Accubuilt. As we explored the market and considered the options available, it was clear Armbruster Stageway presented the best fit for the long term success of Accubuilt, its employees, customers, and vendors. We are very pleased with the outcome.”
Other professionals who worked on the transaction include:
Equity Partners HG brokers sale of Sailing Specialties, Inc. to SSI Custom Plastics Partners, LLC
For Immediate Release | June 7, 2017
Sailing Specialties, Inc. (“the Company”) has completed a going concern sale transaction with SSI Custom Plastics Partners, LLC. Maryland based Equity Partners HG served as investment banker for the seller.
Founded in 1974 and located in southern Maryland, Sailing Specialties, Inc. has become a premier plastic thermoforming company, manufacturing the largest selection of custom and proprietary thermoformed plastic products in the marine industry. The Company retained Equity Partners HG in early February to find a buyer that would allow the owner, Greig Parks, to retire after operating the company for over 40 years. The ideal outcome sought by Greig was to locate a buyer that would continue operations in southern Maryland and continue to provide the quality and service his longtime customer base has come to expect. Equity Partners HG ran an exhaustive marketing process, reaching out to thousands of prospective buyers. Following a thorough evaluation of the market, Equity Partners HG narrowed the field down to the two most logical buyers. After extensive negotiations with both groups, the owner chose to move forward with SSI Custom Plastics Partners, LLC, the principals of which are Maryland based investors that have successfully owned and operated various manufacturing facilities across the country.
Hank Waida, managing director at Equity Partners HG stated, “Greig Parks built an outstanding company servicing many of the largest boat manufacturers in the country. I am pleased we were able to find a buyer with a similar passion for the marine industry, and the experience and financial wherewithal to take Sailing Specialties, Inc. to the next level.”
Other professionals who worked on the transaction include:
Equity Partners HG brokers sale of Peters Machine, Inc. to
Peters Machine, Inc. (“Peters Machine”) has completed a going concern sale transaction with Ventoux Capital’s subsidiary, BMC Global, LLC (“BMC Global”) of Blissfield, MI. Ventoux Capital specializes in acquiring smaller distressed manufacturing operations with strong management teams in place, and provides guidance and working capital allowing the company to continue operations. Maryland based Equity Partners HG served as investment banker for the seller.
In late 2016, Peters Machine retained Equity Partners HG as the exclusive broker to sell their 36 year old company specializing in machining and drilling tube sheets and baffles. The company had borrowed to expand its capacity during a period of sharp increase in demand for its service and subsequently experienced a reduction in its revenues due to the financial crisis and a slowdown of corn ethanol production. Equity Partners’ charge was to quickly find a buyer for the business before it was forced to shut down, and the firm ran an exhaustive marketing process reaching out to thousands of prospective buyers. Following a thorough evaluation of the market, Equity Partners narrowed the field down to the three most logical buyers. After extensive negotiations with all three prospective buyers, a competitive, court approved auction was held for the Peters Machine personal propery, along with the real esate the business operated in, and several pieces of equipment either owned by the Peters Machine shareholders or controlled by a bankruptcy trustee. BMC was the winning bidder for all of these assets, allowing for the continued operation of the business.
Hank Waida, managing director at Equity Partners HG stated, “Peter’s Machine will add unique capabilities to BMC Global’s manufacturing operatations. Building on those synergies and keeping jobs in Decatur, IL will make this acquisition a great success for them. The sale also brought a far greater recovery to creditors than a liquidation of the assets would have.”
Other professionals who worked on the transaction include:
- Jonathan Backman, Law Office of Jonathan A. Backman, counsel to Peters Machine Inc.
- Chris Mehring, Goldstein McClintock, counsel to BMC Global, LLC.
- Mark Wenzel, Smith Amundson, counsel to Regions Bank
- Marianne Pogge, chapter 7 trustee
An industry leading provider of coating and plating services to the automotive industry with two facilities outside of Detroit.
After a 20+ year lending relationship, the Company found itself in forbearance after the automotive market crash of 2008. They were eventually able to refinance the loan, but the new lender was unfamiliar with the business and was restricting cash availability. In addition, a 13 week shutdown of their largest customer’s plant additionally impacted cash flow and led the secured creditor to tighten credit further.
Equity Partners was retained to explore strategic options for the company including new money or an entirety sale. Due to Equity Partners’ involvement, the existing lender was comfortable enough to continue funding while an exhaustive marketing process was conducted.
The Company ultimately chose to refinance the debt with a new lender that seemed comfortable with the business and understood the need for access to a larger revolving line of credit. The key customer’s plant returned to full operation, revenues increased, and the Company’s collateral base grew allowing it to access capital which provided entry into new market segments and long term automotive programs.
Hudson Industries, Inc.
A Richmond based manufacturer of foam, fiber, polystyrene, and gel products servicing the medical, consumer bedding, and casual furniture industries.
The Company had been shutdown for months following a fire and subsequent inventory loss of $4 million. Once operations resumed, the backlog had grown to a level that necessitated increased labor to meet customer demand. Despite incredible top line growth, the inefficiencies in the operation caused massive monthly losses and the lender was no longer willing to fund the business.
Equity Partners was retained to quickly find a buyer for the Company. Due to Equity Partners’ involvement, the existing lender was comfortable enough to extend the forbearance agreement continue funding operations while an exhaustive marketing process was conducted. In addition, through regular conversations with critical vendors, Equity Partners was able to convince them to continue supplying raw material.
Through a competitive auction process, two separate buyers were identified; one for the real estate and one for the business assets. The business buyer entered into a lease with the real estate buyer and continued operations in place, providing continued employment for the shareholders and maximizing recovery for creditors.
Equity Partners HG brokers sale and Financing for Leading Lumber Manufacturer
For Immediate Release | March 2, 2017
Equity Partners HG served as the investment banker for a leading lumber manufacturing business with revenue of approximately $85 million annually (the “Company”). In early March, two transactions in excess of $30 million closed: 1.) A sale of the saw mill and lumber manufacturing division (about $30 million revenue) for 5 times proforma EBITDA, and (2.) a refinancing of the two remaining divisions at very attractive rates.
Up until the sale, the Company operated three related businesses: A sawmill/lumber manufacturing business, lumber concentration yards, and wood flooring manufacturing business. In mid-October 2016, the Company retained Equity Partners HG; having recently added significant capacity, the Company wanted to explore its options to find working capital to further grow those businesses.
Ken Mann, senior managing director for Equity Partners HG, said, “As we explored the market and considered the options and our client’s long term succession plan, it became clear that the saw mill was a highly attractive target. The sale, combined with a refinancing of the remaining operations, was the ideal path forward.”
According to the Company’s CEO, “This sale will allow us to put some growth capital into our remaining concentration yard, and to continue to grow our flooring business.”
Other professionals who worked on the transaction include:
- Richard Nichol, Evans Petree PC, counsel to Seller
- Michael Coury, Glanker Brown, counsel to Seller
- David Bradley, Hodgson Russ LLP, counsel to Buyer
June 4, 2016 | American Bankruptcy Institute
BY KEN MANN, SR. MANAGING DIRECTOR, HERITAGE EQUITY PARTNERS
Your client or borrower is a troubled business that desperately needs to find new money or a buyer, and fast. Somebody suggests that your client/borrower hire an intermediary, but the company already has one “offer” (for purchase, refinance, investment), so is reluctant to hire an i-banker to run a thorough process to find other possible solutions. We have all seen that horror movie, and we must advise our clients of the pitfalls of their single suitor, single solution approach:
1. The company is making a decision in a vacuum
Without a competitive process, how will management know it got the best deal? How can you choose a type of transaction (refinance versus equity infusion, for example), let alone the best suitor for that type of transaction, without knowing what all of your options are?
2. The single solution approach puts the company at great risk of failing to get the needed support for its chosen path
As an offshoot to pitfall #1, you are not likely to get the support of fulcrum creditors or a bankruptcy court without showing them evidence of a true market test; they don’t like to make decisions in a vacuum.
3. All of the company’s eggs are in one basket, and its bottom is very weak
The touted “offer” is usually nothing more than an indication of interest. As we all know, this interest means little until it is supported by a binding transaction document, a good faith deposit (if a purchase), and evidence of ability to close. In almost every case where our client tells us they “have an offer”, we later learn that the offer was “less than half baked”; there is much work to be done to get the interested party across the finish line, and the client is usually not well-equipped to get it there.
4. Even if the company has a bona fide offer, the price and/or terms are likely to “melt down” by the time its suitor gets through diligence
During diligence, the potential new lender will want to disqualify certain collateral, the potential buyer will want price reductions based on its findings, the would-be investor will want a bigger piece for less money, and the number of reps and warranties will likely grow. Sometimes the meltdown is for legitimate reasons, and sometimes it is simply an unjustified negotiating tool. Either way, absent competition and real options, the troubled company will be dealing from a position of weakness and have no way to prevent the freefall.
5. Missed deadlines and broken promises are likely
Get ready to be disappointed. Settlement dates and deadlines of all kinds have a way of slipping. Almost inevitably, things come up, and absent a date certain process or competition, settlement gets pushed back a few weeks. Management hangs on, clinging desperately, with no other options handy. Then another delay comes up, the company’s position gets weaker and weaker, management gets more and more desperate, and it gives up more and more. They want to draw a line in the sand, but absent viable alternatives, their ultimatums have no credibility, and the suitor continues to make all of the rules and controls the pace. Time is lost while damage is done to the business as customers, vendors and employees, already nervous, lose faith and disappointment sets in. Even worse, perhaps patience is lost, and without cooperation, the deal craters. If you thought you didn’t have enough time at the start of this process, now it’s worse; you are out of time and haven’t been looking for Plan B.
6. You leave money on the table
Competition drives price. We like to think of ourselves as expert negotiators that squeeze the last few dollars out of any buyer, investor or lender. But nothing, or no one, improves price or terms better than a competing bidder. Absent that, you are extremely unlikely to get the best possible deal. So, if you didn’t run a process, you probably left money on the table.
With so much at stake, why are some companies reluctant to run a process?
Seemingly reasonable and natural justifications exist, but they are dead wrong. “Dead” wrong because the single suitor approach is very likely to lead to the premature death of the distressed business. Following are 4 common reasons management may be scared of a robust process (and how you might respond to your client’s concerns):
1. Typically, negotiating from weakness, the management team is afraid to insult or chase off their potential white knight, which is likely demanding exclusivity
An experienced expert can explain, to the suitor on the table, why a process is necessary, and in fact, benefits them -protection from follow on litigation, release of liens and encumbrances, garner necessary approvals, etc.)
2. Management is trying to save the fee associated with “closing a deal I already have”
This is penny wise and pound foolish. The improvement in price/terms that comes with a process almost always far exceeds the costs of the process. Further, the offer on the table might not be “approvable” without the process. Finally, it is important to develop a Plan B to the current offer, just in case it falls apart. Proof you need, and insurance you want, come at some price.)
3. Perhaps this particular suitor is offering employment and/or equity to the management team, and so they are not enthusiastic about pursuing other possibilities
Management should play “free agent” and consider each meeting with each potential investor or buyer as a job interview – a chance to prove its value and to determine the best fit for them going forward. The first offer is not necessarily the best one the team will see. Oh, and there is this thing called a “fiduciary responsibility” to maximize value for your creditors!
4. Your client, and perhaps you, believe there “isn’t time to run a process”
The lack of time is precisely why you must run a process; it will be too late if you start the process after your initial deal falls apart. Lenders and courts are reticent to cut you off if you are running a real process, and usually welcome an outsider coming in to conduct it. Finally, the process is faster than you might think – it is often done in 60 days, and it is not unusual to have it done in 30 days when one bid already exists.
Sadly, most of us have failed, on occasion, to get owners and managers to accept what we can clearly see. Those owners have frequently lost their companies and, ultimately, look back at their “white knight” as the “grim reaper”. It is incumbent upon us professionals and advisors to help our clients avoid these pitfalls. Thankfully, we have had success in getting our clients to see this logic, and their outcomes have generally been much better because of it.
Heritage Equity Wins Award for Mallygirl Reorganization
Heritage Equity Partners won the Turnaround Atlas Award Consumer Products & Services Restructuring of the Year winner by Global M&A Network for its Mallygirl Chapter 11 reorganization.
Ken Mann, senior managing director, was also listed as a Top 100 Restructuring & Turnaround Professional.
The Global M&A Network annually recognizes industry leaders through its M&A Turnaround Atlas Awards.
“We are honored to win this award for our work in identifying a buyer and executing an expedited sale of Mallygirl to Beauty Visions,” said Matt LoCascio, managing director of HEP. “We were able to bring a buyer to the table in less than a month and helped Mallygirl emerge from bankruptcy in a stronger position to continue serving its customers.”
The M&A Turnaround Atlas Awards honored 42 transactional deals, 10 outstanding firms, two turnaround and restructuring professionals, four leadership achievement and 100 top professionals. Awardees were honored at a celebratory gala and trophy presentation ceremony at the Harvard Club of New York on May 17.
“I am proud to be included among this list of distinguished turnaround professionals,” said Mann. “It’s the efforts and hard work by HEP’s staff that make this award even possible.”
Private equity funds, venture capitalists partner with precision parts manufacturers poised for growth
Cutting Tool Engineering
By Alan Richter
Published October 1, 2015 – 10:30am
Running a successful machine shop takes more than having advanced machine tools, high-performance cutting tools and machinists that boost productivity. A manufacturer of precision metal parts might also need a strategic partner that has the network, expertise and—last but not least—capital to penetrate new markets, overcome capacity constraints and make investments to help the business grow.
Technicut Tool Inc. is one example of a machine shop that followed this path. The Windsor, Ontario-based company employs 80 people and specializes in machining complex, precision parts for the oil and gas industry, as well as for aerospace customers, at its 44,000-sq.-ft. manufacturing facility. CEO Dino Civiero explained that his partner was looking to retire while he wanted to remain and grow the business. “I was looking for somebody who has the capital and connections to help us do that.”
He turned to Capital Assist (Valuation) Inc., a Windsor-based capital advisory firm, and NewPoint Capital Partners Inc., a Toronto-based investment banking firm, to serve as financial advisers. Capital Assist President Federica Nazzani said the process for securing a financial investor begins by examining an organization’s structure, products and management team while looking at the customers and industries it serves, as well as the direction, opportunities and challenges that exist for the company. From there, an adviser prepares a document called a confidential investment memorandum, which is provided to potential investors as they start to evaluate opportunities, and determine its interest in investing.
“We work closely with management to assess future growth projections,” Nazzani said. “We then look at potential sources of capital required to meet that growth.”
Enter the Equity Fund
After shortlisting those sources, Nazzani noted White Wolf Capital LLC, Miami, was ultimately selected as the most appropriate partner for Technicut. “They have tremendous depth in terms of their technical and financial expertise, as well as their knowledge of the U.S. market, a key target market for Technicut,” Nazzani said.
“From a growth standpoint, they seem to be the best fit,” Civiero added, noting White Wolf is aligned with manufacturers that machine similar types of parts. “They have a lot of connections in the oil and gas industry.”
Civiero said he was also attracted to White Wolf’s focus on long-term investing with a strategy that keeps the administration of a machine shop intact. “They are looking for companies with a strong management team, which is what we have. It’s pretty much business as usual for us.”
Elie Azar, managing director for White Wolf, noted the equity firm focuses on lower- to mid-market companies with revenues up to $100 million and EBITDA (earnings before interest, taxes, depreciation and amortization) up to $10 million. White Wolf typically looks to acquire 60 to 75 percent of those companies. “We are only interested in situations where we can partner with an existing team,” he said. “We look for situations where the management team has grown the company to maybe $15 million to $30 million in revenue and are looking to take it to the next level, take some chips off the table and take a second bite of the apple—hopefully, a much larger apple—5 to 7 years down the road.”
As a partner, an equity firm isn’t going to recommend what cutting tool to apply when deep-hole drilling or the speeds and feeds for roughing a block of Inconel, but rather it helps in areas such as business development, financing and mergers and acquisitions. “Maybe the business needs a CFO, making investments in strategic IT like ERP (enterprise resource planning) or CRM (customer relationship management),” Azar said. “A lot of times these growing companies have been financed by the owner, so they typically are more conservative. We see an opportunity to seek out strategic acquisitions for the company, expanding lines of credit and investing working capital to help grow the business.”
That conservative nature can translate to owners not wanting to accept 100 percent of the risk when growing a manufacturing operation. “So they take on an investor to help share the risk,” Nazzani said. “That could be a reflection of age or just their own internal resources and what they are prepared to continually invest. In the case of Technicut, it’s not just about providing money to help them grow, but they are really looking for expertise and network.”
Because many founders of private equity groups have an industrial background, their personal relationships can be quite valuable when targeting new markets, according to Nazzani.
Although diversifying a manufacturer’s customer base usually involves serving industries it had not previously, that’s not always the case. “There is an incredible amount of promise in the oil and gas industry, and just diversifying in that industry alone is huge,” Technicut’s Civiero said, adding that the company plans to target other industries as well.
Strategic investors often seek to consolidate companies in a highly fragmented marketplace, and, with at least 20,000-plus machine shops in the U.S., precision parts manufacturing certainly qualifies, noted Elijah Crotzer, president and CEO of ARCH Global Precision, Livonia, Mich. The company was formed in 2011 with the goal to acquire manufacturers that specialized in producing machined components and cutting tools.
He explained that large consumers of parts, such as numerous Fortune 500 companies, want to dramatically reduce their supply base. Therefore, a parts manufacturer becomes a more attractive supplier by acquiring additional machining capabilities. “We have different capabilities, from Swiss-style screw machining of very small parts all the way to machining castings and forgings that weigh several thousand pounds—and everything in between,” Crotzer said. “We become a one-stop shop for our customer base.”
Nazzani concurred that it’s an optimal time to consolidate within the parts manufacturing sector. This is because, depending on the industries they serve, machine shops are seeing increased business activity and face several constraints when increasing capacity. These include financial constraints to growth, such as physical, where a facility doesn’t have the space to deploy additional machine tools, people, where even if a facility has the space for new equipment it’s challenged to find a skilled person to operate it, and expertise, because besides machinists, qualified production managers, manufacturing engineers and logistics personnel are also in limited supply.
“All of those things are important,” she said, “and the ability to share those resources through consolidation leads to greater economies of scale and helps with those constraints.”
Nonetheless, the consolidation of parts manufacturing may be more anecdotal than a real trend for now. “For whatever reason, a lot of private equity has not ventured into this space as much as I would have anticipated,” Crotzer said. “But I would be surprised if we don’t start to see more and more folks at private equity firms getting into this space.”
Crotzer pointed out that ARCH Global Precision purchases 100 percent of a company’s equity or assets, depending on how the deal is structured. Typically with ARCH Global, the previous owners remain to continue their day-to-day roles of running the business, or, when owners want to transition out, the owners create a second layer of management to handle operations. “We help with purchasing and benefits and put in a little bit of accounting structure,” he said.
To help ensure that the profitable manufacturers it acquires stay profitable and avoid losing sales to producers in low-labor-cost regions, Crotzer said ARCH targets companies that manufacture high-value-added, difficult-to-machine parts. “It’s not commodity stuff.”
In addition to profitability, diversification is critical. “We don’t want all of our eggs in one basket,” Crotzer said. “We want ARCH Global to be a precision machining company serving as many markets as possible, so as one industry cycles down, another one is presumably doing well or at least holding its own.”
And after the company makes an acquisition, Crotzer emphasized that ARCH intends to hold onto it while continuing to operate the business with its legacy name, at least for now. “One of the ways we differentiate ourselves is we are not the traditional, ruthless private equity firm that is just trying to squeeze the business for cash and leave a disaster,” he said. “We are very actively reinvesting in the businesses and are focused on growth.”
Some strategic investors are also interested in growing companies, but start with calamities. One investment banking firm that specializes in this space is Heritage Equity Partners, Easton, Md. “We live in a small niche in the investment banking world,” said Managing Director Fred Cross. “For the past 27 years, we’ve worked with troubled companies, either finding them new money, joint venture relationships or entirety sales.”
In addition to troubled companies, Heritage conducts single-asset sales, including what once was the largest barge crane. “We’ve sold just about everything, but the common thread is some sort of distress, either in Chapter 11, having financial troubles or experiencing partnership disputes,” Cross said.
The majority of owners of troubled companies stay on board, frequently as part of the ownership group, unless they caused the problems, he noted. The goal is to turn the businesses around by eliminating the financial distress and taking it to the next level.
One manufacturer that recently retained Heritage is TT and D Inc., a 12-employee shop in Tupelo, Miss., that makes precision dies and tooling. “There is significant opportunity to not only expand business with the company’s existing customer base, but also utilize their excess capacity to make new components in any number of different industries,” Cross stated. “We took the project on in late June, and we are finalizing documents with a going-concern buyer now in August. These project don’t need a great deal of time to reach a positive outcome for all those involved.”
Some projects, however, require a resurrection rather than a turnaround, because the business is no longer a going concern. When a company has a padlock on its door, Cross said Heritage looks for a buyer to open the business again by hiring personnel and resuming operations. “We’re not scared of situations like that. The niche we’re in is to try and help people who have seemingly gotten too far along in the fall, so to speak, and then provide a solution that brings them back from death’s door.”
Cross added that nearly all of its clients come to Heritage via hundreds of bankruptcy attorneys across the U.S. and the workout departments at banks where bad loans go. Then, through negotiations with bankers, buyers, sellers and company personnel, Heritage works to awaken a troubled company from its nightmare, he said. “In many cases, the family’s name is in the company’s name, they have a staff of 50 to 100 people on the floor and they’re like family. We understand that and want to do right by all of those people.”
Regardless of the scenario that causes a parts manufacturer to seek an investor, having a positive chemistry between the buyer and seller is critical. “How comfortable do each of the parties feel working together?” Capital Assist’s Nazzani asked. “Because you suddenly are introducing two strangers and telling them that if this deal goes through, they are now going to be partners and aligned to grow this business together.”
ARCH Global Precision’s Crotzer added cultural alignment to the list of marriage requirements. “We have a set of values and beliefs that are pretty core to our identity,” he said, “and we want people who are like-minded and share the same vision and value system.”
Those values, for example, include treating all constituents as you would want to be treated, being passionate about what you do every day and striving to create and maintain a workplace that is fun and enjoyable. Who wouldn’t buy into that?