PE Weekly: Exits Pick Up While Investors Target Consumer, Finance Markets

Middle-market M&A activity picked up across a variety of industries, including sectors facing macroeconomic headwinds like the consumer space. Elsewhere, industrials and finance were also popular among dealmakers, with multiple transactions involving middle-market private equity firms not only as the investor, but as the acquisition target. This week also saw an uptick in exits as corporates and private equity backers had off assets and portfolio companies to other investors. Explore the latest headlines in middle-market M&A below.

Platform Investments

Guardian Capital Acquires Fuel and Auto Services Business. Guardian Capital Partners, a private equity firm focused on the lower-middle market, has announced its acquisition of Nwestco, which provides fuel and car services including car wash services, maintenance, compliance and installation. The company operates throughout the West and Midwest. With support from Guardian Capital, Nwestco plans to expand its geographic reach via organic growth and M&A.

LongueVue Capital Invests in Food Manufacturer. LongueVue Capital, a growth equity firm based in New Orleans, has invested in Global Gourmet Food Solutions, which manufactures ready-to-cook and ready-to-eat food products. Based in Texas, the company services customers nationwide across retail, food service, education and other end-markets. Global Gourmet plans to introduce new products and expand its production capacity.

Interlock Equity Backs Business Analytics Business with Databricks Ventures. Lower middle-market private equity firm Interlock Equity, headquartered in Los Angeles, has joined Databricks Ventures to invest in business intelligence and data analytics company Lovelytics. A press release said the investment will accelerate growth for the company, which plans to introduce new technical offerings across enterprise data, artificial intelligence, data science and more. Lovelytics has been a strategic partner of Databricks since 2021.

MiddleGround Plans SPV for Industrial Metals Acquisition. MiddleGround Capital, a B2B industrial- and specialty distribution-focused private equity firm, has announced the acquisition of A.M. Castle & Co., which provides metals, services and supply chain solutions to the industrial and aerospace markets. MiddleGround founder and managing partner John Stewart said that the firm plans to combine Castle Metals with its existing metals portfolio company Banner Medical Innovations, acquired in 2019, into a special purpose vehicle.

Levine Leichtman Backs Med Spa Operator SEV. Levine Leichtman has invested in med spa operator and manager SEV, according to a press release. Backing from the private equity firm will support SEV’s continued geographic expansion; the company currently operates 27 offices across seven states. The acquisition marks Levine Leichtman’s tenth platform investment from its sixth fund.

Topspin Consumer Partners Invests in Dog Treats. Topspin Consumer Partners, a consumer-focused private equity firm, announced its acquisition of the consumer products division of Three Dog Bakery. The business manufactures and markets branded dog treats, and will use Topspin’s investment to continue to expand its brand and market share within the U.S. as the pet industry evolves.

Kudu Investment Management Acquires Minority Stake in Midmarket PE Firm. Kudu Investment Management, which provides capital solutions to independent asset and wealth managers, has acquired a minority stake in middle-market private equity firm Martis Capital Management, which targets the healthcare industry. Martis is based out of San Francisco and Washington, D.C. In a statement, Martis Capital founder Barry Uphoff said the backing from Kudu provides “asset management industry expertise, a global network of relationships and potential access to capital for future growth.”

The Vistria Group Joins Kohlberg to Back Retirement Plans Business. The Vistria Group, a private investment firm, has announced that it is joining Kohlberg & Company as an investor in U.S. Retirement & Benefits Partners (USRBP). Kohlberg will remain a minority owner in the business while collaborating with The Vistria Group to fuel growth of USRBP, a financial services company specializing in employee-sponsored retirement plans and employee benefits. Kohlberg has been an investor in USRBP since 2018, and has grown the company through technology innovation and strategic acquisitions.

Kelso & Company Invests in Valenz Health. Kelso & Company, a middle-market private equity firm focused on the healthcare space, has invested in Valenz Health, joining existing backer Great Point Partners. Valenz focuses on self-insurance for employers, and plans to invest in organic growth and expansion via strategic M&A.

Bonnaccord Takes Minority Stake in Midmarket PE Firm Synova. Bonnaccord Capital Partners, a subsidiary of P10 and private equity platform targeting the middle market with non-control investments, has acquired a minority stake in European middle-market investor Synova, according to a press release. Synova is a growth investor focused on software and data, healthcare, tech-enabled services and financial services investments. Bonaccord will support Synova with capital and its global institutional network.

Add-Ons

RiverGlade Capital’s Dynamic Access Announces Healthcare Acquisition. Dynamic Access, which provides outsources vascular access services, has announced its acquisition of I.V. Nurse Consultants, a service provider to healthcare facilities across the Seattle area. The investment supports Texas-based Dynamic’s geographic expansion in the west. Dynamic is portfolio company of lower middle-market healthcare private equity firm RiverGlade Capital.

AEA Investors’ Maritus Gas Acquires Global Calibration Gases. Meritus Gas Partners, a network of industrial and medical gas distributors, and portfolio company of AEA Investors Small Business Private Equity, has acquired Global Calibration Gases. In a statement, Global president Ray Borzio said the company has “been approached many times in the past” by acquirers, and pointed to Meritus’ understanding of its wholesale business model as a factor behind the partnership.

Comvest Partners’ GAI Acquires Eland Engineering. Middle-market private equity firm Comvest Partners has announced that its portfolio company, engineering and environmental consulting firm GAI Consultants, has acquired Eland Engineering. Fort Lauderdale-based Eland provides engineering consulting and field maintenance services for transportation and traffic signal systems. In a statement provided to Middle Market Growth, Comvest partner Kevin LaHatte said the acquisition strengthens GAI’s position within the transportation engineering market.

Exits

Brookfield Infrastructure Divests Natural Gas Interest to ArcLight. A stake in Natural Gas Pipeline Company of America, a natural gas infrastructure business servicing the Chicago area, has been sold by Brookfield Infrastructure Partners to ArcLight Capital Partners, according to a recent announcement. Brookfield Infrastructure, which invests in and operates infrastructure businesses, will retain a 25% stake in the company, while energy infrastructure company Kinder Morgan will continue to operate Natural Gas’s pipeline. ArcLight, which had already held a 12.5% interest in the company, has increased its ownership of the business to 37.5% as a result of the transaction.

Heartwood Exits Plastics Manufacturer to One Equity Portco. Heartwood Partners, a middle-market private equity firm based in Connecticut, has announced the completed exit of plastics manufacturer Parkway Products. The company was acquired by One Equity Partners portfolio company Clayens NP Group, according to a press release provided to Middle Market Growth. As part of Heartwood’s portfolio, Parkway expanded via three add-on acquisitions while also growing its geographic reach.

Three Dog Bakery Carves Out Consumer Division to Topspin. Topspin Consumer Partners, a consumer-focused private equity firm, announced its acquisition of the consumer products division of Three Dog Bakery. The business manufactures and markets branded dog treats, and will use Topspin’s investment to continue to expand its brand and market share within the U.S. as the pet industry evolves.

Intel Divests Minority Stake in IMS Nanofabrication to Bain Capital. Technology conglomerate Intel Corporation has announced plans to divest a minority stake in IMS Nanofabrication, a Vienna-based multi-beam mask writing business. Intel is selling approximately 20% of its stake to Bain Capital Special Situations in a transaction valuing IMS at approximately $4.3 billion, a press release said. IMS will continue to operate as a standalone subsidiary.

Summer Street, Concentric Equity Exit Coastal Waste & Recycling. Private equity firm Summer Street Capital Partners and Concentric Equity Partners have announced their exit of Coastal Waste & Recycling, a solid waste collection service provider operating in the Southeast. Macquarie Asset Management has recapitalized the business and become its majority owner to support future growth, a press release said. Summer Street founded the company in 2017 and subsequently supported Coastal’s growth through organic initiatives and acquisitions.

The Riverside Company Exits Baker Hill to Flexpoint Ford. Flexpoint Ford, a financial services and healthcare private equity firm, has reportedly reached an agreement to acquire Baker Hill, a cloud-based loan origination software provider. Baker Hill is currently a portfolio company of middle-market private equity firm The Riverside Company. As part of Flexpoint Ford’s portfolio, Baker Hill plans to grow by expanding its client base.

Lineage Capital Exits Glass Business to KPS Capital’s Oldcastle BuildingEnvelope. Oldcastle BuildingEnvelope, a provider of glazing products and services and portfolio company of KPS Capital Partners, has acquired glass business Syracuse Glass, an announcement said. The investment will support Syracuse’s ongoing expansion across the Northeast. The company had been a portfolio company of middle-market private equity firm Lineage Capital since 2020.

Fundraising

Calera Capital Closes $750 Million Continuation Fund for ImageFIRST. Calera Capital, a middle-market private equity firm, has announced the close of a $750 million continuation fund to continue supporting ImageFIRST, a linen, laundry and hygiene service provider for the healthcare sector. The continuation fund, Calera Capital Image Holdings, L.P., includes a new equity commitment from Calera Capital and will support ImageFIRST’s continued growth strategy. The business, which first received backing from Calera in 2018, aims to expand into new geographic markets and introduce new services.

Epsilon Direct Lending Launches Second Australia Fund for Midmarket Borrowers. Epsilon Direct Lending has launched its second lending fund, Epsilon Direct Lending Senior Loan Fund, in Australia, according to reports in the Financial Standard. The firm plans to focus on middle-market businesses across Australia and New Zealand, which “remains resilient due to its more conservative borrowing levels and relatively lower exposure to imported inflationary drivers,” according to Epsilon cofounder and partner Mark Wright-Smith. Fellow cofounder Paul Nagy pointed to the strength of the private credit market globally as a reflection of strong demand for midmarket companies and their private equity sponsors. A multi-family office provided backing for the fund, reports said.

Insights

Midmarket M&A Volume Outperforms in Q1, Capstone Data Reveals. A new report from middle-market investment bank Capstone Partners has found that, despite a decline in middle-market M&A volume for the year’s first quarter, merger and acquisition activity within the middle market still outperformed activity overall. According to Capstone’s Q1 2023 Capital Market Update, midmarket M&A volume dropped 14.3% year-over-year. But overall volume declined more than 25%, the report noted.