>Selected Transactions


SELECTED transaction

the Story

APG Cash Drawer

Divestiture of division with buy-in from senior managers

APG Cash Drawer grew from its founding in 1978 to become the nation’s leading manufacturer of heavy-duty cash drawers used in point-of-sale (POS) systems. Its products are targeted chiefly at high-traffic retail applications where the risk of equipment failure in the checkout lane must be minimized.

APG’s corporate parent challenged us to design a sale process that would achieve full valuation while also allowing APG to retain its progressive corporate culture. The parent company also indicated that APG’s CEO, who already had a minority stake in the business, should be given a strong voice in the sale process.

We arranged an initial round of interviews between APG’s CEO and prospective financial buyers. These interviews were focused chiefly on chemistry and fit. The CEO was then allowed to determine which parties should receive our confidential memorandum and proceed to the competitive bidding round. After determining that APG’s parent was satisfied, we conducted a spirited auction among the surviving bidders.

Private Capital Management, a Minnesota-based private equity group, impressed APG from the outset and further distinguished itself with a strong bid and expedited diligence. APG’s CEO elected to roll a significant portion of his equity into the new ownership structure. We arranged for other managers to invest alongside the CEO and to receive additional equity incentives.

The closing occurred on October 9, 2008 during a week that witnessed an historic lock-up of worldwide credit markets and an 18% free-fall of the Dow Jones Industrial Average. The Dow fell 700 points on October 9 alone. That the deal closed amidst such intense market upheaval was a credit to the hands-on, senior banker attention we provided.




Company sale providing exit for one shareholder and reinvestment by others

Henderson Products, Inc. manufactures a full line of heavy-duty snow plows, spreaders and specialized truck bodies used chiefly by states, counties, and municipalities for snow removal and ice control. During the years leading up to the sale, the company implemented a strategic planning process that gave Henderson a leading market position.

The president, who owned 50% of the company, wanted to cash out and retire. This dynamic presents a problem in M&A and financing transactions because prospective buyers and investors often attribute the company’s success to its leader. Left unchecked, this perception can drive buyers away or cause them to discount the value of the business for “succession risk." Consequently, we needed to show potential buyers that the other senior managers were capable of executing the company’s growth plan.

Our buyer outreach yielded 15 qualified bidders, several of whom were invited to meet with management. In advance of the meetings, we helped the managers develop a presentation that emphasized the company’s deep bench, strong market position, and bright prospects. The presentation convinced our bidders that Henderson’s future success was not dependent upon its president. The successful buyer was Missouri-based Cameron Holdings, LLC, a private equity company that specializes in the acquisition and operation of middle market manufacturing, industrial service, and value-added distribution companies.  Some of Henderson’s senior managers invested alongside Cameron, but the outgoing president achieved his objectives: retirement from the company and full liquidity.



I&K Distributors

Sale of non-core division for a larger corporate client

Chef Solutions’ two primary business lines, Pennant Foods and Orval Kent Foods, were central to the parent company’s core strategy in the manufacture and marketing of prepared foods. Its third business line, I&K Distributors, manufactured refrigerated items that were complementary to Orval Kent’s products, but I&K also presented a strategic challenge. In addition to its manufacturing operations, I&K operated a distribution business that made in-store deliveries to grocery stores located throughout Ohio and the adjacent states.

Chef Solutions wished to fold I&K’s proprietary product lines and manufacturing operations into Orval Kent. Our presentation of I&K’s distribution activity on a stand-alone basis allowed prospective buyers to understand and value the business.

In addition to its proprietary manufactured brands, I&K distributed national and regional brands to the refrigerated sections of its grocery customers’ deli, dairy, bakery and meat departments. I&K employed over 400 employees at its automated distribution center in Delphos, Ohio, and at nine remote depots.

The leadership of Chef Solutions determined that the products manufactured by I&K should be rolled into Orval Kent, and the remaining distribution business should be sold. This decision set the stage for a complex sale process. The transfer of I&K’s proprietary products to its sister company would strip I&K of items that had long been central to its product array, including Yoders® deli salads and side dishes and Michigan Brand® cottage cheese. These items had historically drawn customers to I&K, but they would now be owned and manufactured by Orval Kent.

Going forward, the relationship between I&K and Orval Kent would be one of supplier and customer. Since the proposed sale would create a legal separation between I&K and Orval Kent, we could see that the negotiation of an exclusive distribution agreement would become a key aspect of the deal. Before taking I&K to market, we developed the outlines of this agreement and baked the associated mark-ups into I&K’s pro-forma financial statements.

Our instincts were rewarded when private equity sponsor Ramex, Inc. recognized that product exclusivity represents a valuable calling card in food distribution and stepped forward with a strong bid for I&K.



MackayMitchell Envelope Company

Debt recapitalization to enable buyout of institutional partner

MackayMitchell Envelope Company is a leading manufacturer of general-purpose and specialty envelopes, photofinishing envelopes, and on-demand stationery products. A private equity firm had acquired control of the company several years prior to our involvement. We were retained to arrange a transaction that would provide an exit for the private equity firm and enable Founder and Chairman Harvey Mackay and CEO Scott Mitchell to regain control of the company at an agreed-to valuation. We crafted a thorough memorandum and approached a wide variety of senior and subordinated debt lenders. The company received funding from senior lenders U.S. Bank and M&I Bank, and from subordinated debt lender, Prudential Capital Partners, in the amount needed by the parties to effect the ownership change they had envisioned.



Raising of growth capital to assist in nationwide expansion

The distinctive concept supporting the growth of Oceanaire Seafood Room involves fresh seafood selections flown in daily from around the world to restaurants that feature an inviting, sophisticated, high-energy atmosphere reminiscent of supper clubs of the 1930s and 1940s.

As part of our customized fundraising process, we developed an Offering Memorandum and Management Presentation that effectively positioned Oceanaire to consumer-focused institutional investors. The company received multiple indications of interest for a wide variety of alternatives including $10.0 to $20.0 million financing rounds. Oceanaire ultimately chose Clarion Capital to support the company’s growth via a $20.0 million, two-tranche transaction.


United Supermarkets

The sale of a private company to a direct competitor

In this case, the cost synergies of combining two overlapping retail chains drove a strong valuation. United Supermarkets of Oklahoma owned and operated 26 conventional retail supermarkets in rural communities throughout Central and Western Oklahoma. United’s chief rival, Homeland Stores, operated 69 stores in Oklahoma, Kansas, and Missouri.

United’s shareholders wanted an all-cash exit at a strong valuation, and Homeland expressed immediate interest. As a subsidiary of Associated Wholesale Grocers—the second largest member-owned grocery wholesaler in the United States—Homeland was viewed as a credible buyer. Moreover, the promise of cost-saving synergies put Homeland in a position to value United at a relatively high price. However, from United’s point of view, the idea of sharing its books and operating practices with a direct competitor was anathema.

The driving force for a deal was that both chains operated in a territory dominated by Wal-Mart. By interacting with Homeland at the highest levels, we learned that its strategy was to drive consolidation and ultimately become the sole, service-based alternative to Wal-Mart in its region.

We brought the parties together for discussions that highlighted the benefits of combining without revealing proprietary client information. In the course of these discussions, Homeland came to believe that United was critical to its growth strategy. In parallel with these discussions, we arranged for United to meet with other potential acquirers. This provided a basis for comparison and allowed United to negotiate from a position of strength. Through our careful handling of this delicate situation, we orchestrated the sale of United to its historic rival, Homeland, in a strong, all-cash transaction.




Note: As used above, the terms “we” and “us” refer to the professionals of Quetico Partners either during or, as managing directors of the Multi-Industry Group at Lazard Middle Market, prior to their affiliation with Quetico Partners.