Category Archives: case studies

VetCor

  • Business

    VetCor is one of the largest veterinary services platforms in the nation managing over 270 veterinary hospitals across 28 states. Its hospitals provide a full range of general medical and surgical services for pets, as well as pharmacy needs and ancillary services such as boarding, grooming, and pet products. VetCor has distinguished itself by promoting the local identity of each hospital, offering a family friendly work environment, providing management, training and administrative support to its hospitals, and relying on the veterinarians of each hospital to manage their medical direction.

  • Situation

    This investment opportunity was developed on a proprietary basis. Harvest had constructed an investment thesis around veterinary services over several years due to the sector’s large, stable, fragmented market with superior consolidation opportunities, lack of reimbursement risk and attractive cash flow profile. Given our familiarity with the sector and asset, Harvest was able to conduct due diligence and present a compelling offer on an accelerated timeframe.

  • Harvest Partners Investment

    In April 2015, Harvest recapitalized VetCor with existing sponsor Cressey & Company (“Cressey”) and management. To fund the acquisition Harvest and Cressey arranged debt financing, which consisted of a unitranche term loan.

    In July 2018, Harvest recapitalized VetCor. To fund the recapitalization, Oak Hill Capital Partners (“Oak Hill”), Harvest, Cressey and management provided equity capital and arranged the financing, which included a first and second lien credit facility and preferred equity.

  • Investment Thesis

    • Large, fragmented and growing veterinary services market
    • Attractive business model with strong, stable cash flows
    • Scarce, scale platform with a proven acquisition and integration strategy
    • Committed and talented management team with a track record of success
  • Value Creation

    • Accelerated same store sales growth
    • Doubled M&A velocity
    • Bolstered infrastructure and personnel
  • Outcome

    • Completed recapitalization with Oak Hill and Cressey in July 2018

FCX Performance, Inc.

  • Business

    FCX Performance (“FCX”) is a leading distributor of highly engineered valves, instrumentation & pumps and provider of related services in the U.S. FCX provides technical, mission-critical products and value-added services to more than 15,000 end users, original equipment manufacturers and engineering and construction firms across the industrial process, oil and gas, power, life sciences, municipal and commercial markets. The Company is known for its technical application expertise and offers customers a full range of valves and automation, pumps and seals, process instruments, steam and piping products, and related equipment, all backed by a full complement of life-cycle services.

  • Situation

    Harvest became aware of FCX in early 2012 through Harvest’s business development activities in the industrials and distribution sectors. Harvest had substantial knowledge of FCX’s core process and energy end markets through prior industrial services investments such as Aquilex and BHI, and developed expertise in industrial distribution through investments in TruckPro and CSC. Prior to the management meeting, Harvest hosted an in-person presentation by the banker on FCX at its offices and completed numerous calls with industry participants via its network. As a result of this prior work and experience, Harvest was well-prepared for the management meeting, developed a strong rapport with management and was able to complete thorough diligence ahead of other potential buyers. This strategy enabled Harvest to deliver a fully-financed final bid without syndication risk that positioned Harvest as the buyer of choice.

  • Harvest Partners Investment

    In October 2012, Harvest purchased FCX with the existing management team. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a mezzanine note. In addition, Harvest underwrote and syndicated equity co-investment capital.

  • Investment Thesis

    • Attractive, differentiated position in supply chain
    • Stable, recurring business model with solid cash flows
    • Diverse end markets and customers
    • Scalable platform with strong infrastructure
  • Value Creation

    • Successfully completed 13 add-on acquisitions
    • Improved organic growth by expanding salesforce and increasing productivity
    • Increased gross margins via pricing initiatives and aligning salesforce compensation plans
    • Incorporated additional value-added services such as integration and calibration
    • Improved operating leverage by consolidating facilities and managing indirect spending
    • Managed succession and expanded management team with several key senior executive hires
  • Outcome

    • Sold to Applied Industrial Technologies (NYSE: AIT) in January 2018

AxelaCare

  • Business

    AxelaCare Holdings, Inc. ("AxelaCare") was a leading provider of home infusion services for chronic and acute conditions. AxelaCare was the fifth largest and one of the fastest growing national providers of home infusion treatment, supported by its patient-centric approach and clinical leadership.

  • Situation

    Harvest first learned about this investment opportunity and met the AxelaCare management team in January 2013 during a healthcare conference. Harvest was interested in the company given favorable industry trends and the company’s impressive growth profile. Harvest had a solid understanding of the opportunity within home infusion due to its prior consideration of other investment opportunities within this niche, including a key competitor to AxelaCare.

  • Harvest Partners Investment

    In April 2013, Harvest purchased AxelaCare with the existing management team. To fund the acquisition, Harvest arranged the debt financing, which included a senior credit facility and a mezzanine note.

  • Investment Thesis

    • Large, growing and fragmented industry with favorable tailwinds, including a shift toward lower-cost, home-based care
    • Attractive, high growth business model
    • Multiple growth levers
    • Strong, clinically focused management team with track record of success
  • Value Creation

    • Transformed from regional Midwest platform with 5 pharmacies to national provider with 35+ pharmacies supporting 48 states
    • Significantly diversified the business by referral source, supplier base and payor mix
    • Professionalized sales force
    • Completed three transformative and numerous smaller tuck-in acquisitions
  • Outcome

    • Sold to OptumRx, a division of United Healthcare, in November 2015

Athletico

  • Business

    Athletico Management Holdings, LLC ("Athletico") was a leading physical therapy business offering rehabilitation, outreach, and fitness services. The business was founded in 1991 by CEO Mark Kaufman, a licensed physical therapist and certified athletic trainer. Athletico has facilities across the Midwest and employs a team of specialists, which includes physical, and occupational therapists, certified athletic trainers, personal trainers, strength and conditioning specialists and massage therapists. In addition to facility-based rehabilitation services, Athletico provided athletic training, physical and occupational therapy, and fitness services through more than 180 affiliations, including high schools, colleges, and several major sports teams.

  • Situation

    In late 2013, Harvest developed this investment opportunity on a proprietary basis. Harvest had identified the outpatient physical therapy sector an attractive niche within healthcare services because it had a large and fragmented market, superior de novo growth opportunity, and an attractive reimbursement profile. Prior to investing, Harvest conducted significant due diligence reviewing many physical therapy businesses.

  • Harvest Partners Investment

    In May 2014, Harvest led the recapitalization of Athletico in partnership with management. To fund the acquisition, Harvest arranged the debt financing, including a revolver and term loan. In addition, Harvest underwrote and syndicated co-investment capital.

  • Investment Thesis

    • Large, growing, fragmented physical therapy industry
    • Consistent performance at the clinic level
    • Favorable payor mix
    • Proven business strategy, with multiple opportunities for growth
    • Powerful history of growth and high free cash flow generation provides downside protection
    • Management team focused on clinical excellence
  • Value Creation

    • Implemented M&A capabilities to transform Athletico from a Chicago-focused provider of physical therapy into a diversified super-regional platform
    • Built dedicated de novo team, expanding annual openings more than four-times
    • Improved infrastructure to make the platform scalable
    • Closed transformative acquisition, more than doubling the size of the business
  • Outcome

    • Sold to BDT Capital in December 2016

Driven Brands, Inc.

  • COMPANY DESCRIPTION

    Driven Brands, Inc. (“Driven”) was a leading franchisor in the automotive aftermarket services industry and a national franchising platform in the United States. Driven’s flagship service brands included Meineke Car Care Centers (“Meineke”) and Maaco Collision Repair and Auto Painting (“Maaco”), two highly recognizable brands within the industry.

  • Situation

    In 2011, Harvest acquired Driven through a broken auction. Harvest had identified the automotive aftermarket services industry as large, stable and growing, with significant consolidation opportunities. Prior to investing, Harvest conducted extensive due diligence, including site visits as well as consumer, franchisee, and brand assessments.

  • Harvest Partners Investment

    In December 2011, Harvest purchased Driven. To fund the acquisition Harvest arranged the debt financing, which included senior credit facility and a mezzanine note. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Leading franchisor with highly recognizable brands
    • Large and growing industry
    • Stable business, with opportunities to accelerate growth through strategic initiatives
    • Strong cash flow characteristics
  • Value Creation

    • Appointed a new management team and independent board members with significant franchise experience
    • Repositioned the business for growth by accelerating new store development and increasing store count by over 100
    • Closed nine add-on acquisitions and refranchising transactions
    • Implemented key strategic initiatives including the implementation of a fleet sales program and the introduction of new franchisee revenue streams such as tires
  • Outcome

    • Sold to Roark Capital Group in April 2015

Regency Energy Partners, LP

  • Business

    Regency Energy Partners, LP (“Regency”, NYSE: RGP) was a publicly traded master limited partnership (“MLP”) midstream natural gas services company based in Dallas, TX. The company was engaged in the gathering and processing, contract compression and transportation, fractionation and storage of natural gas and natural gas liquids with assets primarily located in Arkansas, Kansas, Louisiana, Oklahoma and Texas. Regency’s general partner was majority owned by Energy Transfer Equity, L.P. (“ETE”, NYSE: ETE).

  • Situation

    In 2008, Harvest targeted the midstream energy sector for investment to capitalize on a secular shift toward shale oil and gas development resulting from changes in drilling technology. Harvest engaged consultants to validate its thesis and further develop its understanding of long-term demand drivers and infrastructure needs in the midstream energy sector. At the same time, due to difficult financial market conditions, businesses structured as MLPs within the sector had limited access to financing. Without access to the public debt and equity markets, these companies began turning to private capital sources, which presented an opportunity for Harvest.

  • Harvest Partners Investment

    In September 2009, Harvest made a capital investment in Regency’s Series A Convertible Preferred Units to fund certain growth projects. Harvest converted preferred units to common units of Regency and sold shares in the open market with a final exit in September 2013.

  • Investment Thesis

    • Fee-based, recurring revenue stream
    • High growth operating regions
    • Substantial accretive growth opportunities
    • Positive industry outlook and high entry barriers
    • Seniority in the capital structure with attractive cash yield
  • Outcome

    • Converted preferred units to common units and sold shares in the open market with a final exit in September 2013.

U.S. Silica Company

  • Business

    U.S. Silica Company (“USS”) was the second largest producer of industrial sand in North America with 22% market share and the #1 or #2 positions in most of its local markets. The company supplied well-diversified, growing end markets including glass, building products, fillers/extenders, foundry, chemicals, oil and gas, matrix materials and ceramics.

  • Situation

    Harvest first diligenced USS in October 2006 during an auction process. Primarily due to the poorly understood silicosis liability, USS was not sold. In March 2007, Harvest re-engaged with the sell-side advisor and was able to negotiate a letter of intent quickly due to its prior due diligence of USS. By June 2007, Harvest completed its due diligence. Harvest acquired 95% of the equity at closing.

  • Harvest Partners Investment

    In August 2007, Harvest purchased USS with the existing management team. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a second lien financing. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Strong brand and market leader
    • Steadily growing industry
    • Proven management team
  • Value Creation

    • Harvest anticipated creating value through tuck-in acquisitions, pricing improvement and geographic expansion, as well as macro benefits from increased horizontal drilling/shale development
    • Soon after closing, Harvest was approached by an investor that had a larger consolidation strategy in the industry and made Harvest a highly compelling offer.
  • Outcome

    • Sold to Harbinger Capital Partners in October 2007

New Flyer Industries, Ltd.

  • Business

    New Flyer Industries, Ltd. (“New Flyer”) was a leading manufacturer of heavy-duty transit buses in the United States and Canada. New Flyer held the number one market share position in both the United States and Canada based on installed buses and annual deliveries.

  • Situation

    Harvest sourced New Flyer through a sale process that garnered little interest due to: (i) a negative perception of investing in an industry that was 80% funded by federal budgets and the remainder dependent on municipal budgets; (ii) a lack of confidence that the required surety bonding would be available; (iii) a poor track record of other private equity firms in investing in the bus manufacturing industry; (iv) a competitive bidding process for new contracts; and (v) customer concentration. Through extensive due diligence, Harvest uncovered attractive features of the investment including New Flyer’s significant free cash flow generation, order visibility due to its backlog and the trend towards more fuel efficient buses.

  • Harvest Partners Investment

    In February 2004, Harvest purchased New Flyer with the existing management team. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a mezzanine note. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Market leader
    • Attractive business model and significant free cash flow generation
    • Replacement-driven industry with favorable product trends
  • Value Creation

    • Disciplined operational execution
    • Improved product mix
    • Intense balance sheet management
  • Outcome

    • Completed an IPO on the Toronto Stock Exchange in August 2005
    • Realized investment proceeds through dividends received after the IPO and the sale of shares on the open market

Natural Products Group

  • Business

    Natural Products Group, LLC (“NPG”) was the parent of Arbonne International, LLC (“Arbonne”) and Levlad, LLC (“Levlad”). Arbonne was a leading direct marketer of personal care products including skin and anti-aging creams, bath and body washes and nutritional products. Arbonne marketed these products through a growing, multi-level marketing network of over one million independent consultants in North America, Australia and the United Kingdom. Levlad was a leading manufacturer and marketer of natural and organic personal care products for its branded products business, Nature’s Gate, and for a growing base of private label customers, including Arbonne.

  • Situation

    In 2002, Harvest targeted the healthy living and natural products industries as areas of focus and evaluated numerous opportunities. In mid-2003, NPG hired a boutique mergers and acquisitions firm to conduct a sale process. The sale process was a challenge because NPG was a family-owned business with sub-scale management, weak systems and controls and no obvious strategic buyer. In late 2003, through networking at a conference, Harvest learned of a consultant with specific insight into the company. Harvest differentiated itself by lining up key executives in advance of closing.

  • Harvest Partners Investment

    In November 2004, Harvest purchased NPG. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a mezzanine note. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Market leader
    • Attractive business model
    • Arbonne consultant base generates sustainable revenues and profit growth
    • Favorable industry dynamics
    • Geographic expansion potential
  • Value Creation

    • Introduced new products
    • Developed infrastructure to sustain growth and profitability
    • Upgraded business systems
    • Broadened and Strengthened Management Team
  • Outcome

    • Completed three dividend recapitalizations in August 2005, January 2006, and June 2006 and exited in 2010

Insight Global, Inc.

  • Business

    Insight Global (“Insight”) is one of the fastest growing and among the top 5 providers of information technology, accounting, finance and engineering staffing solutions throughout North America. Through a network of 44 offices, Insight fills temporary and permanent staffing placements for a variety of Fortune 500 corporations.

  • Situation

    Harvest participated in a competitive process to acquire Insight. In addition to valuation, the seller was very concerned with certainty and speed to close due to turbulent debt markets. To differentiate itself, Harvest partnered early in the process with two of its limited partners to develop a unique senior, subordinated, and preferred equity structure that became a significant competitive advantage. Additionally, during the due diligence process, Harvest leveraged its previous experience and network in the staffing industry to consult with a number of former and current CEOs and board members of staffing businesses. Specifically, the Firm partnered with Walt Macauley, the former CEO of Career Horizons, a highly successful former Harvest portfolio company in the staffing industry.

  • Harvest Partners Investment

    In June 2010, Harvest purchased Insight with the existing management team. To fund the acquisition Harvest arranged the financing, which included a senior credit facility, a mezzanine note and some preferred equity. In addition, Harvest underwrote and syndicated significant equity co-investment capital.

    In October 2012, Harvest recapitalized Insight. To fund the recapitalization Harvest and Ares Capital provided equity capital and arranged a first and second lien credit facility.

  • Investment Thesis

    • Optimal time to invest in staffing industry
    • Information technology a highly attractive sub-sector
    • Differentiated strategy and execution
    • Significant growth potential
  • Value Creation

    • Market growth
    • Gained market share
    • New office openings
    • Bolstered infrastructure and strategic support
  • Outcome

    • Completed recapitalization with Ares Capital in October 2012

Evenflo Company, Inc.

  • Business

    Evenflo Company, Inc. (“Evenflo”) designed, manufactured and marketed a broad range of juvenile products including car seats, strollers, safety gates, activity centers and feeding products. Evenflo sold most of its products through five major retailers: Wal-Mart, Target, Babies R Us / Toys R Us, Kmart and Burlington Coat Factory (Baby Depot department).

  • Situation

    In 2003, Harvest targeted the consumer products industry for investment, with a specific emphasis on companies with strong brands or channel positions. In January 2004, the prior owner began a sale process for Evenflo which was undergoing an operational turnaround. After an extended due diligence period, the Firm acquired Evenflo.

  • Harvest Partners Investment

    In August 2004, Harvest purchased Evenflo with the existing management team. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a mezzanine note. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Strong brand and market leader
    • Steadily growing industry
    • Potential for significant profitability improvement
  • Value Creation

    • Market share gains and enhanced brand equity
    • Board-level initiative to improve profitability
    • Strengthened the management team and Board of Directors
  • Outcome

    • Sold Evenflo in February 2007 to Weston Presidio.

Communications Supply Corporation

  • Business

    Communications Supply Corporation (“CSC”) was the third-largest distributor of low voltage infrastructure products in the United States (per the company’s estimate) at the time of exit. More than 90% of CSC revenues were derived from sales to the enterprise segment, which included large corporations, institutions and government entities. CSC had over 10,000 active customers and bought its products from a core group of 40 manufacturers.

  • Situation

    The sell-side advisor approached Harvest due to Harvest’s historical experience in the distribution industry. Harvest felt its industry knowledge and familiarity with management and the company gave it an edge in the CSC process.

  • Harvest Partners Investment

    In May 2004, Harvest purchased CSC with the existing management team. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a mezzanine note. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Attractive company dynamics
    • Geographic expansion opportunities
    • Industry recovery
    • Strong management team
  • Value Creation

    • Leveraged dominant market position
    • Drove end-user business
    • Acquisitions
  • Outcome

    • Sold CSC to WESCO International, Inc. in November 2006.

Associated Materials, Inc.

  • Company Description

    Associated Materials, Inc. (“AMI”) was a vertically integrated manufacturer and value added distributor of exterior residential building products. The company’s core products included vinyl windows, vinyl siding, aluminum and steel siding and accessories. Products were sold on a wholesale basis through the company’s dual-distribution network in the United States and Canada, consisting of more than 120 owned supply centers and approximately 250 independent dealers.

  • Situation

    Harvest sourced AMI through a take-private transaction managed by a sell-side advisor. Harvest had targeted the building products industry in 2001 and had validated several of the growth drivers benefitting AMI before the company announced it was for sale. The equity needed to fund the transaction was substantially greater than what Harvest could fund, which made the Firm’s industry knowledge and proven ability to raise co-investment capital critical in Harvest being chosen to acquire the business. Harvest gained management’s confidence by developing detailed post-acquisition value-building initiatives.

  • Harvest Partners Investment

    In April 2002, Harvest purchased AMI with the existing management team. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a high yield bond financing. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Market leader
    • Vertically integrated business model
    • Reputation for high levels of customer service
    • Favorable industry dynamics
    • Significant margin improvement opportunities
  • Value Creation

    • Divested non-core AmerCable subsidiary
    • Headquarters consolidation
    • Acquired Gentek
    • Implemented substantial operational improvements
  • Outcome

    • Completed a dividend recapitalization in March 2004, a recapitalization with Investcorp in December 2004, and a sale to Hellman & Friedman in October 2010

Aquilex Corporation

  • Business

    Aquilex Corporation (“Aquilex”) was a leading global provider of critical maintenance, repair and industrial cleaning solutions to the energy industry. Aquilex’s customer base included leading global operators in the nuclear, fossil power, refinery/ petrochemical, pulp and paper and other process industries.

  • Situation

    Harvest believed it had a competitive advantage in the Aquilex sales process because it had previously conducted due diligence on the company. In addition, Harvest had familiarity with the industrial services industry segment through a former portfolio company. This knowledge generated additional credibility for Harvest with Aquilex’s executive team and the sellers. Moreover, Harvest embraced management’s vision to build a diversified service company through acquisition.

  • Harvest Partners Investment

    In January 2007, Harvest purchased Aquilex with the existing management team. To fund the acquisition Harvest arranged the debt financing, which included a senior credit facility and a mezzanine note. In addition, Harvest arranged equity co-investment capital for the transaction.

  • Investment Thesis

    • Market leading position
    • Compelling value proposition
    • Highly favorable industry trends
    • Strong, experienced management team
    • Acquisition potential
  • Value Creation

    • Capitalized on favorable industry dynamics
    • Acquired complementary businesses
  • Outcome

    • Sold Aquilex to Ontario Teachers’ Pension Plan in December 2008