Moving Pieces Around on the PE Chessboard – October 2016 M&A Activity
A secondary buyout does not necessarily portend a negative outcome, as the acquiring fund may have a different strategy or unique skill set that builds additional value in the portfolio company before the eventual sale to a strategic buyer or yet another private equity firm. The first private equity fund/owner may have reached the limit of its buying capacity, exhausted its available equity or simply run out of time to increase the value of the acquired company through internal improvements or further acquisitions. The acquiring fund may be larger, more able to finance additional bolt-ons, or simply starts the timeclock over again. Alternatively, the second fund/owner may not have predetermined exit schedules; rather the fund may be patient and manage the company for cash dividends and long term value creation.
Wellspring Capital created flexible packaging powerhouse ProAmpac with its acquisition of Ampac and Prolamina in 2015 (see The Target Report – August 2015). Wellspring quickly added a bolt-on to its new platform company with the acquisition of Coating Excellence International last December. The Wellspring team was apparently on track to complete additional acquisitions when the Pritzker brothers, both billionaires, came knocking. Scions of the Hyatt Hotels fortune, the brothers had lost out to Wellspring in the original bidding for Ampac which subsequently led to the formation of ProAmpac. In September, the Pritzkers re-entered the game and through their own fund, Pritzker Group Private Capital, have acquired the now much larger ProAmpac. In what must have been two very busy days, the brothers made their next move just one day later, acquiring the Vitex Packaging Group, a flexible packaging company, from another fund, Kirkland Capital.
The Pritzker fund is not a traditional fund that raises capital from others; the Pritzkers invest their own capital, hence the fund is free from the outside pressure exerted by investors that force timed exits from portfolio companies. While we expect that more acquisitions by ProAmpac, supported by its new owners, will be forthcoming, it appears that ProAmpac itself is likely off the market for the foreseeable future.
Capital Partners, a private equity fund based in Norwalk, Connecticut, acquired label, flexible packaging and folding carton manufacturer Outlook Group from Milestone Partners, a private equity fund in Radnor, Pennsylvania. Milestone acquired Outlook Group ten years ago, a long time for an investment in the private equity world where typical holding periods are usually five years, seven years on the outside. Regardless of the reason for the long hold, the time had finally come for Milestone to exit and Capital Partners provided the secondary buyout, which was completed through its existing portfolio company, M&Q Packaging, a Pennsylvania-based producer of specialty high-temperature resistant plastic packaging solutions.
Here is a summary of secondary buyouts in the printing, packaging and related industries during 2015
and the first ten months of 2016 (see corresponding Target Reports for more info and links to sources):
Secondary Buyouts in Printing Segments (2015/2016) | ||||||
Buyer Portfolio Co / PE Sponsor |
Acquired Company Portfolio Co / PE Sponsor |
Month | Segment | |||
ProAmpac (Port co. Pritzker Group) |
Vitex Packaging Group (Port co. Kirkland Capital) |
Oct-16 | Flexible packaging | |||
Pritzker Group Private Capital | ProAmpac (Port co. Wellspring Capital) |
Oct-16 | Flexible packaging | |||
M&Q Packaging (Port co. Capital Partners) |
Outlook Group (Port co. Milestone Partners) |
Oct-16 | Labels & folding cartons | |||
Arbor Investments | Dunn Paper (Port co. Wingate Partners) |
Aug-16 | Specialty paper mills | |||
Resilience Capital Partners | DG3 (Port co. Arsenal Capital) |
Aug-16 | Printing & document mngt. | |||
RFE Investment Partners | Stagnito Business Information (Port co. Topspin Partners) |
Feb-16 | Business publishing | |||
Novolex (Port. Co Wind Point Partners) |
Wisconsin Film & Bag (Port. Co. Argosy Partners, et al.) |
Oct-15 | Plastic wraps & bags | |||
Olympus Partners | Liqui-Box (Port. co. Sterling Group) |
Sep-15 | Liquid packaging systems | |||
Argosy Investment Partners | SirsiDynix (Port co. ICV Partners) |
Sep-15 | Library software | |||
Wendell Group | Constantia Flexibles (Port co. One Equity Partners) |
Jan-15 | Flexible packaging | |||
Commercial Printing – Print Management