Mercury Air Centers
Industry: Business Services
Initial Ownership: 100%
Date of Initial Equity Investment: April 2004
Date of Exit: August 2007
Business Description:
Mercury Air Centers, Inc. (“Mercury Air” or the “Company”) was the fourth largest owner and operator of fixed base operations (“FBOs”) in the U.S. Mercury Air provided general aviation services to private, commercial and military aircraft at 24 FBO locations at 22 airports nationwide. These services included fuel sales, ground support services, aircraft hangar and tie-down facilities. The Company operated under the brand names Mercury Air Centers, Corporate Wings, FirstAir and IX Jet Centers, among others.
Investment Thesis:
Mercury Air represented a strong platform business in the highly fragmented FBO business with significant upside value potential. The Company also enjoyed:
- High barriers to entry due to long-term contracts with airport authorities
- A well established brand name in aviation services
- Strong free cash flow characteristics
Investment Highlights:
As Mercury Air was formerly a division of a larger Company, it did not have a back office function. The deal team worked to create the accounting, IT and HR departments. The deal team then worked to create value in the business by recruiting a new management team, helping the company implement several key operating initiatives including a new pricing strategy, and supporting six new site acquisitions. These improvements positioned the Company for a sale to a strategic buyer, Macquarie Infrastructure Company (NYSE: MIC) (“Macquarie”), in August 2007. Macquarie combined Mercury Air’s 24 FBO locations with its existing Atlantic Aviation sites, creating the largest network of FBOs in the U.S. with 67 total locations.
The Hillman Group
Industry: Industrial Distribution
Initial Ownership: 97.0%
Date of Initial Equity Investment: September 2001
Date of Exit: March 2004
Business Description:
The Hillman Companies, Inc. (“Hillman” or the “Company”) is a leading distributor of fasteners, key blanks, letters, numbers, signs and other related hardware items. Hillman also provides value-added merchandise managing services such as reviewing and replenishing stock levels. Hillman’s customers include traditional hardware stores, national and regional home centers and mass-market retailers, including Home Depot, K-Mart, Lowe’s, PetSmart and Wal-Mart.
Investment Thesis:
Hillman’s distribution business was a market leader in a niche business of managing, stocking and merchandising hardware aisles of many retailers. The Company also benefited from:
- High value-added service offering for retailers
- Strong, long-standing customer relationships
- A deep and seasoned management team
- Strong free cash-flow characteristics – high RONA
- Good growth prospects through strategic add-on acquisitions
Investment Highlights:
The deal team helped drive growth and create value in Hillman by providing both capital and financial expertise, leading to:
(i) the completion of two important add-on acquisitions;
(ii) the building of a new state-of-the-art distribution facility; and
(iii) a reduction in overhead by over $3 million that increased efficiency within the organization. In March 2004, the company was sold to Code Hennessy & Simmons.
SunSource, Inc.
Industry: Industrial Products
Initial Ownership: 35.9%
Date of Initial Equity Investment: September 2001
Date of Exit: April 2006
Business Description:
SunSource, Inc. (“SunSource” or the “Company”) is a leading distributor of fluid power components and provider of complementary value-added services including engineering, design, assembly, repair and technical training to a highly diversified group of end-markets. With its broad product offering, extensive service offering and technological capabilities, SunSource creates solutions that enable customers to realize operating efficiencies and cost savings by streamlining their supply chains and manufacturing processes.
Investment Thesis:
SunSource had significant upside potential with the right management team and a strong financial partner. It enjoyed strong customer relationships in a niche industry, and therefore represented the potential to be a solid platform business. Other attractive attributes included:
- Good prospects for add-on investments
- Strong free cash flow characteristics
Investment Highlights:
The deal team played an active role in the strategic growth of the company, helping management:
(i) refocus the business geographically;
(ii) upgrade its sales function; and
(iii) execute three tuck-in acquisitions. The result was more than a three-fold increase in EBITDA during the investment period. In April 2006, the Company was sold to Code Hennessy & Simmons.
Startec Global Communications
Industry: Telecommunications
Initial Ownership: 68.5%
Date of Initial Equity Investment: May 2004
Date of Exit: July 2007
Business Description:
Startec Global Communications, Inc. (“Startec” or the “Company”) owns and leases a telecommunications network throughout the U.S. and in several emerging market economies, including India, Russia, Poland, Ecuador and Israel. Startec provides voice, data and internet services to consumers primarily residing in major U.S. ethnic communities who frequently use telecommunications services to contact emerging market destinations. Startec also markets its wholesale network capacity to international long-distance carriers.
Investment Thesis:
In bankruptcy at the time, Startec was a compelling central equity investment. Key attributes included:
- Attractive purchase price (net liquid asset value)
- Immediate, accretive add-on acquisitions available, absorbing existing fixed-cost structure
- Seasoned operating platform with strong back-office infrastructure
- Stable customer base
- High free cash flow
Investment Highlights:
The deal team stabilized the business and helped drive growth in Startec by providing capital, strategic guidance and financial expertise. Following Startec’s emergence from bankruptcy, the deal team helped the Company complete two add-on acquisitions:
(i) invested $1.8 million to purchase certain assets of Telegent Communications, adding an incremental $1.5 million of EBITDA; and
(ii) $7.9 million to purchase PT-1 Communications, adding an incremental $5.1 million of EBITDA. Further, after recruiting a new CEO and CFO, the deal team worked with management to develop a strategic plan that converted existing customers into the Company’s higher margin Dial-1 business and cell phone products. In July 2007, Platinum Equity purchased the Company.