Industrial Air Tool

Industry: Industrial Distribution to Oil & Gas Sector
Initial Ownership: 37.5%
Date of Initial Equity Investment: June 2008
Date of Exit: N/A (Still Invested)

Business Description: Industrial Air Tool (“IAT” or the “Company”) is an industrial distributor of tools, consumable supplies, and capital equipment (winches and hoists) used primarily for oil & gas drilling and oil refining. The Company is the largest distributor of Ingersoll-Rand material handling equipment to the oil & gas industry. IAT has two locations, in Houston, TX and Texas City, TX. Key customers are oil & gas drilling contractors, resellers to oil & gas drillers, refineries, and EPC (engineering, procurement and contracting) firms. IAT primarily ships products via third party carriers rather than using its own distribution fleet. 
Investment Thesis: IAT was an attractive platform for the following reasons:

  • High return on assets, based on good margins, low capital expenditures, good working capital turnover
  • Experienced management team with meaningful equity stake
  • Largest worldwide distributor of Ingersoll-Rand winches and hoists, with a strong recurring tools and consumables business
  • Attractive purchase price multiple (4.4x) and potential for high returns in upside scenario. Crude oil hedge provides downside protection
  • Experienced and highly motivated sales force, with the best compensation plan in the industry


Investment Highlights: The deal team insisted on IAT investing $9.0 million in crude oil put options at closing which have provided an effective hedge against a decline in oil & gas prices which reduced drilling activity and reduced IAT’s revenues and EBITDA in 2009. The put options can be sold to generate cash and provide significant covenant flexibility.

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