Banyan Capital Partners had an especially active first week of June.
On June 2, the Canadian mid-market private equity firm officially bid adieu to a long-standing portfolio company, Q’Max Solutions. And a day later, it threw out the welcome mat for a new portfolio entrant, Newcrete Investments.
Newcrete is the new moniker for the concrete division of Pennecon, a heavy civil construction, energy and real estate business based in St. John’s, Newfoundland. Last week, Banyan provided undisclosed funding to the management buyout of the division, led by Pennecon CEO Larry Puddister, and the simultaneous launch of Newcrete.
As it did under the Pennecon brand, Newcrete will focus on producing ready-mix concrete, precast concrete and masonry products for construction activity in Newfoundland and Labrador. Its growth prospects appear to be bright—particularly as a result of ramped-up exploration and development in the local oil and gas industry.
In an interview with peHUB Canada, Banyan managing director Jeff Wigle and director Adam Jezewski said the firm was selected as a funding partner partly because of its long investment horizon.
“The Newcrete deal was right in our wheelhouse,” said Jezewski. “The company needed a stable environment in which to pursue long-term growth, as well as a reliable, value-adding partner that could back the company for 10 years or more,” he said. More so than many PE firms, Banyan’s structure and strategic relationship with its largest LP, Canadian asset manager Connor, Clark & Lunn Financial Group (CC&L), “gives the firm that flexibility.”
Pennecon’s Puddister, who will also assume of the duties of CEO at Newcrete, approached Banyan in September. In addition to seeking a patient investor, he was hoping to facilitate a succession event for Pennecon’s founder, Ches Penney. He was also looking to give fresh opportunities to members of the management team who have shown “lots of energy and ambition,” said Jezewski. It was these executives who joined Puddister in the Newcrete buyout.
Newcrete already begins life as “a very healthy company, with strong overall management and a game plan in place,” Wigle said. For this reason, Banyan will focus on supporting Newcrete’s execution of its business plan. This will be done by reinforcing best organizational and governance practices and providing access to external networks. Banyan also is prepared to advance capital for further business development or as promising add-on acquisitions materialize.
“Our strategy, and Newcrete’s strategy, is to continue to win business emerging from new opportunities in Newfoundland and Labrador and beyond the island,” he said. Jezewski is particularly bullish about the impacts of current and future oil and gas investments in onshore and offshore projects, such as Hibernia, Terra Nova, White Rose and Hebron, which are likely to continue to spur intensive building and construction in the Atlantic region.
Wigle and Jezewski were also enthusiastic about the sale of Q’Max Solutions to U.S. private equity firm Palladium Equity Partners. An oilfield services business based in Calgary, Q’Max resided in Banyan’s portfolio for more than a decade, having received its first investment in 2002.
“Q-Max has performed very well over time, and we’re happy with the return we have generated for our investors,” said Wigle. The company selected Palladium as a partner for its next phase of growth in part because the New York-based firm is well-positioned to meet the large capital investments required.
Newcrete is Banyan’s 20th investment to date, and its third completed during the last 18 months. Other recent deals include the firm’s acquisitions of MIP, a Montréal-based manufacturer of healthcare textiles and reusable healthcare products, and Oakcreek, a Calgary-based distributor of Toro commercial turf equipment, Yamaha golf cars and PistenBully snowcats.
Going forward, Wigle said the “pipeline is full.” Neither he nor Jezewski are deterred by the frothy conditions in North America’s PE market. “Valuations are up, but they are not prohibitive to getting good deals done,” he said.
As reported by peHUB Canada last October, the 16-year old Banyan formed a strategic relationship with CC&L in 2010, giving the PE firm more freedom and resources to undertake deals in the lower middle market. Over the last four years, CC&L has been the largest principal in all of Banyan’s new transactions.
Wigle and Jezewski share offices with CC&L in Toronto, while Banyan’s other managing directors, David Eisler and Michael Martin, are located in Vancouver.
Photo of St. John’s lighthouse courtesy of Shutterstock
Photo of St. John’s harbour courtesy of Shutterstock