Bernhard Capital is working on the railroad; Revelstoke buys eating disorder treatment provider from LLCP

LLCP divests an eating disorder treatment provider to Revelstoke.

Good morning, Hubsters. MK Flynn here with the Wire.

Let’s begin the week with how one private equity firm is investing in infrastructure. Also included in today’s newsletter is a PE deal in mental health and a look at investing in music rights.

I’ve been working on the railroad. The Bipartisan Infrastructure Law, which was signed by President Biden in November, includes $102 billion in total rail funding, providing unprecedented federal funding for rail improvement projects in America, according to the US Department of Transportation’s Federal Railroad Administration.

As the country’s aging railway system is poised for improvements, Bernhard Capital Partners, a Baton Rouge, Louisiana-based PE firm, is strengthening its portfolio company RailWorks Corp, to be a key player in the space, reports PE Hub’s Obey Martin Manayiti.

Last week, RailWorks Corp acquired H&H Engineering Construction, a Stockton, California-based rail maintenance and construction contractor. The company’s customers are predominantly in the passenger transit business. Obey discussed the deal with Bernhard partner Mark Spender.

“We are seeing a tremendous amount of budget increases and project opportunities coming from” the new law, Spender said. “Also, all our customers right now are very well funded. They have money that they are looking for ways to use, and so it’s a good market opportunity for RailWorks over the next five to 10 years.”

The H&H Engineering Construction deal will add to RailWorks’ capacity on the West Coast, where the company is underrepresented compared with other regions in the US, Spender said.

He identified the growing trend of cities’ outsourcing rail maintenance service for their transit rail networks as an opportunity for RailWorks.

Bernhard Capital will be on the lookout for M&A deals that will help grow RailWorks’ tech-enabled services. “We would like to make sure we offer our customers any specialty service that we can provide ourselves, rather than subcontract or outsource,” Spender said.

Read the full story here.

Mental health. Eating disorders have grown significantly along with other mental health issues due to the disruptions, isolation and stressors related to the covid pandemic, according to Revelstoke Capital Partners. The Denver PE firm, which invests in healthcare service providers, today announced it has acquired Monte Nido & Affiliates, a Miami-based provider of eating disorder treatments, from Los Angeles-based Levine Leichtman Capital Partners.

“Our investment in Monte Nido reflects Revelstoke’s continued focus on partnering with industry-leading behavioral healthcare businesses to increase access and improve patient outcomes,” said Michael Constantinides, principal, Revelstoke. “Monte Nido’s commitment to providing high-quality care has made it a partner of choice for referral sources and payors, and we see strong opportunities to expand their successful treatment model to new regions.”

For LLCP, the sale of Monte Nido marks the firm’s eleventh exit since the beginning of 2021, following Hand & Stone, Mountain Mike’s Pizza, CJ Fallon, HomeVestors, West Academic, Best Lawyers, Caring Brands, FlexXray, Trinity Consultants and Nothing Bundt Cakes.

You’re gonna hear me roar. Round Hill Equity Partners is expanding its investment strategy with its fourth flagship vehicle, reports Buyouts’ Iris Dorbian. Rather than sticking to its tried-and-true approach of investing exclusively in music copyrights of classic songs or catalogs of established recording artists, the firm is folding in another focus – newer artists and songwriters.

It’s a departure from the firm’s previous investment strategies. But it’s one that founder Josh Gruss feels confident in pursuing.

A key reason for Gruss’s bullishness is the “over 50 percent IRR” that Round Hill Music Royalty Fund III garnered when 5 percent of the $291 million fund was earmarked for new artists and songwriters.

Fund IV, which has not yet been filed with the SEC, will target $500 million with a hard cap of $650 million, according to Gruss.

Since January 2011, Round Hill has deployed more than $650 million across 78 music catalogs “and has been responsible for over $1.4 billion of music copyright transactions across 128 catalog deals,” according to its website.

Included in its portfolio of more than 120,000 songs that span multiple genres, are iconic tunes by legendary artists such as the Beatles, Louis Armstrong and James Brown to more contemporary performers like Bruno Mars and Katy Perry.

Read the story here.

Off the market? We’ve been hearing from our sources that rising interest rates and inflation plus plummeting public markets are making it harder for private equity buyers and sellers to see eye to eye on valuations. Some have told us that the widening gap in expectations will lead many would-be sellers to take their companies off the market and wait for a better time to sell.

How are you managing the challenges of this dealmaking environment? Are you getting deals done? We’d love to hear from you. Email me at mk.flynn@peimedia.com.

I’ll be back with more tomorrow.

All the best

MK