Highland West Capital has gone big with its second platform investment, backing a turnkey supplier to North America’s wood-processing industry.
Earlier this month, the Vancouver private equity firm acquired a majority stake in BID Group. It partnered with the management team, led by CEO Alistair Cook and Chairman Brian Fehr, whose family owned the forest-products specialist for more than 30 years.
Terms weren’t disclosed. However, BID, which has north of 1,000 employees and revenue approaching $400 million, represents a “large-sized deal,” Highland Managing Director David Mullen told PE Hub Canada.
Highland was set up to invest the resources of its principals in Canadian and U.S. mid-market companies with EBITDA of $2 million-plus. To close the BID deal, the firm pooled its capital with a number of co-investors, among them several institutions.
It’s a strategy that requires access to a hefty Rolodex.
Highland was launched in 2013 by Managing Director David Rowntree, one of the founders of Tricor Pacific Capital. His goal was to create a different kind of PE investor, one that blends the discipline and experience of a large fund manager with the flexibility of a family office.
Rowntree took on partners who shared his outlook. They included another veteran investment pro, Mullen, a founding managing director of Graycliff Partners, as well as an operator, David Schellenberg, for many years a senior executive at Jim Pattison Group.
Highland’s strategy is to come up with funding on a deal-by-deal basis. When an opportunity calls for more capital than the firm has on hand, it taps a broad network of contacts the principals developed in their careers.
Along with co-investment capital, the network is a source of deal intelligence. This is also valued by Highland because of its focus on proprietary opportunities, especially in Western Canada.
Rowntree says Highland’s strategy enables it to invest selectively and hold assets indefinitely, affording a longer-term perspective than is usual for many PE firms.
“One of the frustrations of the fund business is you’re on a gerbil wheel,” Rowntree said. “You know that every asset you own will be sold in three to five years. Highland was created to get off of the gerbil wheel, to find great management teams and companies and own them for a long time.”
Founded in 1983, BID is a multibusiness enterprise that offers a one-stop shop for forestry equipment, services, software and installations. With manufacturing plants in British Columbia, Washington state, Québec, and South Carolina, it reaches into the main sawmilling areas of North America.
Showing “double-digit” growth in recent years, the company aims to expand further by accessing Highland’s “deep pockets and strategic thinking,” Mullen said. The deal injected fresh capital intended to advance BID’s offering, in part through investments in technology.
Highland will lend additional support to BID’s plan, which will likely benefit from industry trends, such as rising demand and a need to refurbish infrastructure, Mullen said.
In the years ahead, wood processors are expected to spend heavily to build new mills and retrofit old ones, he said. The effort, which will include introducing new technologies, promises BID particular growth opportunities in the United States.
BID was preceded by Highland’s debut investment in 2016. It acquired AllWest Insurance Services, an insurance broker best known for its mobile road Autoplan service in British Columbia. As with BID, the deal was capitalized by Highland and co-investors, including family offices.
Negotiations are underway that may soon result in a third platform investment, Mullen said. Highland looks to close one or two deals per year.
Mullen, who joined Highland two years ago, continues to hold an investment role at Graycliff. Spending much of his career heading HSBC’s PE operations in the Americas, he led the HSBC Capital spinout in 2011 that created Graycliff and Fulcrum Capital Partners.
Schellenberg, also a managing director, signed on in 2014. He transitioned from an owner-operator role at Conair Group and its subsidiary Cascade Aerospace.
The fourth member of Highland’s investment team, Trevor Brady, joined in 2015 from RBC Capital Markets.
Photo of lumber pile courtesy of KieselUndStein/E+/Getty Images
Photos of David Mullen and David Rowntree courtesy of Highland West Capital