Castle Harlan Buys IDQ Holdings

Castle Harlan has completed its acquisition of IDQ Holdings Inc., an automotive aftermarket company focused on do-it-yourself automotive air conditioner repair, from Arsenal Capital Partners. The deal was valued at approximately $170 million, representing around a 30% IRR and 8x multiple for Arsenal.


Arsenal Capital Partners, a leading New York-based private equity firm that invests in middle market specialty industrial, healthcare and financial services companies, today announced it has completed the sale of portfolio company IDQ Holdings, Inc. to Castle Harlan, Inc. for approximately $170 million. The sale of IDQ, which is expected to return in excess of 8x invested capital, follows Arsenal’s April 2010 sale of Genovique Specialties Corporation which returned to investors 12x invested capital, and continues Arsenal’s strong momentum in 2010.

IDQ is the leading provider of high-quality and easy-to-use air conditioning maintenance and repair solutions for the “Do-It-Yourself” (“DIY”) automotive aftermarket in North America. Headquartered in Garland, Texas, IDQ sells its products to consumers through a blue-chip customer base representing approximately 25,000 retail stores. These include leading national chains, such as AutoZone, Advance Auto Parts, Wal-Mart, O’Reilly, NAPA, Pep Boys, and others.

IDQ was formed in 2007 with the acquisition of EF Products by Interdynamics, an Arsenal portfolio company acquired in 2002. Led by Partners Terry Mullen and John Televantos, Arsenal worked closely with IDQ management to develop and execute a strategy to drive innovative growth and operational excellence which resulted in compounding both growth and profitability.

“We worked with management to develop and execute a long-term investment strategy in line with our commitment to continuously grow and strengthen the company,” said Terry Mullen, a Partner and Co-founder of Arsenal. “With a focus on product innovation, development of a best-in-class manufacturing facility and a key acquisition to complete the IDQ platform, we were able to position IDQ for long-term sustainable success. The enhanced management team led by CEO Michael Klein and CFO Gerry Rooney did an exceptional job transforming IDQ into a platform with exciting upside.”

“It was a great pleasure working with the Arsenal team who were extremely focused in accelerating the growth of IDQ by strengthening our senior management team, improving product quality and manufacturing, and investing in the company’s R&D that was critical in the development of value-added products,” said Mr. Klein. “We thank them for providing strategic thinking and continual support that helped lead to this successful realization.”

“This investment highlights the strength of the Arsenal investment model, which combines best-in-class investment talent with deep industry expertise and a high-impact operational improvement team,” said Mr. Mullen. “Company management utilized a significant number of Arsenal professionals in building to this successful outcome and, as the first investment in our inaugural fund, this has provided a blueprint for value creation in other Arsenal investments. In addition, this realization delivered an excellent return to the limited partners that supported our first fund.”

Management and Arsenal’s efforts resulted in nearly tripling the EBITDA of the Company and through the realization, yielded a multiple of invested capital of nearly 8x and 30% rate of return for investors. Through contingent earn-out payments, the purchase price can exceed $180 million which would result in a return to investors of more than 8.5x their invested capital.

In addition to the IDQ sale, during 2010 Arsenal also sold portfolio company Genovique Specialties Corporation, a leading global provider of benzoate plasticizers, to Eastman Chemical Company. The firm also made a significant equity investment in March in FrontStream Payments, Inc., a leading provider of innovative payment processing solutions.

About Arsenal Capital Partners
Arsenal Capital Partners is a New York-based private equity firm that makes investments in specialty industrial, healthcare and financial services companies. Arsenal makes investments in sectors where the firm has prior knowledge and experience, and targets businesses that have the potential for further value creation by working closely with management to accelerate growth and leverage the firm’s operational improvement capabilities. Arsenal currently has $800 million of committed equity capital. For additional information on Arsenal Capital Partners please visit