Clearspring-backed DME Brewing Solutions completes “transformative” merger

Clearspring Capital Partners has invested in the merger of portfolio company DME Brewing Solutions with a top competitor, a deal the Toronto private equity firm says will reshape the craft-beer-equipment industry.

Last month, Charlottetown, Prince Edward Island’s DME, acquired by Clearspring in late 2015, combined with Abbotsford, British Columbia’s Newlands Systems. Terms weren’t disclosed.

Both companies expanded over a 25-year span with the global rise of craft-brewery startups. DME, founded in 1991 by CEO Peter Toombs, has to date completed more than 700 micro-brewery projects in some 67 countries.

Following the merger, Toombs will take the reins of the new business. His counterpart at NSI, Brad McQuhae, becomes senior vice president of innovation.

In a statement, Toombs and McQuhae said the union will strengthen complementary brand offerings and achieve economies of scale in areas such as purchasing, technical services and administration. An immediate priority will be ramping up production at a new facility in South Carolina.

With its investment, Clearspring becomes majority owner of the largest maker of microbrewing equipment in North America, Senior Vice President Zac McIsaac told PE Hub Canada.

Zac McIsaac, Senior Vice President, Clearspring Capital Partners
Zac McIsaac, Senior Vice President, Clearspring Capital Partners

“The merger is transformative,” he said. “Two storied Canadian businesses, one the market leader in the east, the other the leader in the west, have come together to support the craft movement.”

McIsaac, who with Partner Joe Prosperi led Clearspring’s investment, says the deal reinforces a trend of “locally made, authentic craft products” that are “resonating with consumers worldwide.”

A shift in consumption towards craft beverages has recently fuelled strong sector growth. In the United States, for example, surging sales more than doubled craft’s share of volume in the overall beer market to 12.2 percent in 2015 from 5 percent in 2010, according to the Brewers Association.

This led to a dramatic expansion in the universe of small, independent U.S. craft-beer producers. At the end of June, the number of small breweries hit a record 4,656, with about 2,200 of additional facilities now in the planning stages. A parallel trend has been observed in Canada.

The expectation is that “craft will continue to make gains in North America and around the globe,” stoking demand for microbrewing equipment and systems, McIsaac said.

DME was the debut platform investment of Clearspring’s third mid-market fund. Clearspring Capital Partners III closed in April at $260 million in committed capital, near the upper end of its target.

When Fund III closed, Managing Director Joe Shlesinger said Clearspring’s strategy was to build DME “to the top in its space.” This would be accomplished, he added, through acquisitions and selective global growth opportunities.

Clearspring’s other investments include Medical Pharmacies, a provider of pharmacy services to senior-care centres. In August, Reuters reported that Clearspring had hired BMO Capital Markets and Harris Williams to help sell the company for as much as $1 billion.

McIsaac joined Clearspring in 2014. He previously served as an investment pro at Westerkirk Capital, a private equity arm of Canada’s Thomson family.

Photo of Zac McIsaac courtesy of Clearspring Capital.

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