While local PE firms drive most deal-making in Canada’s mid-market, U.S. investors have been steadily making their presence felt.
Some, like Wynnchurch and Swander Pace, have set up shop here. Others have tended to come to Canada when they spot deals of interest and can demonstrate a particular competitive advantage.
CCMP Capital Advisors’ purchase of Jamieson Laboratories in January, about which I wrote two weeks ago, is emblematic of the latter trend. CCMP’s operational know-how in Jamieson’s niche sector was appealing to the company – and helped clinch the deal. And the acquisition’s financial backing by Canada Pension Plan Investment Board, an investor in CCMP’s latest fund, may have been an added bonus.
We saw nother example of this trend last month with Clearview Capital‘s $45 million take-private acquisition of Novik, a Saint-Augustin-de-Desmaures, Québec-based manufacturer of polymer siding and roofing supplies. In fact, there are some interesting parallels between the two transactions.
Like the Jamieson deal, the acquisition of Novik was all about unlocking new growth opportunities. After a period of exploring strategic options with advisor PricewaterhouseCoopers Corporate Finance, the owners of the 16-year-old business determined that going private in partnership with Clearview made the most sense, primarily because of the investor’s depth of knowledge and networks in the building products industry.
While Clearview focuses on North American investments, the Novik deal is its first in Canada. James Andersen, managing partner of Clearview, said the U.S.-based firm began developing a track record in the sector in 2001 when it bought Compression Polymers Group (CPG), a manufacturer of engineered construction materials. Over the period of its investment, CPG completed five add-on acquisitions and rolled out its Azek wood-substitute brand. Clearview sold part of its CPG stake to AEA Investors in 2005 and its remaining position to Ares Management and Ontario Teachers’ Pension Plan in 2013.
Andersen believes that Novik, like Compression Polymers, can become a market leader in North America and “replicate the incredible success enjoyed by CPG-Azek.”
“Novik is a wonderful, hidden gem that has many of the characteristics that allowed CPG-Azek to grow more than six-fold during our ownership,” he said. “It’s a very well-managed company, and a true volume-growth story.”
Novik, said Anderson, has the potential for further organic expansion in Canada and the United States. The opportunities are especially promising in the U.S. market, where Novik is not as well known.
Clearview will support Novik’s growth strategy in large part by focusing on sales and marketing activities. It will also emphasize broadening the company’s distribution channels and developing its product base.
In another parallel with the Jamieson deal, the acquisition of Novik contributed to resolving a succession issue. The business was founded in 1998 by the Gaudreau family, and Michel Gaudreau, Novik’s former leading shareholder, had been considering a liquidation strategy. Under Clearview’s ownership, Gaudreau will continue to serve on the company’s board of directors and advise senior management.
Novik’s last annual report noted revenue of $25.4 million in 2012, down marginally from the year before. The company attributed this to a slow recovery in the North American building products industry. However, revenue grew 33% and EBITDA shot up 52% year-over-year in Novik’s third quarter 2013 report (its last prior to the acquisition).
The Novik deal is Clearview’s second platform investment of the firm’s third partnership, Clearview Capital Fund III LP, which closed last June at its hard-cap target of US$325 million. Based in Old Greenwich, Conn., Clearview was founded in 1999 by Andersen, managing partner Calvin Neider and founding partner emeritus Pete Doolittle.
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