Harvest Misstep Creates New Opportunity For Linsalata

Target: Lund International

Price: Undisclosed

Seller: Harvest Partners

Buyer: Linsalata Capital Partners and Resilience Capital Partners

Financial Advisor: Seller: Alvarez & Marsal

Through a renewed focus on product development, LBO firms Linsalata Capital Partners and Resilience Capital Partners expect to generate better returns for Lund International than were achieved by its previous owner, buyout shop Harvest Partners.

Linsalata Capital and Resilience Capital, both based in Cleveland, paid less than $100 million for the auto parts accessories maker, representing well under 1x the company’s annual sales of $130 million, a source familiar with the deal said. Sales generated by Lund shrank during Harvest Partners’s 10-year ownership after encountering industry headwinds such as rising gas prices and lower demand for SUVs. Lund also didn’t properly integrate its add-on acquisitions, sources familiar with the company told Buyouts. Lund sells its accessories to auto makers, warehouse distributors, auto accessory dealers and vehicle owners.

The company, based in Georgia, reported revenue of $177 million in 2000. That fell to roughly $130 million by the time of sale this month to Linsalata Capital and Resilience Capital. Harvest Partners took a 30 percent stake in the company in 1997, then later added to its holdings before finally assuming full control in 2003. Along the way, Lund made several add-on acquisitions, including that of Deflecta-Shield for $87 million, Auto Ventshade for $66 million, Smittybuild for $18 million and Nifty Products for $7.3 million.

The firm did not return calls seeking comment.

Harvest Partners initiated a turnaround effort more than a year ago, hiring specialist Alvarez & Marsal to resolve inventory and system control problems, with the goal of preparing the company for the auction block, said George Varuguese, managing director with Alvarez & Marsal. The restructuring was extensive, involving the consolidation of facilities, pruning of product menu, and changing the company’s organizational structure.

Despite its recent performance, Lund still boasts the largest market share in its industry, as well as opportunities to grow, Varuguese said. Linsalata Capital and Resilience Capital have brought in a new management team and aim to boost revenue through investments in research and development, an area not focused on during its previous ownership, according to Varuguese.

Greg Taber, a principal at Linsalata Capital, added that the company has strong long-term fundamental prospects despite shaky market conditions. “We are going to focus on developing new, exciting products that lead the market, and on penetrating existing customers further,” he said.

The aftermarket auto-parts sector is large enough that Lund can grow despite an overall contraction in demand, Taber added. The new owners also haven’t ruled out growth through add-on acquisitions, as the market remains fragmented with bountiful opportunities, he said.

Linsalata has experience in this sector through two previous portfolio companies, Highland Group Industries and Transtar Industries. Resilience Capital specializes in turnarounds and troubled companies.—E.G.