ACA Compliance Group, backed by New Mountain Capital, walked away from discussions with a strategic buyer, a source said.
The strategic’s identity is unclear, but ACA terminated talks due to the party’s “internal challenges,” the source said.
ACA is now in discussions with two private equity firms, the person said. The two PE firms are vying for ACA separately, not together, the source said.
The turn of events is typical in the M&A market. Cash-rich strategics usually beat PE unless there is an intervening factor. ACA’s management now prefers a deal with PE and aims to have an agreement signed within 10 days, the source said.
ACA Compliance, New York, provides regulatory compliance products and services, including cybersecurity and risk assessments. Clients include private fund managers and broker-dealers, as well as international and domestic banks.
Raymond James is advising on the ACA process, Buyouts reported in October. The company is expected to sell for a “big price,” sources said. Buyouts pegged the sale of ACA at $400 million to $500 million.
New Mountain invested in the company in 2013, buying a controlling stake from ACA’s founders and original partners. Rob Stype, ACA’s CEO, is listed on the New Mountain site as a management partner. An ACA co-founder, Stype spent eight years at the SEC’s office of compliance inspections and examinations. He was also branch chief for a time.
New Mountain, also New York, is a generalist investor. It typically provides $100 million to $500 million equity per deal.
Earlier this month, New Mountain acquired a 422,819-square-foot facility in Denton, Texas, from Mohr Capital. The PE firm in October agreed to buy DRB Holdings. Convey Health Solutions, a New Mountain portfolio company, acquired Gorman Health Group last month.
New Mountain in September closed its fifth PE fund on $6.15 billion, beating its $5 billion target. In 2014, the firm raised $4.13 billion for its fourth fund, while the firm’s third pool collected $5.1 billion in 2008.
ACA, New Mountain and Raymond James could not be reached for comment.
Action Item: Contact Krissy Kennedy, an ACA managing director, at +1 212-951-1030
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