NY Shop Scores No-Equity Exit In Less Than Three Months

Target: Location Logic LLC

Price: $25 million

Sponsor: TeleCommunication Systems Inc.

Seller: Hale Capital Partners, Hale Global Holding Co.

Financial Adviser: Seller: America’s Growth Capital LLC

Legal Adviser: Seller: Bingham McCutchen LLP

Small market firm Hale Capital Partners nailed down a healthy exit for its debut fund after owning the target company for barely three months. What’s more, the New York-based firm put up zero equity in the original deal for software developer LocationLogic LLC, which it sold to TeleCommunication Systems Inc. for about $25 million on May 19.

The firm is a partnership of Martin Hale, a former executive at hedge fund Pequot Capital, and Hale Global Holding Co., a company run by Martin’s twin brother Charles Hale. The shop took ownership of LocationLogic, a spinout of San Rafael, Calif.-based manufacturing software designer Autodesk Inc. in February. Terms of the deal, which was part of a larger restructuring plan enacted by Autodesk at that time, weren’t disclosed. LocationLogic’s technology is used by wireless carriers such as Verizon and Sprint to provide location-based data services.

Hale Capital essentially took the division off the hands of Autodesk, which retained a minority stake. Hale Capital and Hale Global each committed to provide up to $10 million to struggling LocationLogic as needed. However, none of that capital was ever called, and the firms were able to enact substantial changes at the newly independent company with just the support of its ongoingrevenue, according to the Hale brothers. Hale Capital and Hale Global also reorganized the research and development group, improved the company’s communication with its customers, and instituted new measures to ensure accountability of managers. “We did one hell of a turnaround,” Charles Hale told Buyouts.

The deal netted both Hale entities about $13 million each, after fees. Not bad for Hale Capital, which raised $60 million from investors in 2008 (one limited partner, a wealthy family, stands prepared to commit an additional $100 million if need be, according to Martin Hale).

The deal is the first major exit for the firml, which Martin Hale launched in January 2008 after leaving Pequot, which, coincidentally, folded a few days after Hale Capital inked the LocationLogic exit. The firm targets carve-outs of divisions of public companies. The $60 million fund is about 30 percent drawn, Martin Hale said.

Martin Hale gained considerable experience in the wireless telecommunications business while at Pequot, where he was involved in that firm’s 1999 investment in and subsequent 2006 $850 million sale of Flarion Technology to QUALCOMM Inc. He was also involved in Pequot’s investment in Celiant Corp., a wireless subsystems manufacturer that Pequot spun out of Lucent Technologies and sold to Andrews Corp. in 2005 for $550 million.

TeleCommunication Systems, an Annapolis, Md.-based developer of wireless communications technology, is paying for the LocationLogic with $15 million in cash and $10 million, or roughly 1.4 million shares of its class A common stock. LocationLogic is on pace for revenue of $18 million and EBITDA of $5 million in 2009, according to a TeleCommunication Systems press release.