10 December 2013 17:24 [Source: ICIS news]
(clarifies EBITDA figures in fifth and sixth paragraph)
By: Joseph Chang
NEW YORK (ICIS)--US-based private equity firm Excellere Partners is working with a former chemical company senior executive to acquire a water treatment chemicals business, an Excellere executive said on Tuesday.
“Water is an area of focus we’re looking at. We can bring deep industry knowledge and expertise to work with entrepreneurs in the business and help them from a strategic alliance perspective,” said Scott Friar, vice president at Excellere Partners.
Excellere has partnered with Paul Turgeon, former president of BWA Water Additives. BWA was sold to US family-owned investment firm Berwind in 2011. Turgeon is currently a board member at US Water Services, an Excellere company.
“We are looking for the right size and platform business we can start with and build upon, bringing value, product development, and potentially taking the business international,” said Turgeon.
“At a minimum we’re looking for a water treatment chemicals business with EBITDA [earnings before interest, tax, depreciation and amoritisation] of $4m [€3m], and on the high side, EBITDA of $20m-25m. The sweet spot is likely $10m in EBITDA,” he added.
The industry average valuation for these types of assets is around 8 times EBITDA, said Turgeon. This would imply a purchase price of around $80m for a business that generated $10m/year in EBITDA.
While US Water Services focused on water treatment solutions, it does not manufacture the chemicals.
The planned new acquisition or series of acquisitions in water treatment chemicals would be independent from US Water Services, noted Friar.
“The M&A [mergers and acquisitions] landscape is attractive, and we are taking a proactive approach with investment bankers, brokers and Paul’s business network. We’re in active dialogue with two parties now,” said Friar.
Excellere is investing in several niche industries in industrial technology; food and agribusiness; oil and gas services; and healthcare from its current $472m fund. The private equity firm is relatively conservative in that it typically targets a 50% equity/debt split, he noted.
“It is very much a partnering approach, where we work with current management to bring in the right talent and resources, using a light investing hand,” said Turgeon.
“Typically the current leadership wants to remain involved, but wants to mitigate risk by taking capital out. That’s where we can take a majority equity stake and then current management can get a 2nd kick when performance improves” he added.
Turgeon would either lead the acquired water treatment chemicals company as CEO, or work on the board of the acquired company.
($1 = 0.73)
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