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Where Do I Find Financing for an Aggressive Consolidation Strategy?
Integrated Supply Network (ISN), Lakeland, Florida, is the largest independent provider of tools, equipment and supplies to the automotive aftermarket. The company was acquired in 2011 via a leveraged buyout by Audax Private Equity (Audax), a private equity group that partners with management teams and financial sponsors to build long term value. PNC Mezzanine Capital (PNC MC) provided a subordinated debt and equity co-investment to fund the leveraged buyout and ongoing consolidation strategy led by Audax Private Equity.
The Plan
Having previously completed three successful transactions with PNC MC, Audax turned to PNC MC in July 2011 as their key financing partner for the initial ISN transaction and to support the planned consolidation strategy. Given the nature of the strategy, Audax was seeking a financing partner that was supportive of add-on acquisitions and who would have the ability to provide additional capital to the company as needed to support the growth.
The Strategy
During due diligence, management and Audax recognized that ISN’s market was ready for transformation through consolidation and wanted to aggressively pursue a strong acquisition pipeline post-close. Furthermore, in areas where management was unable to identify suitable acquisition candidates, they had a greenfield development plan which required investments in equipment, personnel and working capital.
The Result
Since PNC MC’s initial investment in 2011, ISN made eight add-on acquisitions in three countries, with PNC MC providing three follow-on financings. Immediately post-close, ISN focused on expanding their product offering and customer bases through acquisitions of companies with strong private label presence. Then realizing an opportunity to expand into Canada, ISN acquired two distributors covering the eastern half of Canada. In 2015, ISN executed acquisitions to expand the equipment side of its business and also to expand geographically into the UK. In addition to growing through acquisition, ISN opened new locations in the Pacific Northwest and Southwest United States. The successful execution of the strategy allowed Audax to sell ISN to another financial buyer in 2016.
“We have a lot of choices when it comes to financing our companies. PNC MC has been one of our top mezzanine providers since 2006, closing eight platforms and dozens of add-ons. We have turned to PNC MC repeatedly because they understand the needs of middle market companies, actively support organic growth initiatives and consolidation strategies and understand what it takes to get deals across the finish line.”
-Mark Cordes
Managing Director
Audax Private Equity