Sentinel Capital Partners has completed two auto parts deals this week: the acquisition of Vintage Parts from parent company the Swire Group and the sale of Nivel Holdings to Audax Group. Terms for both deals were undisclosed.
Sentinel acquired Nivel, a supplier of golf carts parts, in February 2004 for $26.5 million (€18.5 million) in partnership with Nivel’s management. Nivel benefited from its situation in a fragmented and growing market with thousands of small suppliers and end customers, said Sentinel managing partner David Lobel. Since 2004, Nivel’s sales and earnings before interest, taxes, depreciation and amortisation have doubled.
Vintage Parts buys surplus inventories from heavy equipment manufacturers, then warehouses the products so they are available to customers who need replacement parts for vehicles such as mining or agricultural equipment throughout their entire 20 or 30 year lifespan.
The company is at just the right stage in its development for private equity investment,
The lower middle market, where we operate, has largely been insulated from all of this turmoil that you read about.
“It’s taken a long time for this company to develop the track record to allow the big guys to have confidence in them,” Lobel said. “That hard initial phase work is now in place. They’re poised for big growth.”
Apart from this week’s deals, Sentinel has acquired four businesses, recapitalised two and exited two this year. Several of these deals were closed this summer as credit markets began to freeze, forcing many bigger private equity players into relative inaction.
“The lower middle market, where we operate, has largely been insulated from all of this turmoil that you read about,” Lobel said. “Particularly for the practitioners in the market that have been in the market for a long time.”
Even as mega funds such as Silver Lake and Goldman Sachs Capital Partners have begun to raise middle market-dedicated funds, Sentinel’s sweet spot is still small enough to remain unthreatened, Lobel said.
“When some of these firms say they’re moving down market, really what it means is slightly down market,” he said. “If you’re managing a multi-billion dollar fund, it’s awfully hard to justify putting out $20 [million] to $30 million of equity.”