Denver-based buyout consultant Headwaters MB LLC is buying its way into Orange County, despite plenty of concern that private equity deals are on their way out.
Headwaters, which bought Costa Mesa’s ISI Capital Partners, plans to tap into some strong sectors here: software makers and the action sports market.
Headwaters, which mainly advises midsize companies, had been eyeing the Southern California market for some time.
Despite credit concerns and the lending markets showing caution, Headwaters hasn’t seen a slowdown in private equity deals for smaller to midsize companies, said Brian Mulvaney, its managing director.
“Deals for smaller companies that buyers usually have cash for shouldn’t be affected,” Mulvaney said.
It’s the billion-dollar deals that will suffer because they rely on credit and other outside funding sources, according to Mulvaney.
Mulvaney and Grant Garbers, founding partners of ISI Capital, will continue to head up the Costa Mesa office.
Mulvaney and Garbers consulted on about a dozen deals in three years under ISI Capital.
Local companies they advised include Newport Corp., Point Research Corp. and Alexander Communities.
About half of the companies Headwaters expects to do business with in Southern California will be in OC, according to Mulvaney.
The company, which started in 2002, also has offices in Atlanta and Boston.
Headwaters also works with companies that focus on business services, media and healthcare.
Headwaters already has a bit of foothold in Southern California.
“We’ve completed several transactions for Southern California-based companies during our first five years,” said Philip W. Seefried, cofounder and chief executive of Headwaters. “Having strengthened our presence there, we’re now moving to a more aggressive marketing posture.”
Headwaters consults companies in the $20 million to $200 million revenue range. It recently advised the sale of Acquire Pantone Inc., a Michigan company specializing in graphic arts, to New Jersey-based X-Rite Inc. for $180 million. The deal’s to close this fall.
OC is especially attractive because there are a number of companies here that are selling the “California lifestyle,” Mulvaney said.
The county counts a slew of action sports clothing makers, with big players such as Nike Inc.’s Hurley International LLC in Costa Mesa and Huntington Beach-based Quiksilver Inc. to smaller guys such as Costa Mesa’s RVCA Clothing and Westlife Distribution USA LLC in Irvine.
“The ability to operate globally is one of the key ingredients sellers are looking for in potential buyers,” he said.
Such was the case with telecom Quality Partners, which Mulvaney advised the sale of to British investor Intertek Group. Quality’s customers wanted service in Europe, which it couldn’t provide.
