SMALLER DEALS GETTING DONE
Janes Capital Already Has Brokered a $27.5M Acquisition This Year
By RAJIV VYAS
Getting a deal done is challenging these days. But partners at Irvine-based investment bank Janes Capital Partners were able to complete a deal in less than two months this year.
In January, Janes Capital was engaged by Able Corp., a Yorba Linda-based parts maker for the aerospace and defense industry, to find a buyer for the business. In around 50 days, Stephen Perry and partner Ross Anderson at Janes Capital were able to find a buyer, negotiate and close the deal.
On March 11, Smiths Aerospace Inc., a subsidiary of Britain’s Smiths Group PLC acquired Able for $27.5 million.
The transaction was funded on April 1. Able was valued at a double-digit multiple of its earnings before interest depreciation and taxes, compared to the normal four to six times EBIDTA that most manufacturing companies receive in this market.
“We strive to execute every deal we undertake,” said Stephen Perry, managing director at Janes Capital, which specializes in the aerospace and defense industry.
Last year, the firm completed four deals out of five mandates it received, he said.
Able, started in 1977, counts $12 million in annual sales and makes pumps, motors and fluid control products. The company had designed a hose-and-drogue refueling system and it was looking for additional funds for further research and development. The hose reel is designed for the Boeing 767 Global Tanker Transport Aircraft and is used to facilitate aerial refueling.
Boeing needed to make a decision on whom to give the contract for the hose reel for its aircraft. There were two players in the market: Able and another company that had more resources.
Able needed an additional $50 million for development and also needed to get a large company as its backer, if it were to stand any chance of participating in the Boeing program.
“Putting in that kind of money was almost impossible for Able,” Anderson said. “If Able was not able to align itself with a well-capitalized company, then it would have lost this deal.”
Perry and Anderson had to find a buyer quickly and close the deal at a time when the M & A; market is going through its most difficult phase in 10 years.
“We got our first potential buyer within two days of being engaged by our clients,” Perry said. “Within 15 days we had offers from three viable bidders.”
Smiths Aerospace eventually signed the deal on March 11.
Two days later, Boeing announced it had selected Smiths to supply the air refueling system for its 767 tanker aircraft.
For the deal, Janes worked with Kushner, Smith, Joanou & Gregson a tax and accounting firm in Irvine, and the Orange County offices of law firms Palmieri, Tyler, Wiener, Wilhelm & Waldron LLP and Sheppard, Mullin, Richter & Hampton LLP.
To expedite the acquisition of Able, Smiths relocated its deal team from the UK to Irvine, where it spent 10 days negotiating the transaction.
“This was a high-intensity negotiation,” Perry said.
Almost every investment banker would agree that last year was one of the most challenging years they have ever faced,even those who managed to get deals and execute them.
Perry said that Janes, too, faced challenges.
“From our standpoint, we had to work so much harder to get anything done,” he said. “It hasn’t been an impediment to getting things done. But we had to work twice as hard.”
Perry said that buyers are spending more time in due diligence and conducting tougher negotiations.
Janes Capital was formed three years ago and has four partners and two professionals. It focuses on Southern California-based companies. It is headquartered in Irvine and has an office in Palos Verdes.
Last year, Janes handled two divestitures for Honeywell International Inc., a management buyout of Airdrome Parts Co. in Long Beach, and completed an employee stock ownership plan for Vantage Associates Inc. in San Diego.
Janes Capital usually represents a seller in a deal and focuses on companies with a value of $10 million to $50 million.
Perry said that he is seeing a pick-up in M & A; activity. And if the first quarter is anything to go by, the firm should again achieve its target of four to six deals a year in 2002, he said.
In the first quarter, the firm closed two deals: Able and Intri-Plex Technologies Inc. In the Intri-Plex deal, the firm did a debt and equity placement for the Santa Barbara-based manufacturing company that makes components for semiconductors and personal computers. The equity was provided by Riordan, Lewis & Haden, a Los Angeles-based private equity fund with an office in Irvine. The debt refinancing was provided by Wells Fargo Bank.
The Intri-Plex deal, “utilized our full range of capabilities: financial restructuring, and debt and equity placement,” Perry said. “Able Corp., on the other hand, played to our strengths in aerospace and defense.”
