What’s the word from Washington D.C.? Plans are underway to cut spending. Where will the cuts be? What priorities will continue to get funded? What are the implications to dealmakers?

Both Laura Kevghas of Mirus Capital Advisors and Paul Serotkin of Venture Management agree that hot investment areas in the federal government sector currently include: cyber security, C5 (command, control, communication and computers, combat systems) and ISR (intelligence, surveillance & reconnaissance).

Strategic buyers are busy as they seek to further differentiate themselves. Argon ST, the result of a merger and subsequent buyer of complementary businesses, was purchased on August 5th by the Boeing Company for $775m after some competitive bidding among the big three defense contractors. Just last year Boeing also bought eXmeritus, Applied Signal purchased Pysix Engineering as an entrée into cyber intelligence arena and Raytheon acquired BBN Technologies to better compete for communications and networking contracts.

Foreign buyers intending to build up their American defense presence has not waned. For instance QinetiQ, a London based global defense technology company, has grown through a series of US acquisitions including Foster Miller, Analex Corp and Cyveillance Inc.

Niche private equity firms with focus in the federal government contracting sector are going hot and heavy with roll-ups. For example Court Square Capital Partners purchased Wyle Labs just last year as a platform into the government services space. It will be interesting to see what’s on the horizon for Court Square Capital.

And what about the intersection of private equity and corporates? In 2004 Veritas Capital invested in McNeil Technologies Inc. – a government national security and intelligence services firm. Today McNeil is under agreement to be purchased for $355m by AECOM Technology Corp – a provider of professional technical and management support services for government and commercial clients.

What’s not so hot per Laura and Paul? Administration and basic IT services given the Department of Defense’s announcement to cut $100 billion out of the admin budget. Weapons & armor manufacturing as well as track and wheeled combat vehicles may not be as attractive given US plans to withdraw troops from Iraq and Afghanistan. But technology rich companies with specialties such as unmanned vehicles, secured communications, defense electronics, contingency operations particularly as it relates to Iraq and Afghanistan and intelligence services for analysis remain hot among corporate and private equity buyers.

Laura Kevghas, long-term ACG member, is a Partner with Mirus Capital Advisors – an investment banking firm that specializes in mid-market technology, federal government contracting business, services companies and family-owned businesses.

Paul Serotkin serves on the Corporate Development Forum program committee for ACG Boston and consults with Venture Management Inc (VMI) – an M&A services company for technology-based businesses best known for its expertise in supporting consolidation strategies in the Federal Services market.

Carol Bergeron

BERGERON ASSOCIATES

Workforce Planning & Integration | Management Development | Human Resources

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BB&T

National Dentex Corporation (NASDAQ: NADX) announced that it had entered into a definitive agreement and plan of merger to be acquired by a holding company of GeoDigm Corporation, a portfolio company of Welsh, Carson, Anderson & Stowe. The transaction was approved by shareholder vote on July  29, 2010. Under the terms of the merger agreement, National Dentex’s shareholders received $17.00 in cash for each share of National Dentex common stock held, representing a premium of approximately 70% over National Dentex’s pre-announcement closing share price. BB&T Capital Markets served as the exclusive financial advisor to National Dentex Corporation.

National Dentex, based in Natick, Massachusetts, is one of the largest owner/operators of dental laboratories in North America. The Company serves an active customer base of over 24,000 dentists through 44 dental laboratories located in 30 U.S. states and one Canadian province. National Dentex’s dental laboratories provide a full range of custom-made dental prosthetic appliances, including dentures, crowns, fixed bridges and other dental specialties.

GeoDigm, based in Minneapolis, Minnesota, is a leading innovator in dental and orthodontic imaging and manufacturing technology. The company deploys its proprietary, digitally-enabled production system exclusively through GeoDigm Laboratories, delivering improved products and services to its client base of over five thousand dentists and orthodontists.

Welsh, Carson, Anderson & Stowe is one of the largest and most successful private equity firms focused in two industry sectors: information/business services and healthcare. Founded in 1979, Welsh, Carson has organized 15 limited partnerships with total capital of over $20 billion. The firm is currently investing an equity fund, Welsh, Carson, Anderson & Stowe XI, L.P., and its current portfolio consists of 31 companies with combined revenues of approximately $27 billion and EBITDA of $4 billion.

The BB&T Capital Markets Healthcare and Consumer Investment Banking Groups provide M&A advisory and capital raising services to leading middle-market companies and private equity groups.  As trusted strategic advisors, we provide clients with creative, thoughtful ideas and solutions, bringing to bear industry specialization and the resources of one of the largest and most stable financial institutions in the country.

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BB&T

BB&T Capital Markets is pleased to announce that Nick Konstantinou has joined our team as Managing Director in the Healthcare Investment Banking Group.  Mr. Konstantinou’s clients have included private and public companies in a number of healthcare sub-sectors including specialty and infusion pharmacy, home health, drug and medical-surgical distribution, hospitals and health systems, CRO and drug development services, direct-to-consumer, diabetic supply distribution, healthcare information technology, vitamins and nutritional products, physician and dental practice management, specialty pharmaceuticals, drug delivery, and cardiovascular medical devices.

Mr. Konstantinou has 19 years of experience in the healthcare industry in both investment banking and operating roles.  Prior to joining BBTCM, Mr. Konstantinou was Head of Healthcare Investment Banking at KeyBanc Capital Markets.  Prior to KeyBanc, Mr. Konstantinou worked in the Healthcare Investment Banking Group at Raymond James & Associates and started his investment banking career in the Mergers & Acquisitions Group at Lehman Brothers in New York City in 1997.  Mr. Konstantinou began his career at Johnson & Johnson’s Cordis Division, a leading manufacturer of cardiovascular medical devices.  At Cordis, Mr. Konstantinou held various management positions in manufacturing operations and logistics planning.

Mr. Konstantinou received his MBA in Finance, Strategy and Accounting from the J.L. Kellogg Graduate School of Business at Northwestern University and holds a Bachelor of Business Administration from Florida International University.
Healthcare Investment Banking

The BB&T Capital Markets Healthcare Investment Banking Group provides M&A advisory and capital raising services to leading middle-market companies and private equity groups.  We have developed particular expertise and experi ence in alternate site (outpatient to home) healthcare services and medical products, specialty distribution and outsourcing.  As a trusted strategic advisor, we provide clients with creative, thoughtful ideas and solutions, bringing to bear industry specialization and the resources of one of the largest and most stable financial institutions in the country.

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Stonebridge Associates was recently retained by SmartPill, a venture-backed medical device company, to advise the special committee to the board of directors regarding an insider-led investment round and to render a fairness opinion on the transaction. Led by Mitch Briskin, the Stonebridge team worked with the special committee to structure and negotiate the proposed investment. Stonebridge then evaluated the fairness from a financial perspective of the company’s valuation as reflected in the transaction.

As a result of the financing, SmartPill received $9.4 million in preferred equity in an investment round led by Psilos Group Managers LLC and joined by other current institutional and individual investors of the company. The funds will be used to begin a clinical trial to assess diagnostic outcomes for the SmartPill, a single-use, ingestible capsule that utilizes sensor technology to measure pressure, pH, and temperature throughout the entire GI tract.

Chip Broadhurst, chairman of the special committee, stated, “Stonebridge was very helpful in assisting the special committee in our negotiations with our lead investor. They also prepared a professional and independent fairness opinion that the committee relied upon in its recommendation to proceed with the transaction.”

Stonebridge Associates specializes in providing merger and acquisition (M&A), divestiture, private placement, and strategic financial advisory services to middle market and emerging growth technology companies. Applying industry experience and structuring expertise to every engagement, Stonebridge Associates develops creative solutions to help clients achieve superior outcomes. Since 1986, Stonebridge has closed over $3 billion in private financings and advised on over 300 M&A transactions and advisory assignments. Member FINRA/SIPC. For more information, please visit www.stonebr.com.

Located in Buffalo, New York, the SmartPill Corporation is a privately held developer and manufacturer of cutting-edge technology that offers a new and exciting breakthrough in the rapidly growing diagnostic GI healthcare arena. Their flagship product, the SmartPill GI Monitoring System, is an ingestible capsule that is outfitted with sensors to monitor patients’ gastrointestinal health. It was recently approved by the FDA for use in evaluating colonic transit time in patients with chronic constipation.

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ACG Boston, the Boston Chapter of the Association for Corporate Growth (ACG), announced its new chapter president & CEO, Ben Procter, a partner at the Watermill Group, and elected six other members to its board of directors. New board members include Julie Barron, Keith Broyles, Christine Lynch, Kevin Macdonald, Jimmy Rich and Kerry Muse.
“One of the first goals of my presidency, with the support and effort of our board, is to focus ACG Boston on our community of dealmakers. ACG is a community for people focused on making deals, and not just for those of us in private equity or investment banking – but lenders, lawyers, and other advisors who are involved in and support the process of dealmaking,” said Ben Procter, incoming president & CEO, ACG Boston. “ACG is both an organization for senior people in the deal market, and the place for people coming into the industry to develop their networks. I am excited to be able to work with this talented board to deliver on the goals of all of our members.”

Background – New 2010 ACG Boston Board Members

Ben Procter (Incoming President & CEO) – The Watermill Group
Ben Procter, a partner at the Watermill Group, leads the sourcing, due diligence and acquisition of new investments. During his 20 years with Watermill, Procter has led or been involved in more than 25 acquisitions, and numerous public and private financings. He also served as partner at Woodside Capital, an investor in distressed debt and equity for companies with up to $150 million in revenues, sourcing and managing control equity transactions in distressed or challenged companies. Procter received his BA in Economics from Trinity College and MS in Accounting from Northeastern University. He resides in Dover, Mass.

Julie Barron (Incoming Director) – Brown Brothers Harriman
Julie Barron, senior vice president in the Banking and M&A Advisory Group of Brown Brothers Harriman & Co., focuses on building commercial banking and corporate finance relationships with middle market private firms and closely held public companies based on her 27 years of financial services and real estate experience. Prior to joining Brown Brothers Harriman & Co., Barron was a private banker with J. P. Morgan Private Bank, and held a variety of position with Citizens Bank over a 17-year career there. Barron resides in Wellesley.

Keith Broyles (Incoming Director & Chair, Sponsorship) – TD Bank
Keith Broyles, vice president and business development officer for the Asset Based Lending Group within TD Bank, N.A., is responsible for sourcing and developing new business opportunities for the ABL Group and TD Bank. In his 21st year in the banking/ABL industry, Broyles’ career spans positions with Shawmut Bank, the National Bank of Canada and Siemens Financial Services, Inc., where he worked on M&A transactions, recapitalizations and refinancing of senior debt. Broyles has worked extensively with private equity and private investment groups, mezzanine and term B lenders, investment banking groups, consultants and service providers located through New England and across the middle market. A graduate of University of Massachusetts Dartmouth, Broyles lives in Mansfield.

Christine Lynch (Incoming Director & Chair, Emerging Professionals Committee) – Goulston & Storrs
Christine D. Lynch, director at Goulston & Storrs, P.C. in Boston, concentrates on bankruptcy and restructuring matters. Lynch has extensive experience in complex Chapter 11 reorganizations and distressed M&A transactions, representing debtors, creditors’ committees, unsecured and secured creditors, landlords, equity-holders and purchasers of assets. Lynch has her undergraduate degree from Georgetown University and law degree from New York University School of Law.

Kevin Macdonald (Incoming Director) – McGladrey
Kevin Macdonald, audit director at McGladrey, works with private equity funds, mid-sized manufacturers and distributors, and venture-backed start-up companies on tax and financial issues. He was a founder and director at Macdonald, Levine, Jenkins & Co., P.C. Macdonald has his undergraduate degree from Boston College and a Master of Science in Taxation from Bentley College.

Jimmy Rich (Incoming Director) – Gemini Investors
Jimmy Rich joined Gemini Investors in 2000. Gemini, a private equity firm based in Wellesley, Mass., provides growth capital to, and finances management buyouts of, private companies between $10 and $50 million in sales. The firm has raised three private equity funds, comprised of more than $450 million of capital under management. Rich is active in all firm activities with a focus on business development and new investment activity, and currently serves on the boards of directors for eight of Gemini’s portfolio companies. He began his career as an investment banker with J.P. Morgan, and also worked for Citizens Energy. Rich has his A.B. from Dartmouth College.

Kerry Muse (Incoming Director) – Sherbrooke Capital
Kerry K. Muse is a director with Sherbrooke Capital, a private equity firm that provides growth and expansion capital to emerging companies in the health and wellness industry. She is active in the investment process, from deal-sourcing and screening, due diligence and investment, and post-investment oversight and assistance. Muse coordinates interaction between Sherbrooke Capital and its outside experts, and has been responsible for originating a variety of industry-focused events and symposia. Prior to joining Sherbrooke, she worked for several non-profit organizations, including American Ballet Theatre, Merce Cunningham and Martha Graham Dance Theater. She holds an undergraduate degree from George Washington University and an M.B.A. from Boston University.

Janice Shields is the outgoing president & CEO and has served in that capacity for three years.  “Jan has steadily guided the association through a strategic reorganization through difficult economic times, thereby ensuring ACG Boston’s stability and growth for the future,” said Jack Derby, Chairman of the ACG Boston Board of Directors.  Outgoing ACG board members include Brian Cuddy, Katherine Rogers, Sharon Stone, Derek Swaim, Tyler Wick, and Bryce Youngren. We would like to thank all of our board members for the support and leadership they have given to ACG over their terms of office.

Upcoming ACG Boston Events

ACG Boston will kick off the event season this fall with its Fall Networking Night, Thursday, September 16, 2010 from 6:00 p.m. to 8:30 p.m. at the Marriott Long Wharf, and will host its invitation only Middle Market Forum on Monday, September 27, 2010 from 5:30 p.m. to 7:30 p.m. at the offices of Goodwin Procter.

About ACG Boston
ACG Boston (www.acgboston.org) is one of 53 chapters around the world that form the international ACG organization, which focuses on corporate growth, corporate development, and mergers and acquisitions. With nearly 800 members, ACG Boston holds more than 25 networking and educational events per year, including Dealmaker’s Breakfasts, Middle Market Forums, Corporate Development Forums, Women’s events, Networking Nights, Emerging Professionals networking events, an annual M&A conference in June, an annual Private Equity and M&A Outlook conference in February, and an annual M&A sector specific conference in November. More than 5,000 people attended ACG Boston events in the last year.

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BB&T

On June 23, 2010, Zaxby’s completed a debt recapitalization transaction funded by Wells Fargo and GE Capital.  BB&T Capital Markets acted as the financial advisor to Zaxby’s.

Zaxby’s is a leading quick service restaurant chain focused on offering fresh, cooked-to-order chicken fingers, wings, sandwiches, salads and side dishes at value prices.  Concentrated on the southern region of the United States, Zaxby’s operates and franchises 490 stores across 11 states.

The BB&T Capital Markets Restaurant Investment Banking Group focuses on assisting middle market clients across all sectors in the restaurant industry. The Restaurant Group has completed eight engagements in the past two years and has served clients such as Mrs. Fields, Wetzel’s Pretzels, Boston Restaurant Associates, BUCA, Ted’s Montana Grill and Gordon Biersch. A full-service platform, BB&T provides M&A advisory, equity underwriting, debt capital markets, corporate lending, sales and trading, and private capital raising services.

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Tully & Holland, Inc. is pleased to announce it has successfully advised Burris Logistics, Milford, DE, North America’s seventh largest refrigerated warehouse & distribution company, in the sale of selected assets to Cloverleaf Cold Storage Co., Sioux City, IA.  The terms of the transaction were not disclosed.

In this transaction, Burris Logistics, a leading full line frozen and dry food logistics company, divested a network of facilities representing over 10 million cubic feet of refrigerated warehouse space to Cloverleaf Cold Storage Co.  Burris’ divestiture of multiple warehouses located east of the Mississippi offers an East Coast presence to the predominately Mid-West-based Cloverleaf Cold Storage Co.  As one of the largest privately-held public refrigerated warehouse companies in the U.S., Cloverleaf Cold Storage shares with Burris a philosophy dedicated to superior service, innovation, technology, and execution.

Tully & Holland, an investment bank established in 1992, provides corporate finance and merger & acquisition advisory services to middle market consumer product companies. The firm has particular expertise representing food & beverage companies, multi-channel marketers, retailers, and consumer product manufacturers and distributors.  For further information about the firm, please visit our website at www.tullyandholland.com.

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Harris Williams & Co. is pleased to announce the sale of Veritext Holding Company (Veritext), a portfolio company of The Riverside Company (Riverside), to Investcorp International, Inc. (Investcorp). Harris Williams & Co. acted as the exclusive advisor to Veritext. The transaction was led by Ned Valentine, John Arendale and Brian Lucas from the firm’s Richmond office. Veritext, headquartered in Florham Park, NJ, provides court-reporting services to law firms, insurance companies, and corporations. Veritext arranges for court reporters to capture testimony given during depositions, primarily in civil litigation and other proceedings. Veritext provides its services through regional offices, a national network of independent contractors, and affiliations with hundreds of court-reporting agencies and individual court reporters.

Riverside is a global private equity firm focused on acquiring leading small and medium-sized enterprises (with a value of up to $200 million) and partnering with strong management teams to enhance the success of its companies through acquisitions and organic growth. Since its founding in 1988, the firm has invested in 231 transactions with a total enterprise value of $5.0 billion. The investment portfolio in North America, Europe, and Asia includes 72 companies with annual sales totaling $3.3 billion, EBITDA of $506 million, and more than 13,000 employees. Riverside offers the resources to complete acquisitions smoothly with more than $3.0 billion in assets under management, more than 185 professionals in 19 offices and its longstanding relationships with partner lenders. According to Thomson Venture Economics, seven of Riverside’s nine mature funds rank in the top 25% of all funds (as at December 31, 2009). The firm’s investors include the world’s leading pension funds, endowments, funds of funds, insurance companies and banks.

Investcorp is a leading provider and manager of alternative investment products. It has offices in New York, London and Bahrain and is publicly traded on the London Stock Exchange (IVC) and Bahrain Stock Exchange (INVCORP). Investcorp has six lines of business: private equity, hedge funds, real estate, technology investment, Gulf growth capital, and MENA Mezzanine. Founded in 1982, Investcorp has grown to become one of the largest and most diverse alternative investment managers in terms of both product offerings and geography.
Harris Williams & Co. is the premier middle market advisor with a two-decade legacy of sell side excellence serving clients worldwide. The firm is focused exclusively on the middle market providing sell side and acquisition advisory, restructuring advisory, board advisory, private placements and capital markets advisory services.  For more information about Harris Williams & Co., please visit www.harriswilliams.com.

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Ken’s Foods, Inc., one of the nation’s largest manufacturers of salad dressings, condiments, and sauces, has retained Tully & Holland to represent the Company in an exclusive acquisition search assignment. Ken’s Foods, an $800 million dollar manufacturer and marketer of Ken’s Steak House salad dressing and Sweet Baby Ray’s barbecue sauce, seeks to acquire complementary companies to further diversify its brand portfolio. Ken’s is headquartered in Marlboro, MA with additional manufacturing facilities in McDonough, GA and Las Vegas, NV.

ACQUISITION CRITERIA
Products:  Hot sauces, BBQ sauces, mustard, salad dressings, mayonnaise, salsas,  pasta sauces, hummus, marinades or other shelf stable liquid condiments in glass or plastic bottles; refrigerated condiments will be considered.

Label:   Strong brand recognition with national distribution or branded regional product with rapidly growing sales.

Company Size:   $15M to $500M annual sales.  Smaller companies will be considered if they offer significant growth potential; e.g. growth beyond a specific geographic market.

Distribution:   National grocery chains and food service distribution channels preferred;  distribution through Direct Store Delivery (DSD) is less desirable.

Geography:   U.S. and Canada with specific interest in the Midwest, the Carolinas, Texas, and St. Louis areas.

Having successfully completed one acquisition that subsequently resulted in a position of market leadership, Ken’s Foods seeks to replicate this experience and sustain its impressive growth by acquiring brands that would benefit from Ken’s strong marketing and sales organizations. Please feel free to call or email either of us in complete confidence to discuss possible acquisition opportunities.

Tim Tully
ttully@tullyandholland.com
(781) 239-2900 x14

Russ Robb
rrobb@tullyandholland.com
(781) 239-2900 x15

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BB&T

On July 14, 2010, Tappan Wire & Cable, Inc., a portfolio company of Ares Capital Corporation, was acquired by Southwire Company. BB&T Capital Markets served as the exclusive financial advisor to Tappan Wire & Cable, Inc.

Tappan Wire & Cable, Inc. was founded in 1978 as a manufacturer of low-voltage specialty wire and cable for the communications and computer industries. Its products include fire alarm, sound and security, high temperature, coaxial, armored, chemical-resistant, industrial, automotive, home theater, and tray cables. The Company is based in Blauvelt, New York and has distribution warehouses in Dallas, Atlanta, and Los Angeles.

Southwire Company develops, manufactures, and markets building wire and utility cable for the wire and cable industry in North America. It offers bare overhead conductors, insulated products, high and medium-voltage cables, bare copper, and power generation cables. The company serves automotive, electrical wire and cable, telecommunications, HVAC, lighting, power distribution and control, home appliance, industrial equipment, and military markets, as well as retail, industrial, and distributor customers. Southwire Company was founded in 1950 and is headquartered in Carrollton, Georgia.

The BB&T Capital Markets Commercial & Industrial Investment Banking Group provides clients with industry expertise and flawless transaction execution.  We offer M&A advisory and capital market raising services across a variety of sectors including, construction and infrastructure, building materials, industrial equipment and distribution, and commercial and consumer durable goods.

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