Enstar is a publicly held insurance company based in Bermuda. The company acquires and manages insurance and reinsurance companies in "run-off," and provides management consulting and other services to the insurance and reinsurance industry. The company primarily focuses on the financial services industry in a global market which would complement its operating businesses, investigating opportunities in the United States and worldwide.
Enstar asked Nicholas to analyze a wide range of capital forms that the company could potentially raise to prepare itself for future acquisitions. The selected form of capital needed to be of a certain minimum amount, and needed to fit the following criteria:
- Avoid current shareholder dilution
- Ability to retire the capital in the short-term
- Minimize risk to Enstar
- Minimize the public investor relations burden
- Minimize or eliminate negative effects on stock price
Mason Wells is a leading lower middle market private equity firm. Based in Milwaukee, WI, the firm was founded in 1982 as part of the Marshall & Ilsley Corporation and became an independent firm in 1998. Mason Wells currently manages approximately $500 million of capital and looks to invest in family owned, privately held companies or corporate divisions with headquarters in the Midwestern U.S. Mason Wells focuses on companies with $25 - $250 million in sales and $5 - $30 million of EBITDA with an industry focus on the engineered products and services; specialty packaging and paper; and out-sourced business services sectors. A key component in every Mason Wells investment is gaining economic and voting control. In most instances, Mason Wells looks to partner with the existing management team to continue to operate the business post-acquisition.
Mason Wells asked Nicholas to develop a list of potential acquisition targets within the analytical instruments and services sector. Mason Wells considers this sector to be attractive and growing because of high R & D intensity and low competitive import susceptibility. Such acquisitions are believed to provide the firm with high gross and EBITDA margins with low capital expenditures. The Nicholas team provided investment risks and rewards as part of an overall investment thesis. Finally, the team identified several macro trends and drivers, both positive and negative, for the Mason Wells team to consider while investing in this sector.
Calavo Growers, a public company trading on Nasdaq, was originally founded in 1924 when a group of grower/hobbyists banded together to form the California Avocado Growers Exchange. Nearly 84 years later, Calavo is the leading packer, grower and shipper of fresh avocados and related food products in the United States and worldwide.
Calavo requested that the Nicholas Center analyze a potential Chilean acquisition target. The team specifically looked at:
- The Cost of Capital of Calavo and the potential target
- The value of 50% stake in the target company
- How Calavo should pay for the acquisition, stock or debt
- If this deal would add value for shareholders
- How to best integrate the target into Calavo
- Nicholas' view of some sort of performance feature since Calavo believes a significant amount of the value is dependent on their forecast of future years' earnings.
The team was confronted with the more complicated issues of M&A; specifically the cyclical industry of produce growers and acquiring a private company from an emerging country.
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Spring '06 Projects |
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