Behrman Capital: Diversified Plays
Founded in 1991, New York and San Francisco based Behrman Capital is a private equity firm focused on management buyouts, leveraged buildups, and recapitalizations of established growth companies. Deal values range from US$25 million to US$100 million and the firm has more than US$2 billion in capital under management with their last fund capitalized at US$1.2 billion. Sectors of focus include Health Care, Defense, Specialty Manufacturing, Business to Business Outsourcing, and Information Technology. Key criteria for investment include industries that are fragmented and considered ripe for consolidation, market sectors characterized by weak competition, or companies in sound industries with good prospects that are underperforming due to lack of capital or attention from current owners. In addition, Behrman looks for companies that are profitable and typically have revenues ranging from US$50 to US$500 million.
Behrman Capital’s senior management team includes:
South Africans Darryl Behrman (1950–2002) and his brother Grant G. Behrman are the founding Partners of Behrman Capital. Prior to founding Behrman, Grant was a founding member of Morgan Stanley's principal investment activities and a consultant with the Boston Consulting Group. He currently serves as the Chairman of the Board of Brooks Equipment and serves on the boards of Pelican Products , and Selig Sealing Products .
William M. Matthes (Managing Partner) joined Behrman Capital in April 1996. Prior to joining Behrman Capital, he was the Chief Operating Officer of Holsted Marketing, a General Partner with Brentwood Associates (a leveraged buyout and venture capital firm with more than US$500 million under management), and an Analyst with Morgan Stanley. William currently serves on several boards including ILC Industries and Pelican Products and previously was the Chairman of Hunter Defense Technologies .
Other key figures include New York based partners Simon P. Lonergan, Tom W. Perlmutter, and Mark P. Visser; San Francisco based Partner Gregory J. Chiate (who covers the IT, specialty manufacturing, and defense sectors); and Senior Advisor Glen A. Tobias (who had also served for 20 years in various positions with Bear Sterns).
Operating Partners include General Peter Pace, United States Marine Corp. (Ret.), who joined Behrman Capital in March 2008. From September 2005 to October 2007, General Pace served as the 16th Chairman of the Joint Chiefs of Staff and was responsible for providing military advice on US operations in Iraq and Afghanistan. In addition to currently serving on the President’s Intelligence Advisory Board and the Secretary of Defense’s Defense Policy Board, he currently serves as Chairman of the Board of Pelican Products and as a board member of ILC Industries .
Other Operating Partners include Paul Block (specialty manufacturing), Roy Dagnall ( pharmaceutical outsourcing), Larry Deering (health care services), H. Michael Gleason (IT), and Robert W. Gluskin (specialty manufacturing).
Key defense related portfolio components include:
Founded in 1947, Bohemia New York based ILC Industries designs and develops defense electronics and engineered soft goods for the Department of Defense, NASA, and commercial customers. Products fall into three main categories: aerospace and defense ( space suits, airships, mars landing bags, and gas masks for soldiers), personal protection equipment (escape hoods), and pharma/biopharma products (powder containment solutions). In early 2003, Behrman acquired ILC in a deal reportedly worth US$240 million with Behrman investing US$70.4 million in equity, ILC's CEO Clifford Lane rolling over a US$40 million stake, and UBS Warburg providing a US$130 million line of credit.
Other portfolio investments include: Ark Holding Company, Athena Diagnostics , Esoterix , Tandem Health Care , Wil Research Laboratories , ACS Dataline , The Management Network Group , Nimbus CD International, Peacock Engineering Company , Sanmina–SCI , Celerity , Brooks Equipment , Pelican Products , and Selig Sealing Products .
Past Defense Deals:
Noteworthy defense related deals completed by Behrman include the following:
At the end of 2003, Behrman invested US$90 million in Hunter Defense Technologies , a manufacturer of military shelters, power generation, and chemical and biological defense protection systems. To carryout the deal, Behrman reportedly provided US$50 million for an 80% convertible preferred stake while Merrill Lynch Capital and Madison Capital Funding LLC provided US$25 million in senior debt and Albion Alliance provided US$15 million in subordinated debt. In 2005, Hunter Defense acquired Bea Maurer, a manufacturer of rapidly deployable tactical shelters for military, medical, and homeland defense uses, for US$80 million. Later that same year, Hunter acquired PowerSystems International, a developer of power generation systems, and environmental control units for military applications, for US$40 million. In August 2007, Behrman sold Hunter Defense to New York based private equity firm Metalmark Capital for US$335 million (reportedly, Behrman generated a 2.5 return on its investment).
In November 1996, Behrman carried out a US$117 million leveraged recapitalization of San Jose California based Condor Systems , an electronic warfare equipment maker. Behrman reportedly invested US$24 million to secure a 60% equity position while Nomura Holdings and Antares Leveraged Capital together invested US$75 million in senior debt with an additional US$18 million (US$13 million of equity and a US$5 million subordinated debt note) coming from Condor’s Management. In early 1999, Behrman sold its stake for US$134 million to an investor group led by former Defense Secretary William Perry and the former head of the CIA John Deutch (Global Technology Partners LLC and DLJ Merchant Banking Partners II LP).
The Bottom Line:
Although New York and San Francisco based Behrman Capital is not a pure defense or government services investor, having the 16th Chairman of the Joint Chiefs of Staff as an Operating Partner no doubt opens a few government and defense industry doors around the country. Look for more defense related deals from this group.
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