Mason Wells invested a larger portion of equity when it recently bought Dedicated Computing because it sees the acquisition as a growth investment. Though the terms of the deal weren’t disclosed, Bill Krugler, a managing director at the Milwaukee, Wis. buyout shop, said 40% of the transaction was equity--instead of the typical 20%. In the last two years, the private company has grown from $33 million in revenue to $100 million, and Krugler wants to double the company’s size. Saddling the company with a larger debt burden could hinder growth.
Dedicated Computing’s management and Prudential Capital also took stakes in the company, which was sold by founders Terry and Nancy Anderson. Prudential also supplied mezzanine debt. Harris, U.S. Bank and Marshall & Ilsley--Mason Wells’ former parent--provided senior debt.
William Blair & Co. advised the company. The Chicago firm ran a limited auction, Krugler said, adding his shop would usually pass on a company sold through a wider auction. Family-owned companies often run smaller auctions because they care more about finding a careful buyer than getting the highest possible price, Krugler said. “They want to know not only what you’re going to do with it while you own it but what are you doing to do when you sell.” The Andersons did due diligence on Mason Wells, calling portfolio companies and reviewing the buyout shop’s track record.
Krugler said the company could wind up like General American Corp., large enough that it kept its identity when bought by Fiserv in 2003.