Press

press picture

September 14, 2007

Distressed, But Not Stressed - PrivateEquityCentral.net

Marc Raybin
September 14, 2007

Earlier this week, distressed investor Angelo, Gordon & Co. announced it had started raising two new funds targeting a total of $900 million. The New York-based private equity firm could be on to something as the credit market continues to fall. Investors should not be surprised to see more announcements of distressed funds being raised. The time is right for bargain hunting.

"It is always a good time for distressed investing as far as I am concerned," says Gregory Segall, a managing partner with Chrysalis Capital Partners, a private equity firm in Philadelphia that focuses on the distressed market. "There are always distressed companies."

Segall says the environment has changed. Up until about a month ago pretty much anyone with a business plan on a napkin was able to get financing from a lender. Today, things are different. Companies are going to have to work a little harder to prove themselves these days.

Although the credit crunch itself does not seem to be targeting a specific sector as lending was overly generous across the board, the nature of the business cycle does work against a few types of businesses. Daniel Collin, a founding partner for distressed investor Monomoy Partners, has noticed companies in basic manufacturing, auto and consumer retail are those hit the hardest by the increasing scarcity of credit.

"Where we are seeing opportunities is that businesses that historically could buy their way out of trouble, cannot anymore," says Collin. "They are forced to restructure, which takes capital not just in the form of changing the balance sheet, but also expertise to take the prior cost structure and operations and make it better."

While there could be some short term relief as it relates to what the Federal Reserve Bank does with interest rates, the bottom line is that similar to the subprime market, which is credited of course with triggering the current state of the credit market across the entire economy, a lot of businesses that should not have been lent money were in the last three to four years. In order to survive, these companies are going to need to refinance their loans or seek some sort of relief from their lenders. Collin predicts the pullback in the credit market could last for as much as the next 24 months.

"We believe we are in a position to take advantage of the market opportunity," says Collin. "Firms that survive will be those that can add to the operations of the [portfolio] companies, and not just capitalize on the market sentiment."

A recent Monomoy deal involved the acquisition of Transeo, a provider of integrated vehicle solutions to the armored vehicle industry. The company designs, engineers and manufactures armored trucks and similar vehicles for the transportation of cash. Although specifics about the deal were not made public, Monomoy typically makes control investments in companies that require operational or financial restructuring, acquiring these businesses through bankruptcy, out-of-court restructurings, corporate divestitures and other types of complex deals.

Not surprisingly, Collin says Monomoy has seen deal flow steadily pick up as the credit markets become more volatile. Transeo, which will operate in partnership with Western Recreational Vehicles, also a Monomoy portfolio company, and represents the firm's 10th transaction in the last 20 months in the smaller end of the middle market. He calls the current state of the market the "tip of the iceberg."

Bringing some pragmatic thought to the situation, Segall points out that after the credit market popped on about Aug. 12, it was not as though businesses filed for bankruptcy protection on Aug. 13. He says the market is just starting to "unwind" right now and investors should expect to watch the air gradually come out of the balloon. Perhaps the sound in the credit market that we are hearing is a fizzle more than it is a pop.

As the basic study of economics tells us, the investment cycle is a zero sum gain. Meaning for every positive transaction, there is a negative and vice versa. When someone is earning money, that means someone else is losing. When the market is down, as credit environment seems to be headed, someone, somewhere is making money off of it. At some point, the cycle will start over again, with the credit markets loosening up. However, in the meantime, do not be surprised to hear a lot more about distressed investors making a bundle in the next few years.

Archive: 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | 2005

IN THE NEWS

April 27, 2012
Little Private Equity Firm Gets a Big Spotlight
Monomoy Capital Partners, the mid-market private equity firm whose work at Oneida, the flatware giant, was featured in DealBook in January, is quickly becoming the most popular private equity firm in town.

April 26, 2012
My Life in Private Equity
Inside the weirdly obsessive, suprisingly creative world of a corporate efficiency expert.

February 10, 2011
Faith in the system
Monomoy Capital Partners, which recently closed its second fund on more than $400m, has developed a unique system as part of its turnarounds of struggling companies that borrows heavily from Japanese business philosophies.

September 14, 2009
Everything Must Go
Despite the cheerless news, several investors anticipate even more bankruptcies and the shuttering of plants.

June 1, 2009
Icing On The Cake: Hilco, Monomoy Order Dessert
Monomoy Capital Partners Principal Dan Collin tried, but couldn’t exactly sample every product that his firm’s newest add-on company makes....

March 30, 2009
NY Shop Forges Auto Parts Niche Platform
Monomoy Capital Partners is fast at working carving out a niche for itself in teh beleagured auto parts industry. The New York-based fim has now coralled its fourth add-on for Compass Automotive Group Inc., a company it's using as a platform to roll-up businesses in teh auto-related aluminium casting industry…

March 18, 2009
Monomoy adds on to automotive platform

PRESS RELEASES

December 3, 2013
Monomoy Capital Partners Sells Heat Transfer Products Group, LLC

October 24, 2013
Monomoy Capital Partners Sells High Performance Industries, Inc.

October 7, 2013
Monomoy Capital Partners Acquires Escort Inc.

May 21, 2013
EveryWare Global, Inc. and ROI Acquisition Corp. Complete Business Combination

January 31, 2013
EveryWare Global, Inc. and ROI Acquisition Corp. Announce Execution of Merger Agreement

November 29, 2012
Monomoy Capital Partners Acquires MPI from Revstone Industries

June 14, 2012
Monomoy Capital Partners Acquires High Performance Industries, Inc.