Cool Under Pressure
Invested Banker to the Consumer Industry

Cool Under Pressure

Description
TARGET: Medtech Holdings, Inc.
OWNER/PARENT: The Shansby Group
COUNTERPARTY: GTCR Golder Rauner, LLC
SEGMENT: Health & Wellness
TRANSACTION VALUE: $244.3 million
CLOSING DATE: February 9, 2004
ROLE: Exclusive Financial Advisor

Medtech Holdings, Inc., (“Medtech” or the “Company”) headquartered in Irvington, New York, was formed in 1996 as a joint venture of Medtech Labs, a company focused on niche over-the-counter (“OTC”) brands, and The Shansby Group (“Shansby”), a private investment firm based in San Francisco. Between 1996 and 2002, Medtech had acquired and successfully integrated 14 OTC and personal care brands, and had established a highly profitable growth platform for further acquisitions in these categories. By 2002, Medtech was a leading marketer and distributor of health and beauty care products in the U.S. and Canada. Medtech’s leading brands include Compound W, Denorex, Cutex, New-Skin, Dermoplast, Momentum and Percogesic.

“I couldn’t have wished for a better team of partners in a sale process than Fuad and his team at Sawaya Partners. With their help and integrity, we achieved a fantastic sale for the Medtech shareholders and were able to partner up with a private equity firm that will allow us to continue on our growth path and further establish Medtech as a leader in the industry.”

PETER MANN
CHIEF EXECUTIVE OFFICER, MEDTECH HOLDINGS, INC.


Shansby hoped to maximize the value of the Company in a sale process by emphasizing the strength and talent of its seasoned management team as well as the growth potential of its branded portfolio.

Sawaya Partners’ credentials for this assignment were unsurpassed, having successfully packaged similarly diverse portfolios of OTC and personal care products. The first of these engagements was the sale of Reckitt & Colman’s Personal Products Division. The division manufactured and marketed 9 branded consumer product lines that included Wet Ones pre-moistened towelettes, Chubs baby wipes and Ogilvie hair perms, among others. Due to the lack of corporate purchasers for a relatively small business with a number of brands and categories, financial sponsors were the primary buying group targeted. As it turned out, the key to engineering this transaction was attracting the former President of the division to return as CEO of the business under the new ownership. A deal with J.W. Childs Equity Partners (“JWC”) was completed in April 1996, and represented the first transaction for John Childs’ new private equity firm.

Soon after starting Sawaya Partners, the firm advised Brynwood Partners on the sale of JB Williams, a personal care and OTC portfolio. This portfolio was smaller in size and equally diverse with branded OTC offerings in several categories including cough/cold (Cepacol) and oral care as well as a collection of “vintage” men’s grooming products including Aqua Velva, Lectric shave, and Brylcream. In addition, the business had been “in the market” only 18 months earlier, and had failed to attract a single final bid. Sawaya Partners conducted a broad solicitation that attracted both strategic and financial parties. After a competitive process in which several final bids were considered, the portfolio was acquired by Combe, Inc., a family-owned personal care and OTC products business.

This experience proved to be critical in securing the market to sell Medtech as well as in crafting the sale process. Medtech’s owner, Shansby, awarded the mandate to Sawaya Partners to sell the business solely on the success of the JB Williams process. No other investment banking firms were interviewed, nor did Sawaya Partners formally “pitch” for the assignment.

Sawaya Partners orchestrated a broad and highly competitive process that involved very careful screening of potentially interested financial sponsors. Based on our in-depth knowledge of the financial sponsor community, their levels of interest in the consumer sector, as well as the specific internal and external growth opportunities in the OTC sector, the Medtech process realized a very high conversion ratio of non-binding indications received as a percent of total information memoranda circulated. As illustrated below, over 56% of those receiving an information memorandum submitted a non-binding proposal. Of the total of 31 preliminary indications received, 11 parties were selected to participate in management meetings and the data room. Of those, 7 parties actively participated in the due diligence process, hired external financing and accounting advisors, and dedicated internal resources to the transaction, representing a retention rate of 64%. Only one of these parties failed to submit a binding proposal and marked-up purchase agreement.

Additionally, the Sawaya Partners team conducted the process on a highly accelerated timeline in order to complete the process ahead of another, complementary business that was also in the market (see Subsequent Events, below). To that end, Sawaya Partners and management worked together to complete the entire process, from kick-off to closing, in 23 weeks.

Sawaya Partners received high marks from all parties involved for its ability to manage the complexities of the process from beginning to end. Terms of the transactions were not disclosed but the results of this sale transaction were viewed by Management, Kohlberg and Crowne as a “win-win-win” outcome. In a market environment where only 50% of middle market sale transactions are successfully consummated (based on industry estimates), the Trico closing is yet another example of Sawaya Partners’ industry leading record of completion rates.

Video