This transaction is an example of mezzanine funding provider partnering with a specialized private equity firm to acquire a market/niche leading company. It is a win-win-win combination. The acquired company gets the benefit of having sector focused and dedicated investor. The PE firm leverages its funds, by accessing mezzanine capital and, in this case, equity co-investment. Finally, the mezzanine lender employs its capital with suitable risk profile and partners that have long track record.
Target company overview
Headquartered in Maurmelle, Arkansas, BEI Precision Systems & Space Company, Inc. (BEI PSSC) designs and manufactures highly accurate optical encoders, flight worthy accelerometers, infrared optical scanners and encoder-based motion control systems for military, space, aviation, and range instrumentation markets.
The company has 60+ years of expertise allowing it to offer a stable of sensing solutions that can be configured for the customers’ needs. Thanks to its capabilities BEI PSSC is able to meet demanding requirements for high accuracy, resolution, environmental durability, and high reliability. As a military and aerospace supplier of hardware, the company prides itself with delivering supreme quality and reliability.
The company is a market leader in several of the segments where it competes and is a sole-source provider to key and prestigious satellite and defense programs. According to the company, over 90% of all optical encoders currently flying in space are BEI PSSC encoders.
Use of proceeds
Although publicly available information related to the transaction is limited, it seems that the mezzanine funding will not only allow the PE investor to execute the takeover, but will also support further growth of the acquired company. This is rather typical scenario.
“With its expertise in the defense, aerospace and maritime sectors, J.F. Lehman is the perfect partner to help BEI leverage its market leadership and grow the business organically and through complementary acquisitions.”
Bob Shettle, managing director and co-head of Barings’ North American Private Finance Group
Mezzanine funding provider
Barings is a roughly $280 billion global asset management firm. The focus on building lasting partnerships that leverage their distinctive expertise across traditional and alternative asset classes to deliver innovative solutions and exceptional service. A member of the MassMutual Financial Group, Barings maintains a strong global presence with over 1,700 employees and 600 investment professionals across 41 offices in 17 countries.
The link between Barings and J.F. Lehman & Co. extends beyond this transaction. Already in the past MassMutual and its affiliates were limited partners in several private investment funds in which affiliates of J.F. Lehman & Co. served as the general partner and advisor.
Given vast size of Barings’ assets under management, it might be sometimes difficult to comprehend their approach to middle-market transactions. Here’s a link to some clarifications on their recent thinking in the space of private credit.
Resources and useful links