PE Buying More Distributors & Wholesalers

Platinum Equity and Littlejohn & Company have agreed to support a recapitalization of Bain Capital-backed Keystone Automotive Operations. The two currently hold over 64% of the company's senior subordinated notes due 2013. $175 million of notes will be converted into new equity. Additionally, they will backstop a $60 million rights offering. Proceeds will be used to help repay existing debt. Keystone distributes specialty automotive parts and accessories and is being advised by Kirkland & Ellis, Miller Buckfire & Co. and FTI Consulting. Willkie Farr & Gallagher is advising Platinum and Littlejohn.

Since the beginning of 2009, PE investors have invested in 77 companies in the Distributors/Wholesale industry, according to the PitchBook Platform. Deal activity in the industry came close to doubling up last year with 47 completed deals, compared to only 27 for all of 2009. About 43% of the PE investments during the roughly two-year period were add-ons, revealing that PE investors are spending a significant amount of resources acquisitively building up portfolio companies and are not just growing them organically or only acquiring new platform companies. Over the same time period, 72 PE investors completed investments in Distributors and Wholesalers. The most active include BlackEagle Partners with 6 deals, Building Industry Partners with 5 and Clayton, Dubilier & Rice with 4.