Highlander Partners, L.P., a Dallas-based investment firm, announces the sale of its portfolio company, SensoryEffects, to Balchem Corporation, a publicly-traded human and animal health and wellness company.
The purchase price was $567 million, before working capital and other adjustments. The sale represents the culmination of eight years of collaboration and enterprise building between Highlander Partners and SensoryEffects' founder, Chairman and CEO, Charles A. Nicolais, and the management team he assembled. The investment has been the most successful one in Highlander Partners' history and the firm is grateful to Mr. Nicolais and his team for all their efforts and proud of Highlander Partners' substantial role in partnering with him to build a company that is a clear industry leader and poised to thrive for years to come.
Mr. Nicolais approached Highlander Partners nine years ago with a business plan he had developed to consolidate and professionalize certain segments of the food ingredient manufacturing industry. His plan was influenced by his direct experience in the food industry as well as dynamics he had observed in the specialty chemicals industry earlier in his career. Mr. Nicolais, a chemical engineer by training, believed that certain industry characteristics in food ingredients mirrored the trends within the specialty chemical industry. In particular, multinational consumer food companies sought suppliers with size and scale to address supply chain reliability, increasing quality and food safety requirements and, importantly, open innovation in research and development. Mr. Nicolais' vision was to create a "custom solutions house" that would develop unique solutions to customers' product challenges, whether they be imparting sensory attributes (such as taste, aroma, texture or color) or manufacturing improvements (delivering ingredients in a form that better enabled the next step of the manufacturing process). The opportunity to bring professional management practices, continuous improvement processes and systems to a highly fragmented industry was compelling to him. Mr. Nicolais needed a business and financial partner who shared his vision and who brought other needed skill sets to the collaboration, including acquisition execution, financing, management recruiting, and organizational skills, among others.
SensoryEffects was backed by Highlander Partners and the Company's first acquisition in spring of 2006 was Diehl, Inc., a 125 year old family-owned business in Defiance, Ohio, with revenues of approximately $15 million. After eight years and twelve additional acquisitions, substantial organic growth, millions of dollars of capital expenditures and investment in human resources, SensoryEffects has six manufacturing sites that in 2014 are expected to generate revenues and EBITDA of $260 million and $53 million, respectively. The acquisitions included: family-owned businesses and corporate carve-outs; auction processes, privately negotiated deals and one bankruptcy process; acquisitions of manufacturing sites, product lines, technologies, and equipment. Every acquisition, however, was consistent with and reinforced the original strategy developed by Mr. Nicolais. Although the Company has executed a successful acquisition strategy, SensoryEffects was able to leverage its platform of offerings to deliver outstanding organic growth that has contributed to the majority of the Company's sales and EBITDA growth. Today, SensoryEffects is firmly entrenched as a key supplier and innovator for some of the world's most important food and beverage companies and its products are key ingredients in some of the world's best known brands.
The relationship between management, led by Mr. Nicolais, and Highlander Partners was highly collaborative. While the day-to-day running of the business was always in the hands of management, there was constant interaction and communication between senior management and Highlander team members, particularly in the areas of acquisition strategy, tactics and negotiations; new product development projects; management recruiting; budgeting; development of key performance indicators; and overall business philosophy.
Michael R. Nicolais, President of Highlander Partners and former Board Member of SensoryEffects, added, "Highlander is proud of its association with Charles, his team and everyone at SensoryEffects. We truly believe that Balchem has acquired an exceptional company that is well positioned for future growth. We wish Charles and his team as well as SensoryEffects' new owners great fortune for years to come."
Similar to the SensoryEffects strategy, Highlander Partners has successfully replicated the approach of partnering with seasoned industry executives and used a "buy and build" tactic with several of its portfolio companies. The firm will continue seeking talented managers to partner with on future acquisition opportunities in attractive industries, creating value through consolidation, organic growth and operational efficiencies. Highlander Partners continues to be very active in the middle-market M&A space and constantly evaluates potential new platform opportunities and add-on acquisitions for its current portfolio companies.
