76799_Webvision ready 5/13/13 4:55 PM Page 1 YOUR SOURCE FOR LEVERAGED AND MANAGEMENT BUYOUTS www.buyoutsnews.com April 22, 2013 • Issue 9 Deal Of The Year AWARDS Awards 2013 CHS Capital Spawning Three PE Firms Dolan, Harvard’s Private Equity Chief, Resigns LargeNew Market Mountain Deal Capital,of the Year LLC New York City Makes Mammoth $1.1B In PE Commitments Ridgemont Raises $735M, First Fund Post-BofA Energy Future Proposes Chapter 11 Plan Foray Into Distressed Debt Pays Off For American Securities 76799_Webvision ready 5/13/13 4:53 PM Page 2 BUYOUTS | April 22, 2013 www.buyoutsnews.com LARGE MARKET DEAL OF THE YEAR New Mountain Capital LLC Deltek Showcases Buy-And-Grow Model SNAPSHOT: Firm : New Mountain Capital LLC Target : Deltek Inc. At the height of scrutiny around job cuts founded the company, kept 25 percent of Sale Price : $1.05B by private equity firms during the 2012 the company as part of New Mountain’s Hold Period : 7 years presidential election, New Mountain Capital model of teaming up with owners. Tapping Return Multiple : 5.3x on equity LLC sold Deltek Inc. for $1.05 billion after into its $1.5 billion New Mountain Fund II, adding 945 employees in about seven years the firm invested $75 million structured as WHY THE FIRM WON through a combination of organic growth debt and $105 million as common equity. AWARDS and acquisitions. Third-party debt amounted to less than 4x 2013 The deal delivered a big profit for the EBITDA. Although the company could have New York buyout shop. The firm generated raised much more debt, New Mountain a return multiple of 5.3x on equity thanks stuck to its habit of using a “strong balance n Company acquired in an exclusive, proprietary in large part to EBITDA at Deltek growing to sheet to enable portfolio companies to deal an estimated $95 million in 2012 from $37 increase research, increase sales efforts and n CEO recruited from larger company million in 2005, despite the impact of the build other drivers of accelerated, acyclical n Employee count rose to 1,675 from 730 through 2008-2009 recession. “Our firm emphasizes growth,” said David Coquillette , managing acquisitions, organic growth n Successful exit through auction sale to Thoma growth and business building, rather than director of New Mountain. With its capital Bravo in 2012 debt and excessive risk, as its path to structure in place, New Mountain focused returns,” said Steven Klinsky , chief execu- on growing the mid-market family business. tive officer of New Mountain Capital. The key was management. Along with Klinsky, members of the Deltek team at New Mountain included New CEO United States, Deltek’s international busi- Managing Directors Mike Ajouz , Pete Kev i n Pa r k er , PeopleSoft’s co-president ness grew to about 29 percent. The firm Masucci and Alok Singh ; along with Senior and chief financial officer, attracted interest held an auction for Deltek in 2012. Mid-mar- Advisor Bert Notini , Director Matt Ebbel , from the New Mountain team after Oracle ket private equity firm Thoma Bravo bought Vice President Jack Qian and Associate bought PeopleSoft for $10 billion. Deltek for $13 a share in October, more Teresa Teodori . “I got his cell number and I talked to than quadruple the $3-a-share price of the Currently managing more than $9 bil- him,” Singh said. “I said, ‘I have a great rights offering. lion in assets, New Mountain began invest- opportunity for you — would you be inter- The Deltek deal returned $635 million in ing its first private equity fund, the $770 ested in exploring it?’ He had never heard of cash, including $75 million of debt repaid in million New Mountain Partners , in early Deltek but he got to know the firm and the 2006, plus $6 million in interest. Also 2000. The firm was founded in 1999 by franchise. He thought it would be an inter- included in the $635 million was $554 mil- Klinksy, who had earlier co-founded the esting business.” lion of cash returned on $105 million in leveraged buyout group of Goldman Sachs In a coup for New Mountain, Parker equity. & Co . in the early 1980s before moving on joined Deltek as chief executive officer four While the S&P 500 total return index to Forstmann Little . months after Singh’s initial call. Deltek grew at a 5 percent rate over the same peri- By late 2004, New Mountain had invest- floated its initial public offering in 2007. od with a 1.5x multiple of invested capital, ed in Apptis Holdings, an information tech- Including its IPO proceeds from Deltek, the Deltek deal provided a 5.3x multiple on nology services specialist for the federal New Mountain had by that point paid $150 equity for a 27.8 percent gross internal rate government. While managing Apptis, New million to limited partners out of their orig- of return. Mountain became aware of Herndon, Va.- inal $180 million investment. The deal stands out as a poster child for based Deltek Inc. as a niche leader in soft- When the recession took hold, Deltek’s New Mountain founder Klinsky’s effort as ware designed to help government con- profits held steady, but its stock price fell chairman of the growth capital committee tractors with revenue recognition, cost sharply with the broad equities market. within the Private Equity Growth Capital allocations, timesheets/expenses, proposal New Mountain reinvested $47 million in Council. building, materials tracking and billing for Deltek as part of a $60 million rights offer- “Private equity, when properly execut- projects. ing in May, 2009. After the $3-a-share rights ed, is a proven asset class that can deliver Singh held his first meeting with the offering, the fund’s ownership increased to superior returns to its investors and can company in late 2004. It turned out that more than 60 percent of all shares and provide capital, create jobs and drive pos- Deltek had been looking for a successor for Deltek’s balance sheet strengthened. itive economic activity at a time when our its chief executive officer, Ken DeLaski , but All told, New Mountain made 11, mostly economy badly needs such support,” it was not formally up for sale. New smaller, add-on acquisitions for Deltek. Klinsky said in a 2011 post on The New York Mountain negotiated an exclusive, propri- Employment grew to 1,675 from 730, Times DealBook blog. etary transaction to buy 75 percent of including 139 jobs from organic growth and “We’re trying to deliver on that,” Klinsky Deltek in 2005 with the target’s enterprise 806 from acquisitions. Deltek’s client list told Buyouts . “We’ve never had a portfolio valued at about $335 million, or 9.5x EBIT- jumped to 15,000 from 9,000. From less company go bankrupt and we’ve never DA at the time. The DeLaski family, which than 5 percent of revenue outside the missed a debt payment.” –S.G. (#76799) Excerpted and adapted with permission from the April 22, 2013 of Thomson Reuters Buyouts. Copyright 2013 Thomson Reuters. To subscribe to Thomson Reuters Buyouts, contact Greg Winterton at [email protected]. For more information about reprints from Thomson Reuters Buyouts, visit PARS International Corp. at www.reutersreprints.com..