Plexus Perspective

Plexus Perspective
SECOND QUARTER, 2012
Welcome
to the Plexus Capital Newsletter
The partners at Plexus Capital value the relationship we have developed with each of our industry
partners. To further deepen this relationship, we
plan to author a newsletter for your education
and enjoyment, share our thoughts with you, and
provide you with content that will inform and be
of interest. We will publish the newsletter several
times per year, keeping our information fresh and
relevant, and promise to keep our content brief in
order to be mindful of your time.
I hope you enjoy our first edition and find it beneficial.
We welcome your feedback and comments.
Bob Anders
Managing Partner
Our History
Plexus Capital was founded as a Small Business Investment Company
(SBIC) by Bob Anders, Mike Becker, Robert Gefaell, Kel Landis, and
Michael Painter during the summer of 2005. Each of the founding
partners had worked together for RBC Bank, f.k.a. Centura Bank –
Kel as CEO, Bob as Head of the Capital Markets Group, and Mike,
Robert, and Michael for Centura Capital – RBC’s bank-owned SBIC
mezzanine fund which began investing in 1995. Following the early
retirement from RBC of both Kel and Bob, the five partners came
together to form Plexus. Having worked together for many years, it was
a natural fit and the continuation of a successful partnership. Fund I was
$81MM in size and saw its first investment closed December 30, 2005.
On July 2, 2010, the 28th and final transaction was closed in Fund I.
Plexus subsequently raised $175MM for its second SBIC fund – Plexus
Fund II. To date, Plexus Fund II has invested $105MM in 17 companies.
With approximately $70MM in capital remaining to invest, the
partners are planning on kicking off fund raising efforts for Plexus Fund
III in Q4 of 2012.
Thought Leaders Speak:
In the spirit of sharing interesting articles,
our keynote speaker at the 2012 Plexus
Annual meeting, Dr. Douglas Ready of
the UNC Kenan-Flagler Business School,
recently published a piece in the Harvard
Business Review. We hope you find the
following excerpt from the article, “The
Power of Collective Ambition”, insightful
and helpful. If you would like a printed
copy of the complete article, we have a
limited number available and will be glad
to mail one to you. Please send requests
to camp@plexuscap.com.
…The Glue and the Grease
Shaping a collective ambition
isn’t simply about crafting an
inspiring story. The point is to
build engagement as a means
to an end: to make the purpose
personal. In other words, shaping your collective ambition is an
opportunity to build or strengthen
the organizational glue. It’s also a
chance to launch enterprise-wide
change initiatives, which require
disciplined execution—the grease.
Glue and grease exist in parallel….
GETTING TO KNOW US
Meet Founding Partner and Principal of
Plexus Capital – Kel Landis
Plexus Capital Fund II Surpasses
$100 Million Milestone
Over the past two years, Plexus Capital has made investments totaling
more than $100 million in high growth, lower middle market businesses
from its $175 million Plexus Fund II.
Specializing in providing growth capital in the form of mezzanine,
subordinated debt, or preferred equity, Plexus launched Fund I in 2005
and followed with Fund II in 2009. The Plexus team currently manages approximately $255 million of investable capital and has closed 45
investments between its first two Funds.
Kel was born in Rocky Mount, NC on Dec
15, 1956 and proceeded to spend the
majority of his life and career there, having
only recently moved to Raleigh, NC in 2008.
In 1975, Kel left home to begin his educational endeavors at The University of North
Carolina at Chapel Hill where he ultimately
earned his BS in Business Administration
in 1979. After beginning his banking career
with Wachovia Bank, he returned to Chapel
Hill in order to continue his educational pursuits where, in 1982, he received his MBA.
Upon graduation, he accepted a position
with First Union Bank in Winston-Salem,
NC in its commercial lending department.
Ultimately, Kel joined what became Centura
Bank in 1988 where he held various positions, including Regional Executive, Head
of Mergers and Acquisitions, Chief Risk
Officer, and Vice Chairman. He ultimately
rose to the rank of President before its sale
to RBC Financial Group in 2001. Post close
of the acquisition, Kel was named the first
CEO of RBC Centura, an $18 billion bank
holding company, where he served until he
took early retirement in 2004.
Upon retirement, Kel turned his focus
toward economic development initiatives
and educational involvements in the state
of North Carolina. As a North Carolina
native, Kel has a special place in his heart
for the Tar Heel state, especially the Eastern portion which has suffered economically for several years following the demise
of the furniture, textile, and tobacco
industries which were the backbone of
the state’s economy. Subsequently, he
took the position of Senior Advisor to the
Governor of North Carolina for Business and
Continued on page 3 in sidebar
2
“Plexus conducts exhaustive due diligence, employing the most
current technology and maintaining close contact with our portfolio
management teams. We strive to build a mutually beneficial relationship with each of our constituents — always with the long term in mind.
What distinguishes Plexus is our desire and willingness to serve as a
valued strategic financial partner to each and every one of our portfolio
companies,” said Bob Anders, Plexus managing partner.
Plexus focuses on providing growth capital to healthy businesses
located in the Eastern United States with revenues between
$20 million and $100 million. The private firm is a Small Business
Investment Company (SBIC) and provides funding from its private
investors in collaboration with the Small Business Association.
Case Study
Plexus’ First Ever Investment
Overview
Transcription Relief Services, LLC, (“TRS”), headquartered in
Greensboro, NC, is a medical transcription company specializing in
quality healthcare documentation services. TRS was founded by Mary
Harvey in the mid-1990’s to provide an avenue for people desiring to
improve the quality of their family life to be able to provide medical
transcription services out of their homes. In 1999, Bob Harvey took
over the business and continued TRS’ growth by bringing on new transcriptionists and pursuing new customers and business opportunities.
In 2002, TRS began to outgrow its current capitalization. In an
effort to help fund the company’s rapid growth, Mr. Harvey brought in
DataMax Corporation to invest equity dollars for a 51% ownership
position (Harvey retained 49% ownership). With the new capital in
place, TRS continued its strong growth trajectory through 2005.
Exit
In response to its strong track record of predictable growth, its increasing
profitability, and declining debt balance, TRS was able to secure additional
senior bank financing in July 2008. This capital was used to refinance
Plexus’ outstanding debt and to redeem its warrant position, leaving
Mr. Harvey with complete ownership of the Company.
Summary
This transaction illustrates how Plexus Capital is able to provide
solutions to small business owners seeking to grow their business with
debt, therefore avoiding the dilutive effects of raising pure equity. In
TRS’ case, Mr Harvey started out with 49% ownership in his business
when he first met Plexus and subsequently used Plexus’ capital to
increase his ownership to 100%.
Other Highlights of Kel’s Career
Board Involvements:
•Board of Trustees at the University of North Carolina
at Chapel Hill
•Board member of the UNC-Chapel Hill Foundation
Board that oversees the investment management and
deployment of investment proceeds of the University’s
$2.5B endowment
•Trustee of the Kenan Institute for Private Enterprise
housed at the University of North Carolina-Chapel Hill. •Board member of the NC Community Foundation with
assets exceeding $100MM.
•Member of the UNC-Chapel Hill Kenan-Flagler Business
School Board of Visitors and previously an adjunct
professor of finance
•Board Member and Executive Committee member of
Live Oak Bank, Wilmington NC. •Past Trustee for the NC Supplemental Retirement Board
that oversees $5B in 401K assets.
•Chair of the UNC-Chapel Hill Board of Visitors in 2005
•Past Board member of the Golden Leaf Foundation, a
$700MM economic development foundation in the State
of NC. Chair of the Audit Committee, appointed by the
Governor for 6 year term.
GETTING TO KNOW US
Continued from page 2 sidebar
Economic Affairs from 2004-2005. He later
furthered the cause when he founded and
served as Chair of the Foundation of Renewal
for Eastern North Carolina. Kel remains a
major advocate for the state and continues
to give a portion of his time toward ensuring its economic stability and growth.
Outside of his professional endeavors,
Kel has a passion for running, having
completed 5 marathons over his lifetime
(NYC twice, Boston, Marine Corp, and Big
Sur) with a personal best time of 3:07. In
addition to running, Kel also has a love/hate
relationship (as most of us do!) with the
game of golf, currently sporting a 9 handicap. In his down time, he prefers to spend
time at Wrightsville Beach, NC with his wife
Nina who founded a media and communications consulting firm call Circled Square
Media, having gotten her start in the industry
as a TV reporter for WRAL in Raleigh. Nina
is also involved with the state of North Carolina currently serving as a board member of
the NC Department of Transportation. Kel
has two children, Dorsey who works for PNC
Bank and is a graduate of the University of
North Carolina at Chapel Hill, and HK who
is currently a student studying at the University of North Carolina at Chapel Hill.
➦
Transaction
In mid-2005, having experienced continued strong growth, Mr. Harvey
sought to buy out DataMax’ ownership position and approached Plexus
as a potential investor. After spending time with Mr. Harvey and helping him understand the different financial instruments available to him,
Mr. Harvey and Plexus signed a term sheet to provide $2.15 million of
subordinated debt. The subordinated debt security was an attractive solution for Mr. Harvey as it allowed him to leverage his balance sheet and
regain majority control of his business (100% voting rights on a going-forward basis). The transaction closed in late 2005 with the combination of
Plexus investing $2.5 million of subordinated debt with detached warrants
and Mr. Harvey’s personal investment in the form of common equity to
buy out DataMax’ ownership position, thereby regaining 100% control of
his business.
•Past Trustee of Elizabeth City State University for 7 years,
one of the 16 member campuses of the University of
North Carolina Public University System
•Past Board member of Nash Healthcare Systems, a 200
bed hospital in Rocky Mount, NC. •Past Director of the NC Citizens for Business and
Industry (NC Chamber of Commerce)
•Past Chair of the Rocky Mount Area Chamber of
Commerce in Rocky Mount, NC
•Past President of the Rocky Mount, NC Family YMCA
•Past Young Presidents Organization (YPO), Treasurer
Significant Contributions and Accomplishments:
•Chair of the North Carolina Bankers Association
•Senior Advisor to the Governor of North Carolina for
Business and Economic Affairs 2004-2005
•Founded and served as Chair of the Foundation of Renewal for Eastern North Carolina
•Boy Scouts of America-Eagle Scout
3
Plexus Puzzle
What We Look For:
Industry
• Business Services
• Consumer Services
• Manufacturing
• Healthcare Services
• Value Add Distribution
• Other General Industries
Use of Proceeds
• Leveraged Buyouts
• Management Buyouts
• Change of Control/Ownership
• Acquisitions
• Organic Growth
• Recapitalizations
Company Characteristics
ACROSS
DOWN
4 a double tap
6 Brookline’s boy wonder
9 2011 PGA winner’s aunt
10 WFU green jacket choker
14 in your life shot maker
15 please alternate
16 fear the stache 3 time winner
18 a cold plunge
19 rarest of shots
21 hole in one
24 just a wie bit
27 comedian George’s sister
32 Beth Black’s creator
33 Carnoustie’s clown
34 makes it fair
35 a golfer’s favorite hole
36 Titanic sinker
38 wooden mine
40 a type of hazard
41 lemonade with tea
43 never leaves the deck
1 pizza by the _____
2 music to the matchplayer’s ear
3 number one ball in golf
5 sea dwelling mammal
7 an eight
8 Aussie or Great White
11 Hoffman in Peter Pan
12 Scotland lard
13 Saturday
17 the mechanic
20 pencil whipper
22 Buckeye legend
23 Bobby slammed it here
24 She’ll never wear the green jacket
25 a chiropracter’s dream patient
26 General Lee owner
28 Sir Nick
29 green mile locale
30 hosel rocket
31 plugged in the sand
37 the dreaded snake
• Minimum Revenue of $15MM
• Minimum EBITDA of $2MM
• Experienced Management Team
• Management with “Skin in the Game”
• Sustainable Business Model
Investment Instrument
• Senior Subordinated Debt
• Junior Subordinated Debt
• Unitranche Debt
• Equity Co-Invest
About Us
Overview
Team
Mezzanine Fund
Portfolio
Contact
Please click here for puzzle solution.
I hope you will call on us any time to discuss ways we might
partner with you to provide capital for your growing business.
You can reach me directly at 704.927.6246 or via email at
banders@plexuscap.com.
Thank you. — Bob Anders
CHARLOTTE, NC
200 Providence Road, St 210
Charlotte, NC 28207
RALEIGH, NC
4601 Six Forks Road, St 528
Raleigh, NC 27609
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Bob Anders
Principal
704.927.6246
banders@plexuscap.com
Robert Gefaell
Principal
704.927.6247
robert@plexuscap.com
Mike Becker
Principal
919.256.6342
mbecker@plexuscap.com
Kel Landis
Principal
919.256.6343
klandis@plexuscap.com
Visit us at www.plexuscap.com
Michael Painter
Principal
919.256.6341
mpainter@plexuscap.com