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Blue Wolf makes first investment from new fund

The New York-based mid-market buyout firm has acquired two hospital laundry companies to form Healthcare Laundry Systems in a ‘conservatively financed transaction’ that was more than a year in the making.

Blue Wolf Capital Management has established Healthcare Laundry Systems by acquiring Chicago-based Hospital Laundry Services as well as the assets of Northern Illinois Hospital Services, based in Rockford, Illinois, for an undisclosed amount.

Healthcare Laundry Systems provides laundry services to hospitals and clinics in the greater Chicago area.

The transaction was identified in the latter half of 2007, Blue Wolf founding partner Josh Wolf-Powers told PEO.

“It was an extraordinarily complex company facing an extraordinary complex situation,” Wolf-Powers said of Hospital Laundry Services.

The company was owned by a consortium of not-for-profit hospitals and the labor force was represent by three different labor unions, one of which has a collective bargaining agreement expiring soon and another with a critically underfunded pension plan.

Blue Wolf was attracted to the relatively non-cyclical industry, the underutilised facility and the strong management team at Hospital Laundry Services, Wolf-Powers said. Northern Illinois Hospital Services’ had a nearby similar plant with a similar business that could be integrated, which made the acquisition even more enticing, he said.

“This was a very conservatively financed transaction that featured a combination of asset-based financing, vendor financing, equity financing and seller financing,” Wolf-Powers said.

The deal was the first for Blue Wolf’s second fund. According to sources, the fund has held a first close on $100 million en route to a $250 million target and is expected to hold a final close sometime in the first half of 2009.

Founded in 2005, Blue Wolf has completed three previous acquisitions – two paper-products producers and a producer of BTU gas. The firm said it targets “unconventional” deal flow not touched by mainstream private equity firms. It specialises in acquiring companies whose values are “obscured by complexity” in the form of labour union relations, government contracts and financial underperformance.