Halyard Capital has agreed to sell portfolio company TRANZACT to Veronis Suhler Stevenson for $185 million (€131 million), earning a 12 times return on its original investment and an internal rate of return of 85 percent.
There aren't a lot of players with the size and channel diversification that they have.
TRANZACT is a direct marketing company that serves the financial services and communications industries. Halyard created the company out of assets it acquired from bankrupt marketing firm Mosaic Group in May 2003. The division, originally Mosaic Performance Solutions USA, focussed on the wireless communications, satellite and credit card markets.
Halyard expanded the company’s operations to include the financial services sector, particularly insurance, consumer finance and mortgages, and grew its communications business to include entertainment and publishing. During the period of Halyard’s investment, TRANZACT’s revenues grew 40 percent on a compounded annual basis, according to a statement.
“TRANZACT was built upon a new premise – that large brands were extremely interested in acquiring customers cost effectively. Everything TRANZACT pursues is done with an eye to delivering an attractive return on marketing dollars,” Halyard founding partner Bruce Eatroff told PEO.
VSS managing director Kevin Waldman said TRANZACT stood out from its peers in the space.
“It’s really a unique platform in the marketing services space,” Waldman said. “It’s one of the larger scale-driven services built around a pay-for-performance customer acquisition model. There aren’t a lot of players with the size and channel diversification that they have.”
BMO Capital Markets was TRANZACT's financial advisor, and Paul, Weiss provided legal advice. BMO Capital Markets, Bank of Ireland and CIT Financial Group will provide senior debt financing for the deal, which is expected to close later this month.
The sale of TRANZACT, which was conducted through an auction, is the thirteenth realisation from Halyard’s first fund, which closed on $350 million in the spring of 2000. The fund’s sole limited partner was BMO Financial Group. Halyard spun out from BMO in January of last year, at the same time as it launched its second fund with a $400 million target. That fund held a first close on $250 million in May.
Halyard allocates a significant part of its portfolio to the direct marketing space, seeking to capitalise on the shift from traditional media marketing to direct marketing both online and offline. The firm holds four other direct marketing firms in its portfolio: Engauge Marketing, Stoneacre Partners, Halyard Education Partners and WMI.
Media- and communications-focussed VSS recently purchased online career info marketing site Vault.com for an undisclosed amount, and in August invested $42 million in Loewy Group, a UK marketing firm.