HSBC spin-out seals first platform deal

Graycliff Partners’ acquisition of aviation products and services company Skandia comes a week after the firm completed an add-on acquisition for aerospace company Venture Aircraft.

Graycliff Partners, which spun out of HSBC Capital last December, has sealed its first platform investment by acquiring a majority interest in aviation products and services company Skandia.

Founded in 1983, Skandia provides services such as flammability testing and produces products including foam used in business jet seats. Graycliff invested in the company using capital from its $300 million US buyout fund raised by HSBC Capital’s Americas private equity team in 2007. Graycliff also continues to manage a $200 million Latin American buyout fund that closed in 2009.

“We continue to have enough capital to do a couple more platform deals in each fund,” Graycliff managing director Jim Marley told Private Equity International. East West Bank and Brookside Mezzanine Partners provided acquisition financing for the deal.

The firm anticipates managing a new generation of funds sometime in the next two years, Marley told Private Equity International in a previous interview.

Last week, Graycliff combined portfolio company Venture Aircraft, which provides engineering, manufacturing, and assembly services to the aerospace industry, with Swift-Cor Aerospace, forming new business Impresa Aerospace.

“We like the fact that the private aviation industry has been stable now for the last couple years,” Graycliff principal Duke Punhong said. “If you look at what equity analysts are saying here, there should be an increase in the number of planes that will be shipped over the near to medium term, so we think we’re catching it at just the right time.”

Graycliff targets investments between $5 million and $25 million in businesses with revenues of at least $10 million. The firm provides equity as well as mezzanine financing for buyouts, expansion capital, recapitalisations and real estate investments. Graycliff’s US mezzanine portfolio and real estate activity are each approaching roughly $200 million in the aggregate, according to the firm.

Graycliff plans to remain active in deploying its remaining capital in a small number of additional investments before the end of 2012.

“It wouldn’t surprise me at all to have another platform investment close before the end of the year in the US buyout fund and one or two more platform investments in the Latin America fund as well,” Marley said.

Since 1991, operating as HSBC Capital, the Graycliff team has invested more than $1 billion across roughly 80 transactions. The firm is comprised of 16 investment professionals, 13 of which are based in the firm’s New York headquarters, with the remaining three in Sao Paulo, Brazil.