Weston Presidio 2012 Review

Weston Presidio | Providing Growth Capital Since 1991

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Providing Growth Capital Since 1991

Weston Presidio experienced another year of strong performance in 2012. The Firm continues to have substantial momentum across all facets of its business - realizations, portfolio company growth and sourcing activity.

  • Exits and Liquidity: In 2012, Weston Presidio generated attractive returns and realizations aggregating over $520 million through five liquidity events. Since 2010, the Firm has completed twenty transactions resulting in $1.5 billion in realizations.
  • New Investments: Three new investments in high growth companies in our core sectors - DISYS, Snooze and Edge Systems.
  • Follow On Investments: Two follow-on investments supporting the growth of our portfolio companies - Xenon Arc and Flynn Restaurant Group.

Liquidity event highlights in 2012 include:

  • The sale of our holdings in Fender Musical Instruments, an iconic American brand and one of the world's leading manufacturers of musical instruments. Weston Presidio worked with the company throughout its investment period to build a comprehensive product portfolio, develop and implement an acquisition strategy and improve manufacturing productivity. During Weston Presidio's investment, Fender's revenues nearly tripled and its profitability increased substantially due to organic growth and acquisitions, including Guild & Gretsch, Jackson, Charvel, Kaman Music and Groove Tubes.
  • The sale of a substantial portion of our holdings in SquareTrade, a leading consumer electronics warranty provider. Weston Presidio helped transform SquareTrade from an online dispute resolution service to a successful, branded warranty provider. SquareTrade's focus on superior customer service and its use of innovative technology have earned the company numerous industry awards and five star consumer reviews.
  • The sale of Party City Holdings, the dominant player in the party goods industry. The fund had initially invested in Amscan, Inc., a leading wholesaler in the party goods industry. By consolidating the retail party goods industry, beginning with the acquisition of Party City, Amscan evolved to become a world-class company with a wide assortment of licensed products distributed globally through its industry leading sourcing model. Throughout the fund's investment period, the company demonstrated strong growth and saw its EBITDA quadruple, driven both organically and through acquisition.
  • A recapitalization of Jimmy John's Gourmet Sandwiches. Weston Presidio assisted the company in completing its second dividend recapitalization since our investment. Cumulatively, since the fund's investment, the company's EBITDA has grown 333% with system-wide sales exceeding $1 billion for 2012. The company has 1500 stores open, with an additional 740 in the pipeline.
  • The sale of AMC Entertainment, the nation's second largest theater chain. The company, which operated over 5,000 screens in more than 300 theaters in the U.S. and Canada, was sold to China's Dalian Wanda Group Corp., the owner of China's largest movie theater operator.

Weston Presidio also invested in three new portfolio companies during 2012. We partnered with the founders of Digital Intelligence Systems (DISYS), Snooze and Edge Systems. In addition, we provided follow-on investments to two of our companies, Xenon Arc and Flynn Restaurant Group, to support their continued growth.

  • DISYS is a high growth, founder led, IT services business. DISYS was recently recognized by Staffing Industry Analysts as the second fastest-growing IT firm among U.S. companies exceeding $100 million in revenue for 2012. With a 30% annual growth rate over the last five years, DISYS and Weston Presidio plan to target strategic acquisitions and other growth initiatives to provide a richer portfolio of IT solutions to the company's growing stable of Global 1000 customers. Our investment represents the company's first institutional capital.
  • Snooze is a highly compelling restaurant concept in the breakfast space. Before closing the investment, we recruited a new CEO (formerly a member of Panera's senior leadership council) and several key Board members to assist the company in its growth plans. Weston Presidio and the company are focused on developing the company's real estate pipeline to help expand the concept in both new and existing markets. Weston Presidio, the company's first institutional investor, sourced the deal through its proprietary network of operating partners.
  • Edge Systems is a high growth, consumer services business in the health and beauty sector. The company designs, assembles and markets machines and related consumable products for skin care. The company operates a highly attractive razor-razorblade model with a significant and growing portion of its revenue from high-margin consumable products used during the treatments. Weston Presidio plans to invest heavily in the company's sales, marketing and training/education functions to help drive new unit sales and improve the productivity of the existing units. Weston Presidio sourced Edge through its proprietary network of operating partners and our investment is the first institutional capital into the business.
  • Xenon Arc provides outsourced sales, marketing and distribution services to large specialty chemical companies. Since launching in 2011, the company has grown substantially and has a deep pipeline of additional customer opportunities. Weston Presidio provided additional capital in 2012 to support the company's rapid growth.
  • Flynn Restaurant Group owns and operates 514 restaurants in 25 states. Its two divisions, Apple American Group and Bell American Group, comprise 438 Applebee's Neighborhood Grill and Bars and 76 Yum! Brands restaurants, respectively. In 2012, Weston Presidio completed a follow-on investment in Flynn Restaurant Group to finance the acquisition of Bell American Group, a franchise group of 76 mostly Taco Bell restaurants. With the acquisition of Bell American Group and the 2012 acquisition of 99 Applebee's units, Flynn Restaurant Group is now the largest U.S. franchisee in the restaurant industry, generating annual system-wide revenue of approximately $1.25 billion.

With numerous liquidity events in process and a solid pipeline of high quality prospects, we expect to continue our liquidity and investment momentum in 2013. We appreciate our great partnership with our portfolio management teams and the continued support of our investors and operating network members. Thank you for all of your help in making 2012 a great year. We look forward to 2013.

Weston Presidio
  • Weston Presidio has raised over $3.3 billion in five funds since its inception in 1991
  • The Firm's Partners have helped identify, build and maximize value in over 100 growth companies
  • Weston Presidio has established a reputation as the preferred partner to management teams for growth capital
Formula For Successful Growth Investing
  • Continued focus on lower middle market growth companies in the consumer, business services and industrial growth sectors where the Firm can exploit its sector expertise, growth investing experience and strong network
  • Back exceptional, highly engaged leaders with proven track records and significant ownership positions
  • Target investments of $20 - $60 million while maintaining flexibility for both minority and control structures
  • Emphasis on building value, first and foremost, through growth, while utilizing prudent leverage and a strong balance sheet
  • A reputation forged on collaborative partnerships with management teams to build sustainable enterprise value
Summary of 2012 Activity
  • Five liquidity events aggregating over $520 million of realizations
  • Three new investments in high growth companies in our core sectors and two follow-on investments to support the growth of two of our portfolio companies

Please note that past performance is not indicative of future results.

Office Locations
Boston Office

John Hancock Tower
200 Clarendon Street, 50th Floor
Boston, MA 02116

PHONE: (617) 988-2500
FAX: (617) 988- 2515

San Francisco Office

Ferry Building
One Ferry Building, Suite 350
San Francisco, CA 94111

PHONE: (415) 398-0770
FAX: (415) 398- 0990

© 2013 Weston Presidio

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Date Posted: 2/21/2013

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