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Medtech Holdings, Inc.

Background:
Medtech Holdings, Inc., ("Medtech" or the "Company") headquartered in Irvington, New York, was formed in 1996 as a joint venture of Medtech Labs, a company focused on niche over-the-counter ("OTC") brands, and The Shansby Group ("Shansby"), a private investment firm based in San Francisco. Between 1996 and 2002, Medtech had acquired and successfully integrated 14 OTC and personal care brands, and had established a highly profitable growth platform for further acquisitions in these categories. By 2002, Medtech was a leading marketer and distributor of health and beauty care products in the U.S. and Canada. Medtech’s leading brands include Compound W, Denorex, Cutex, New-Skin, Dermoplast, Momentum and Percogesic.

I couldn’t have wished for a better team of partners in a sale process than Fuad and his team at Sawaya Segalas. With their help and integrity, we achieved a fantastic sale for the Medtech shareholders and were able to partner up with a private equity firm that will allow us to continue on our growth path and further establish Medtech as a leader in the industry.
Peter Mann
Chief Executive Officer, Medtech Holdings, Inc.
The Sawaya Segalas team is the most knowledgeable consumer products banking team I have encountered. Their constant pursuit of excellence never ceased to amaze me.
Gary Shansby
Co-founder, The Shansby Group
I was very impressed with how efficiently the Sawaya Segalas team handled the sale process. Their assistance throughout the process and their hands-on approach all the way through the finish line made this acquisition a reality for GTCR.
David A. Donnini
Senior Principal, GTCR Golder Rauner LLC

Objective:
Shansby hoped to maximize the value of the Company in a sale process by emphasizing the strength and talent of its seasoned management team as well as the growth potential of its branded portfolio.

Sawaya Segalas’ credentials for this assignment were unsurpassed, having successfully packaged similarly diverse portfolios of OTC and personal care products. The first of these engagements was the sale of Reckitt & Colman’s Personal Products Division. The division manufactured and marketed 9 branded consumer product lines that included Wet Ones pre-moistened towelettes, Chubs baby wipes and Ogilvie hair perms, among others. Due to the lack of corporate purchasers for a relatively small business with a number of brands and categories, financial sponsors were the primary buying group targeted. As it turned out, the key to engineering this transaction was attracting the former President of the division to return as CEO of the business under the new ownership. A deal with J.W. Childs Equity Partners ("JWC") was completed in April 1996, and represented the first transaction for John Childs’ new private equity firm.

Soon after starting Sawaya Segalas, the firm advised Brynwood Partners on the sale of JB Williams, a personal care and OTC portfolio. This portfolio was smaller in size and equally diverse with branded OTC offerings in several categories including cough/cold (Cepacol) and oral care as well as a collection of "vintage" men’s grooming products including Aqua Velva, Lectric shave, and Brylcream. In addition, the business had been "in the market" only 18 months earlier, and had failed to attract a single final bid. Sawaya Segalas conducted a broad solicitation that attracted both strategic and financial parties. After a competitive process in which several final bids were considered, the portfolio was acquired by Combe, Inc., a family-owned personal care and OTC products business.

This experience proved to be critical in securing the market to sell Medtech as well as in crafting the sale process. Medtech’s owner, Shansby, awarded the mandate to Sawaya Segalas to sell the business solely on the success of the JB Williams process. No other investment banking firms were interviewed, nor did Sawaya Segalas formally "pitch" for the assignment.

Process Highlights:
Sawaya Segalas orchestrated a broad and highly competitive process that involved very careful screening of potentially interested financial sponsors. Based on our in-depth knowledge of the financial sponsor community, their levels of interest in the consumer sector, as well as the specific internal and external growth opportunities in the OTC sector, the Medtech process realized a very high conversion ratio of non-binding indications received as a percent of total information memoranda circulated. As illustrated below, over 56% of those receiving an information memorandum submitted a non-binding proposal. Of the total of 31 preliminary indications received, 11 parties were selected to participate in management meetings and the data room. Of those, 7 parties actively participated in the due diligence process, hired external financing and accounting advisors, and dedicated internal resources to the transaction, representing a retention rate of 64%. Only one of these parties failed to submit a binding proposal and marked-up purchase agreement.



Additionally, the Sawaya Segalas team conducted the process on a highly accelerated timeline in order to complete the process ahead of another, complementary business that was also in the market (see Subsequent Events, below). To that end, Sawaya Segalas and management worked together to complete the entire process, from kick-off to closing, in 23 weeks.

Outcome:
The process ultimately resulted in a transaction with the sale of the business to GTCR Golder Rauner LLC ("GTCR") for a total purchase price of $244.3 million. The transaction value and contract terms greatly exceeded Shansby’s expectations. Furthermore, Sawaya Segalas successfully negotiated a purchase agreement that limited the seller’s post-closing obligations. At the same time, GTCR’s track-record of backing entrepreneurial businesses in acquisition-driven build-ups provided Medtech with an ideal financial partner.

Subsequent Events:
Anchored by Medtech’s outstanding management team, GTCR realized its vision for a new platform company by completing two follow-on acquisitions in rapid succession. Within a month of closing the Medtech deal, GTCR successfully acquired Prestige Brands International, a much larger portfolio of OTC and household brands from MidOcean Partners and other investors. Later in 2004, the combined entity, renamed Prestige Brands Inc. ("Prestige"), acquired Little Remedies (advised by Sawaya Segalas), a high-growth OTC business focused on the infant/juvenile markets. Within less than a year of the first deal, Prestige was ‘on the road’ once again, this time in preparation for an Initial Public Offering. The offering was priced on February 9, 2005. Prestige now trades on the New York Stock Exchange under the ticker symbol PBH.

Medtech Holdings, Inc.
Client
Medtech Holdings, Inc.
Brands
New-Skin ®
Cutex ®
Compound W ®
Denorex ®
Dermoplast ®
Owner/Parent
The Shansby Group
Counterparty
GTCR Golder Rauner LLC
Segment
Personal Care, OTC & Cosmetics
Transaction
Sale of Portfolio of Brands
Transaction Value
$240 million
Closing Date
February 9, 2004
Role
Exclusive Financial Advisor
 
 
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OTHER PRIVATE EQUITY DEALS
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