The Value of Being in the Driver's Seat

The Matrixx Group Story

The Situation

T&T once represented the publicly-traded, British Vita, a billion dollar manufacturer of foam, plastics and non-woven products. Vita had 93 locations in 23 countries however they did not have a presence in the US, a market in which they sought a strong platform. T&T was engaged by the Vita management team to identify candidate companies in the US which met their specific criteria and would be receptive to being acquired.

T&T identified and contacted the ownership of approximately 30 companies which met the strict Vita criteria. Following meetings and interviews with several of these potential targets, Vita management selected the Evansville, Indiana based compounder; The Matrixx Group. The company was a well managed thermoplastic compounding operation with 5 plants in the US and sales in excess of $100 million making it an attractive platform for Vita.

The Vita acquisition team led by T&T began a series of meetings with Matrixx management and their major shareholders to discuss a potential transaction with Vita. Like any billion dollar company, Vita had many layers of management which had to approve the deal and accordingly many meetings were necessary in order to gain approval of each of the Vita managers. During this period, which lasted over 9 months, Matrixx management obliged Vita’s request not to speak with any other suitors about a potential deal. T&T, Vita and Matrixx management spent hundreds of hours analyzing and negotiating all the elements of the deal with the intention to close within 6o days.

The Set Back

Just about that time, the private equity firm, Texas Pacific Group made an offer to acquire Vita and take it private. While the Vita board initially rejected the bid, TPG continued to sweeten the price until the board agreed in late March to the deal terms. All major pending transactions including the Matrixx deal was put on indefinite “hold”. Vita was acquired by for ₤668 million by TPG.

The hundreds of hours of effort expended by the Matrixx management team had been wasted. The fact was that the founder of the company, Ray Wright was no longer active in the business and was seeking to monetize his ownership in Matrixx. Meanwhile, the active managers in the company who were also shareholders were in search of a strong financial partner in order to assist with the significant growth the company was experiencing.

This time, the Matrixx management and shareholders chose to take a proactive role in seeking the right buyer and engaged T&T to advise them and to manage the transaction process. The Matrixx Group was organized in a blend of seven sub-chapter S and C corporations with the ownership unevenly split between approximately 50 shareholders.

The Solution

T&T immediately recognized the potential problems that could come about regarding the allocation of value to each of the entities and recommended the hiring of an independent valuation expert to allocate the values between the various companies. The next potential problem identified was the quality of the financial statements which were not prepared by an outside CPA firm. T&T suggested to management that the financials needed to be audited and a regional accounting firm was hired. A final issue that needed attention was the absence of environmental site assessments on the properties and an engineering firm was hired to prepare site assessments on each of the locations.

While that work was being done by those firms, T&T in conjunction with Matrixx management prepared the descriptive offering memorandum which was to be released to a select number of potential financial partners. As an M&A specialist in the plastics industry, T&T had already identified the private equity groups who were the most likely candidates and therefore they would be most apt to pay a maximum price to the Matrixx shareholders.

Once the financial statements had been completed, confidentiality agreements were executed and a select group of private equity sponsors were provided with the offering memorandum. On the basis of the information in the memo, the suitors submitted their offers for management and shareholder consideration. The numerous offers had a wide range of values however several were significantly higher than the others. These choices provided the Matrixx team with the opportunity to select the candidate with whom they were most comfortable and were most capable of getting the deal closed.