missouri pe deal report 1h 2019 - r.l. hulett
TRANSCRIPT
This report provides an overview of private equity activity in the state of Missouri. Our report offers key market place trends and
drivers as well as professional, high-level insights on the quantity, type, region, and industry of deals reported in the 2H of 2019
in Missouri. R.L. Hulett & Company uses data from Pitchbook for all accompanying charts. For more information please contact
Trevor Hulett at [email protected].
Missouri PE Deal Report2H 2019
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Missouri PE Deal Report2020 Outlook
1
Under the so-called "phase one" trade deal signed in January, China
pledged to boost US imports by $200bn above 2017 levels and
strengthen intellectual property rules.
The U.S. agreed to halve some of the new tariffs it had imposed on
China.
The pause on trade war is good news for PE investors but the
uncertainty of next step (phase two) is still cause for considerable
volatility in the market.
Trade War & Tariffs
Coronavirus Impact
As of this writing, the S&P 500 Index had dropped 19% from its all-
time high set in Feb 2020 amid fears over the coronavirus outbreak
coupled with a correction in the oil and gas market.
Volatility has been extremely high in the equity markets in recent
weeks, which could present challenges in dealmaking and could put
pressure on transaction volumes over the next 3-6 months.
According to PitchBook, the global M&A market is already set for its
slowest first two months since 2006.
In the state of Missouri, we expect deal volume in the first half of
2020 to see a similar decline.
S&P 500 Index vs. WTI Crude Oil
30.00
35.00
40.00
45.00
50.00
55.00
60.00
65.00
70.00
2400
2600
2800
3000
3200
3400
3600
S&P 500 WTI Crude Oil
Global Deal Count in Jan & Feb
2400
3400
4400
5400
6400
7400
8400
2006 2008 2010 2012 2014 2016 2018 2020
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Missouri PE Deal Report2H 2019 Highlights
2
Deal activity in the state of Missouri declined in the 2nd half of 2019, down 24% compared to the first half of the year.
Despite the decreasing deal volume, deal value actually increased in 2019, led by Bain Capital’s $6 billion buyout of Redcard.
77% of the buyout deals in 2019 were add-ons as pricing on larger platform deals remained very competitive.
B2B sectors such as BPO services, Logistics, and other commercial services remained active in the Missouri market in 2019. Of particularnote was the IT sector, which almost doubled 2018’s deal volume, showing that new technologies are attracting attention from PE buyers.
The EV/EBITDA valuation multiple increased slightly in 2019, while EV/Revenue dropped to the range of 1x – 2x from 3x – 4x in 2018.
Marketplace Trends
As always, good companies are getting plenty of attention as they go to market. Key drivers
of interest include:
Key Drivers
St. Louis
Kansas
CityColumbia
• Diversified customer base • Low customer churn
• A good handle on key performance indicators
• Minimal legal risks in play
• Strong and capable management team • Good sources of recurring revenue
• Growth Opportunities • Cutting-edge Technology
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St. Louis – Growing Hub for Agriculture and Tech
3
St. Louis is a growing hub for startups, as well as Agriculture Technology (AgTech) companies. Investments for the future are made, and
companies are moving to the city. Some of the highlights for 2019 include:
The city has been named #2 in the Top 10 Rising Cities for Startups by Forbes Magazine
There has been a +20% tech job growth since 2014 (2nd largest in the country)
Venture capital investments are up 90% compared to the last three years
National Geospatial Intelligence Agency will construct a $1.75bn campus in St. Louis
Bayer backs BioSTL’s new Headquarters with a $1.5bn grant
Bunge, an agriculture giant with more than 31,000 employees, is moving its HQ from NY to St. Louis
Key Drivers
• St. Louis provides an unique geographic location
• Lower business and living cost
• Local Talent (According to TDC, STL has highest concentration of
plant science PhD’s in the world)
Missouri PE Deal Report
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Missouri PE Deal ReportPE Deals Closed by Quarter
4
PE deal activity in the state of Missouri slowed down a bit in the 2H of 2019 to 28 deals, down from 37 the 1H.
Of these 28 deals in 2H, the St. Louis area accounts for the largest share at 11 deals, compared to 6 in Kansas
City and 1 in Springfield.
Deal Activity Records
21
6
9 9 9
7 78 8
9
11
14
10
14
54
10
14 1415
1011 11
15 15
18
10
18
13
1615
21
24
12
10
23
12 12
20
12
26
21
17
20
16
21
18
10
0
5
10
15
20
25
30
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
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Missouri PE Deal ReportPrivate Equity Transactions
5
Largest Transaction
Seller / Target Transaction Type
Buyout/LBO
Buyer / Investor Deal Size
USD $6,000mm
Date Company Investor Primary Industry Code Transaction Type Transaction DetailDeal Size
($mm)
Implied EV
($mm)City Target Business Description
03-Dec-19 GME Supply Platte River Equity Distributors/Wholesale PE Growth/Expansion - - - Columbia Distributor of safety equipment.
22-Nov-19 EPR Properties Rosemawr Management Buildings and Property Buyout/LBO Asset Acquisition 454.0 454.0 Kansas City Portfolio of Charter Schools.
19-Nov-19 Thomas McGee Group HarbourVest Partners Insurance Brokers Buyout/LBO Add-on - - Kansas City Provider of brokerage services.
14-Nov-19Micro Medical
InstrumentsAudax Group BPO/Outsource Services Buyout/LBO Add-on - - Saint Louis
Provider of medical device contract manufacturing
services.
08-Nov-19 ASPEQ Heating Group Industrial Growth Partners Electrical Equipment Buyout/LBO Secondary Buyout - - Saint LouisProvider of electric heating and thermal management
products.
04-Nov-19 Jack Cooper VenturesSolus Alternative Asset
ManagementLogistics Buyout/LBO - 450.0 450.0 Kansas City Provider of transportation and logistics services.
01-Nov-19ABI Document Support
ServicesBV Investment Partners Medical Records Systems Buyout/LBO
Corporate
Divestiture- - Saint Louis Provider of document retrieval services.
18-Oct-19 Spartech Nautic Partners Industrial Supplies and Parts Buyout/LBO Secondary Buyout - - Maryland HeightsConverter of engineered plastics and polymer
products.
04-Oct-19 Redcard Bain Capital Medical Records Systems Buyout/LBO Add-on 6,000.0 6,000.0 Saint Louis Provider of claims services.
03-Oct-19 Banner Solutions Tailwind Capital Distributors/Wholesale Buyout/LBO Secondary Buyout - - Kansas City Distributor of building hardware.
03-Sep-19 Bluebird NetworkMacquarie Asset
Management Telecommunication Buyout/LBO - - - Columbia Provider of telecommunication services.
30-Aug-19 Vast Broadband Oak Hill Capital Internet Service Providers PE Growth/Expansion Recapitalization - - Sikeston Provider of internet services.
09-Aug-19 Vanguard Packaging Dunes Point Capital Paper Containers & Packaging Buyout/LBO - - - Kansas City Designer and manufacturer of packaging products.
06-Aug-19 Azimuth Energy Oakland Capital Partners Construction and Engineering Buyout/LBO - - - Saint Louis Operator of an engineering and construction company.
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Missouri PE Deal ReportPrivate Equity Transactions
6
Date Company Investor Primary Industry Code Transaction Type Transaction DetailDeal Size
($mm)
Implied EV
($mm)City Target Business Description
06-Aug-19 Cretcher Heartland AlpInvest Partners Other Commercial Services Buyout/LBO Add-on - - Kansas CityProvider of insurance, risk and business support
services.
05-Aug-19 BoardPaq Clearlake Capital Group Business/Productivity Software Buyout/LBO Add-on - - Saint CharlesProvider of an online application for paperless board
meetings.
05-Aug-19Summit Bank of Kansas
CityCastle Creek Capital Regional Banks Buyout/LBO Add-on - - Lee's Summit Provider of personal and commercial banking.
01-Aug-19 Federal Steel Supply V&A Capital Distributors/Wholesale Buyout/LBO - - - Chesterfield Distributor of steel pipes, fittings and flanges.
01-Aug-19 InterCarrier Networks Grain Management Communications and Networking Buyout/LBO Add-on - - Clayton Provider of critical bandwidth infrastructure solutions.
01-Aug-19 The Meyer Group LNC Partners Insurance Brokers Buyout/LBO Add-on - - Saint LouisProvider of insurance products and consultancy
services.
26-Jul-19Underground Records
Management
Access Information
ProtectedOther Commercial Services Buyout/LBO Add-on - - Columbia Provider of access and information management.
23-Jul-19 Grant Cooper Diversified Search Human Capital Services Buyout/LBO Add-on - - Saint Louis Provider of staffing and recruitment services.
19-Jul-19 2e Creative Fishawack Media and Information Services Buyout/LBO Add-on - - Saint Louis Provider of healthcare marketing strategy services.
18-Jul-19 Anchor Packaging The Jordan Company Plastic Containers & Packaging Buyout/LBO - - - Ballwin Manufacturer of rigid packaging products.
11-Jul-19 Thrive Autism Solutions Blue Sprig Pediatrics Clinics/Outpatient Services Buyout/LBO Add-on - - Saint Louis Provider of applied behavior analysis therapy.
09-Jul-19 Lew's Fishing BDT Capital Partners Recreational Goods Buyout/LBO Secondary Buyout - - Springfield Supplier of fishing equipment and tackle.
08-Jul-19 Meridian Loyalty InComm Media and Information Services Buyout/LBO Add-on - - Saint Louis Operator of a full-service incentives business.
03-Jul-19 Just Cash Canaccord Genuity Financial Software Buyout/LBO Add-on - - Saint LouisDeveloper of an application for access to ATM
networks.
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Missouri PE Deal ReportActive PE Investors in Missouri
7
Company Location# of Investments
(2019)Targets
St. Louis 12
St. Louis 9
Kansas City
6
St. Louis 6
Ballwin 6
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Missouri PE Deal Report
8
We saw 77% of PE transactions closed
as add-ons in the 2H of 2019. This is
up marginally from 65% in the
previous year and up from 49% in
2008. We expect add-ons to remain a
high percentage of PE transactions.
The Consolidation Game2
1
10 1
8
10
22
13 1
9
14 2
2
16 2
3
19
20
12
19
19
20
27 2
6
36 3
1
28
42
37
77%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
10
20
30
40
50
60
70
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Buyout/LBO (Non Add-On) Add-On Add-On %
2110
1810
2213 19
1422 16 23 19
37 3
4
10
513
1412 10 15 9
20 12 1919
2027
2636
31 28 42 37
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Buyout/LBO PE Growth/Expansion Platform Creation Add-On
PE Deals Closed by Type
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Missouri PE Deal ReportPE Deals by Sector
9
B2B sector has been the largest sector in
Missouri PE Deal activity. 13 deals have
been completed in the 2H 2019,
contributing to a total of 28 deals in the
year. Both B2B and B2C deals decreased
slightly in terms of deal count compared
to 2018, down 24% and 33%,
respectively.
2019 saw a total of 11 deals closed in the
IT sector, which almost doubled the prior
year’s deals. Of note was a significant
increase in the second half of 2019,
leading by the acquisition of Bluebird
Network by Macquarie Asset
Management and the Diligent takeover
of BoardPaq.
B2B biggest by deal count
2415
1510
27 2426 26
23 19
37 28
76
9
6
11 10
15
7
810
9 6
6
3
4 9
4
3
5 11
18
8
15
11
52
6
5 4
4
8 6 13 86
11
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
B2B B2C Energy Financial Services Healthcare IT Materials and Resources
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Missouri PE Deal ReportPE-Backed Exits by Type
10
Secondary buyouts (SBOs) have
been a popular exit type over the
last few years. However, Missouri
has seen a slow down in these
types of exits in 2019 as well as in
corporate acquisitions.
Persistence of SBO Exits
8
2
10
7 7
11 11 12
17
11
64
17
2
4
2
6
8
13 12
8
8
6
4
0
5
10
15
20
25
30
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Corporate Acquisitions IPO Secondary Buyouts
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Missouri PE Deal ReportInventory of Currently PE-Backed Companies
11
The number of companies in Missouri held by Private Equity firms has increased over the past decade. This
demonstrates the growth and appeal of the PE business model. Dry powder for investments is still largely
available in the private markets. We expect this trend to continue.
PE holdings on the rise
499
2 4 6 616 21
29 4155 62
7489
117
146
182
224
277
327
411
0
100
200
300
400
500
600
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2012-2019
2007 - 2011
2000 - 2006
Pre-2000
# of PE Backed Companies
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Missouri PE Deal ReportValuation Multiples
12
Total Capital Invested Leverage
0.00x
10.00x
20.00x
30.00x
40.00x
50.00x
60.00x
70.00x
80.00x
20192018201720162015201420132012201120102009
EV/EBITDA
0.00x
1.00x
2.00x
3.00x
4.00x
5.00x
6.00x
20192018201720162015201420132012201120102009
EV/Revenue
0
5
10
15
20
25
20192018201720162015201420132012201120102009
0.00x
5.00x
10.00x
15.00x
20.00x
25.00x
20192018201720162015201420132012201120102009
Debt/ Equity Debt/ EBITDA
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EBITDA Revenue
31-Dec-19 W. L. Cassell and Associates IMEG Construction and Engineering - - - Kansas City Provider of engineering services
23-Dec-19 World's Fair Donuts - Food Products - - - Saint Louis Retailer of donuts
02-Dec-19 AmeriStaff QPS Employment Group Human Capital Services - - - Saint. PetersProvider of staffing services focusing on industrial and
clerical staffing
25-Nov-19 Tuva Interactive Alliance Technologies Software Development Applications - - - Saint Louis Operator of a digital agency
19-Nov-19 Catastrophe Cleaning & Restoration Interstate Restoration Other Commercial Services - - - Maryland Heights Provider of commercial restoration services
12-Nov-19 Element - The Data Agency - Media and Information Services (B2B) - - - Kansas City Provider of medical media services
12-Nov-19 Smoker's Outlet Smoker Friendly Specialty Retail - - - Wright City Operator of retail chain selling smoking products
05-Nov-19 Electronic Check Services Surge Holdings Telecommunications Service Providers - - - Springfield Provider of communication services
30-Oct-19 Pacific Mutual Door Hardwoods Distribution Distributors/Wholesale 34.5 - - Kansas CitySupplier of quality millwork products to the greater
kansas city area
25-Oct-19 Kozeny & McCubbin Buckley Madole P.C Legal Services (B2B) - - - Saint Louis Provider of legal services
24-Oct-19 Timberlake Engineering Customengr Construction and Engineering - - - Columbia Provider of engineering consulting services
01-Oct-19 NorthStar Battery EnerSys Energy Storage 182.5 13.04x 1.16x Springfield Designer and manufacturer of lead-acid batteries
01-Oct-19 Bank of Cairo & Moberly RMB Bancshares Regional Banks - - - Moberly Provider of banking services to its clients
01-Oct-19 Resource Optimization & Innovation HealthTrust Purchasing Group Consulting Services (B2B) - - - Saint LouisProvider of supply chain, business information,
business model, and manufacturing solutions
25-Sep-19 The Printing Source Garlich Printing Printing Services (B2B) - - - Saint Louis Provider of printing services for commercial customers
24-Sep-19 Peak Resorts Vail Resorts Holding Companies 265.0 5.73x 1.34x Wildwoodowns and operates day ski and overnight drive ski
resorts through its wholly-owned subsidiaries
12-Sep-19 Wiethop Truck Sales Summit Truck Group Road - - - Cape GirardeauProvider of dealership service offering brand inventory
for medium, heavy and severe service trucks
10-Sep-19 Hatchbuck Benchmark Internet Group Automation/Workflow Software - - - Saint LouisProvider of a web-based marketing automation
platform
06-Sep-19 Atlas Team Deveron UAS Government 0.1 Kansas City Provider of digital agricultural solutions
04-Sep-19 Kansas City Royals - Other Restaurants, Hotels and Leisure - - - Kansas City Operator of a baseball team
Target Business DescriptionEV
Date Company Investor Primary Industry CodeDeal Size
($mm)City
Missouri PE Deal ReportStrategic Acquisitions
13
Note: Strategic acquisitions are not analyzed in our report.
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Missouri PE Deal ReportStrategic Acquisitions
14
EBITDA Revenue
04-Sep-19 MediBeacon Huadong Medicine Company Monitoring Equipment 34.3 Saint LouisDeveloper of a kidney monitoring system designed to
fetch critical information about the renal function
03-Sep-19 Lowenhaupt Global Advisors CIBC Private Wealth Management Asset Management - - - Saint Louis Provider of investment advise
01-Sep-19 DL Insurance Group Lakenan Insurance agency Property and Casualty Insurance - - - Chesterfield Provider of Property Insurance services
30-Aug-19 Bucher Emhart Glass Rath Raw Materials (Non-Wood) - - - OwensvilleManufacturer of refractory materials for the container
glass industry
27-Aug-19 Pulse Systems Harris Healthcare Enterprise Systems (Healthcare) - - - Kansas City Developer of health care information system software
21-Aug-19 Perched Elasticsearch Education and Training Services (B2B) - - - Lohman Provider of education and consulting services
16-Aug-19 10/10 Taxi WHC Worldwide Automotive - - - Kansas City Provider of taxi services
13-Aug-19 Oak Street Sales WHC Worldwide Other Commercial Services - - - Kansas City Provider of transport acquisition services
02-Aug-19 QM Power KCK Group Electrical Equipment - - - Kansas City Developer of an electric motor technology
01-Aug-19 BankLiberty Central Bank Regional Banks 103.7 Kansas CityLiberty Bancorp Inc is a holding company for
BankLiberty, which is a full-service community bank
31-Jul-19 Center Oil Company BioUrja Group Distributors/Wholesale - - - Saint Louis Wholesaler of gasoline, diesel and ethanol
31-Jul-19 PenTech Computer Company NWO IT Services IT Consulting and Outsourcing - - - Saint Louis Provider of managed IT services
29-Jul-19 Stanbury Uniforms Varsity Spirit Clothing - - - Brookfield Designer and manufacturer of uniforms
26-Jul-19 American Railcar Industries The Greenbrier Companies Rail 418.3 - - Saint Charles Manufacturer of hopper and tank railcars
12-Jul-19 Navvis Healthcare - Consulting Services (B2B) 4.0 - - Saint Louis Provider of healthcare consultancy services
11-Jul-19 CADMIN Services D3 Technologies IT Consulting and Outsourcing - - - O'Fallon Provider of Information Technology (IT) services
10-Jul-19 Transmission Digest Babcox Publications Media and Information Services (B2B) - - - Springfield Publisher of an automotive journal
01-Jul-19 Air Industrial Resource Sullair Distributors/Wholesale - - - Kansas City Distributor of compressed air equipments
01-Jul-19 American Piping Products Blue Sprig Pediatrics Distributors/Wholesale 3.2 - - Chesterfield Distributor of pipes and fittings
Target Business DescriptionEV
Date Company Investor Primary Industry CodeDeal Size
($mm)City
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Missouri PE Deal ReportActive Strategic Investors in Missouri
15
Company Location# of Investments
(2019)Targets
St. Louis 5
St. Louis 5
St. Louis 5
St. Louis 3
Kansas City
2
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About R.L. Hulett & Company
16
Founded
1981Experience
39 yearsTransactions Closed
230+ Second generation family-owned, middle-market investment bank
Focused on advising middle-market businesses with revenues from $10 to $250 million
Small Business Monthly’s Best M&A Providers: 2018-2020
Named one of “Top 100 Very Best Middle Market M&A Advisory Firms in the U.S.” by Axial Markets in 2017
CorporateINTL Magazine’s M&A Advisor of the Year: 2014-2019
Silver Sponsor in the Association for Corporate Growth
Member firm in the Alliance for M&A Advisors, an international network of over 900 M&A professionals
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Recent Transactions
17
has completed a recapitalization with
has sold substantially all
of its assets to
The Boeing Company
has been acquired by
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RLH Team
R.L. Hulett & Company is one of the most established middle-market investment banking firms in St. Louis
9 professionals from a variety of backgrounds
Managing Directors
Directors
Analyst
Bob Hulett Founder & Chairman, over five decades of experience as Investment Banker and CPA
Trevor Hulett CPA with over 25 years of Investment banking, Corporate Finance and Public Accounting experience
Pete Fischer 15 years of manufacturing management and 10 years of financial industry experience
Holly Hart CPA with 15 years of corporate development and Big 4 transaction group experience
David Vass 30 years of business executive level and business management experience in multiple industries
Jason Qiao
Senior Advisors
Turk Lewis Bill Sheridan
Marketing & Administration
Cheryl Morris 30 years of experience in marketing and office administration
18
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Our Team
19
At R.L. Hulett and Co. we are ready to assist you or your clients in determining a succession plan and process. We have advised on over 230 transactions over our 39 years in business.
Mr. Vass has over 30 years of business management
experience including more than 10 years as President
of a highly successful consumer products
manufacturing company with revenues exceeding $25
million. During this time, he not only reversed a
declining sales and earnings trend, but increased both
sales and operating income over 100%. In addition, he
has spent over 20 years at the executive level of Vice
President of Sales and Business Development. Mr.
Vass earned his MBA from the University of Michigan.
David T. [email protected] | (314) 721-0607 x 115
Director
Mr. Hulett has led M&A transactions in a variety of
industries including manufacturing/industrial,
software development/IT, business services and
value-added distribution. Prior to joining the firm, he
held senior level accounting and financial
management positions in both public accounting and
large corporate environment. Mr. Hulett holds his
Series 62, 63 and 79 Securities registration. Mr. Hulett
earned a Bachelor’s Degree in Accounting from the
University of Missouri, Columbia.
R. Trevor [email protected] | (314) 721-0607 x 112
Managing Director
Mr. Hulett founded the firm in 1981 and has
negotiated and completed more than 200 transactions
throughout his career. He began his career as a
Certified Public Accountant and practiced with Peat,
Marwick, Mitchell & Co. in St. Louis as an Audit
Manager and in New York as the Director of Training
for Private Business. Mr. Hulett has also served as
Chief Executive & Board Member for various middle
market companies. Mr. Hulett earned his MBA from
Lindenwood University.
Robert L. [email protected] | (314) 721-0607 x 103
Chairman & Managing Director
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Methodology
20
Missouri Private Equity Deals
Private Equity Backed Missouri Companies
Missouri Private Equity Firms
Missouri private equity backed companies
are defined in this report as companies that
are headquartered in the state of Missouri
and financially backed in whole or in part by
private equity firms.
Private equity deals in Missouri are defined
in this report as investments made by
private equity firms or their portfolio
companies. These deals include companies
headquartered in Missouri that are
categorized as Buyout/LBO, secondary
buyouts, public to private,
growth/expansion, recapitalization, or PIPE.
Real estate is not included in our data.
Missouri private equity firms are defined in
this report as private-equity firms
headquartered in Missouri that are actively
investing or raising funds in the 2H of 2019.
Missouri PE Deal Report2H 2019