‘A lovely sign’ - Canadian investors bet on NYC giant

Friday, January 31, 2003

MT. VERNON, N.Y. - Alan Landauer’s got big plans, and now it looks like he’s got the cash to carry them out.

The owner of one of the largest independent HMEs in the New York City area, Landauer-Metropolitan, sold a piece of his company to Canadian investors in December for $7.63 million. Landauer intends to use the money to grow his $40 million company to $70 million to $100 million over the next two years.

“I can’t do it myself, or only very slowly,” Landauer said. “The banks are tightening down with credit. The manufacturers are tightening down with credit.”

Clairvest Group and Clairvest Equity Partners Limited Partnership, which manage a $220 million portfolio, see big things for Landauer-Metropolitan and the home medical equipment market in the United States. In addition to the market’s steady 7% to 10% annual growth, the HME market plays right into Clairvest’s investment strategy, which targets fragmented, consolidating industries. Clairvest looks for platform companies where owners want to expand by acquisition and need additional capital to do it, said David Sturdee, a Clairvest associated who worked on the Landauer deal.

The Clairvest investment is just the lastest instance of a large, new investor (in December it was Allied Capital Corp.; in October, Air Products) entering the HME market and “a lovely sign,” said M&A expert Dexter Braff.

“We like what we are seeing,” Braff said. “Every time a new investor comes into the busienss, it is a strong postive signal for the industry. These things build on one another. Investment begets investment.”

Unlike most venture capitalists, Clairvest acquires minority - not majority - interests in companies, preferring to back owner-operators. As part of this deal, Landauer’s president, Lou Rocco, and executive vp of marketing, Sal Burdi, were allowed to acquire a piece of the company.

“This aligns the key players,” Sturdee said. “We believe that for a company like Landauer-Metropolitan to achieve what it has achieved is based on the strength on management. We also want the operators to have their skin in the game.”

That suits Landauer just fine. He’d considering taking on an investor for the past two years, but didn’t want to retire or sell. Except for Clairvest, all his suitors wanted to buy a controlling interest in the company.

Landauer plans to use the Clairvest investment to grow his company internally and through acquisition. Landauer said he has no aspirations to expand beyond the New York metro region, but does intend to move into northern New Jersey and lower Connecticut.

Clairvest typically exits an investment in five to seven years. With Landauer Metropolitan, that could mean either selling to a strategic player or going public. In talking about an exit strategy, Landauer held up as a possible example the recent $165 million sale of American Homecare Supply to industrial-gas giant Air Products. At the time of that deal in early October, AHS generated annual revenue of about $110 million. CEO Bob Cucuel grew AHS through a combination of internal growth and by acquiring well-run HMEs in strategic areas.

As Landauer marches toward its goal, should additional money be needed to make acquisitions, “Clairvest is there, has the funds and is eager to make the additional investment,” Sturdee said. HME