Birch Hill Equity is one of the country’s largest private equity firms, with stakes in 20 partner companies. It operates on a cycle: it raises new capital, it seeks out opportunities and after a reasonable period of ownership looks to reap the rewards.
In 2015, it was in the harvesting phase, hoping to realize value for GDI Integrated Facility Services, Sleep Country Canada and Shred-it International.
Of the three, the disposition of Shred-it was the most unusual. Instead of selling part of its stake via $600 million initial public offering — and ending up with about a 40 per cent interest — Birch Hill and the other shareholders sold to an industry buyer, Stericycle Inc.
But Birch Hill, which first invested in Shred-it in June 2009, and the other shareholders went a long way to take the company public.
Shred-it filed a prospectus for an initial public offering and secondary offering. Toronto0-Dominion Bank, Bank of Montreal, Canadian Imperial Bank of Commerce and Bank of Nova Scotia were lead managers.
But the parties were also involved in trying to find a buyer privately. Having two irons in the fire is known as dual track. CIBC had that mandate.
Paul Farrell CIBC’s head of Canadian Investment Banking said the “opening up” of the IPO market in 2015, “presented an opportunity for private equity sponsors to consider it a reasonable exit.” But because of the success Shred-it achieved as a private company,” the equity market and the M&A market provided an attractive proposition. But Birch Hill, elected, for its own reasons, to do the private trade.”
John MacIntyre, a Birch Hill partner said “there was a good reception in the public market and (Shred-it) was a logical candidate to go public. But when a strategic buyer (like Stericycle) comes along, it made sense for us and the other owners and the business. It was a superior bid,” he said, adding that the sale to a strategic Buyer also “de-risks” the investment, because all the proceeds are received on closing.
Birch Hill’s other two divestitures were more normal: it took Sleep Country Canada Holdings public and executed a reverse takeover between Medwell Capital Corp. and GDI.