Pamlico Capital Wins Buyouts Middle Market Deal of the Year Award

It’s easy to forget that consolidations are fragile things, easily dashed to bits by culture clashes, IT incompatibilities and political infighting. Pamlico Capital found the right formula for folding companies into transportation technology provider TMW Systems. And it led to a spectacular jump in equity value.

Walker C. Simmons, the lead partner on the deal, said that the lower-middle-market specialist went into the late 2005 deal with an add-on acquisition strategy in mind. By then TMW Systems had established itself as a leading provider of enterprise resource planning (ERP) for companies that truck cargo for customers over long distances. The system lets customers dispatch their fleets and track cargo more cost-effectively. “It’s sort of the guts of a transportation company” that gets integrated with accounting and payroll systems, Simmons said.

The five add-on acquisitions—made over a five-year period from mid-2006 to mid-2011— allowed TMW Systems to add new features and functionality to its core product. The acquisition of TMT Software in mid-2007, for example, added repair records tracking as a feature, while the acquisition of Integrated Decision Support just a couple of months later brought functionality that optimizes routing and fuel purchases.

These additional features, Simmons said, gave the sales force of TMW Systems a calling card to sell into fresh markets. By the time Pamlico Capital sold the business for $335 million in mid-2012, the company had broadened its potential customer base to include intermodal companies that ship both by rail and truck, third-party logistics companies and private fleet operators that ship their own goods locally. All in, the company’s “addressable market” grew roughly 10-fold during Pamlico Capital’s seven-year ownership, to more than $1 billion, Simmons said.

The Charlotte, N.C.-based buyout shop, which tends to invest $25 million to $75 million per platform in North American business services, technology services, communications and health care, also developed an integration strategy to make sure each of the acquisitions quickly added to organic EBITDA growth. The key, said Simmons, was centralizing finance, administrative and sales in Cleveland, while maintaining R&D employees in their local markets. Growth accelerated in 2011 and 2012 as the economy found its footing in the wake of the Great Recession.

“There was a lot of value creation in those last two years,” said Simmons.

Prior Relationship With Founder

In 2004 Pamlico Capital first reached out to Tom Weisz, who founded TMW Systems in 1983, about buying his business. The idea was to avoid an auction, but Weisz, who planned to retire from the business after cashing out, wasn’t convinced. He ended up hiring investment bank William Blair to run a sales process shortly afterwards.

Nevertheless, said Simmons, “I think our prior relationship with the management team ended up carrying the day.” Senior debt lenders GE Capital, Wells Fargo, Golub Capital and CIT would all have a role in financing the company’s growth.

One of the first orders of business for Pamlico Capital, which took two board seats, was finding a new CEO, according to Simmons. The company hired Dave Wangler, an executive with extensive sales experience in enterprise software, in 2006. The choice turned out to be a good one. Under Wangler’s leadership the company embarked on the five-deal acquisition spree.