Published in M&A Award Profiles
Kraig Harper, CFO of Service Express Inc. Kraig Harper, CFO of Service Express Inc. File Photo by Katy Batdorff

SEI kept culture, management intact with sale to Pamlico Capital

BY Tuesday, October 18, 2016 12:12pm

Finalist | Deal: >$150M

  • Company: Service Express Inc.
  • Top executives: Ron Alvesteffer, CEO; Kraig Harper, CFO
  • Annual sales: $59 million
  • Total employees: 130
  • Business description: A third-party maintenance service provider for mission-critical data center infrastructure, Service Express Inc. delivers on-site hardware maintenance, especially for servers.
  • Advisers: Barnes and Thornburg LLP (legal), Ernst & Young Capital Advisors (financial)

When Service Express Inc. (SEI) sought a buyer in 2015, owners Michael McCullough and Ed tenHaaf were just looking to retire. 

McCullough and tenHaaf owned the third-party information technology hardware maintenance provider for longer than either had ever planned, said CFO Kraig Harper. The duo hadn’t been active in day-to-day operations since 2002, instead opting to put the SEI executive team in the driver’s seat. 

When it came time to seek a new owner, the team wanted to maintain that structure. With the help of attorney Tracy Larsen, a partner at Barnes & Thornburg LLP, they began the search for a private equity firm that would act more as a collaborator than as an operator.

In July 2015, SEI found that partner in Pamlico Capital, a Charlotte, N.C.-based private equity firm, but only after an exhaustive search.

“We worked through a very thorough process that was very competitive,” Harper said. “We were looking for a partner that would see the success we’ve had and was wanting to allow us to continue that growth through those same avenues.”

The sale of SEI to Pamlico Capital was a finalist in the 2016 MiBiz M&A Deals and Dealmakers of the Year Awards for transactions of more than $150 million.

Of all the prospective buyers, Pamlico best understood SEI’s success and growth strategies, such as continuing to open new offices around the country. In particular, the executive team didn’t want a partner that would alter the company’s growth initiatives. Harper said that the most important factor — beyond price even — was that the new owners respect and appreciate both the culture and people that SEI had worked so hard to develop. In that aspect especially, Pamlico “rose to the top,” he said.

In finding the right partner, Harper said that having the right advisers was key. In addition to Larsen, SEI brought on David Hedley and Jim Reinhart of Ernst & Young Capital Advisors’ San Francisco office. Together, the advising team did a “fantastic job” of representing SEI’s expectations on all fronts, according to Harper.

From Larsen’s perspective, the SEI executive team clearly articulated those expectations. The transaction was highly strategic, he said, but was made simple because “the management so understood every aspect of their business.” 

The only complications occurred in handling some of the finer points of the deal, Larsen said, such as rollover components for current investors, which required a separate set of negotiations.

Still, SEI’s leadership structure remained relatively the same, except that a board of directors was created with three members from Pamlico.

According to Harper, the deal has allowed SEI to grow more quickly in exactly the ways his team had hoped.

“We felt like we were holding back the reins and holding our employees back from the opportunities that could be created,” he said. “We really felt like there was still a lot of room to grow in our industry.”

Pamlico has provided SEI not only with capital, but also with a new array of resources and partnerships — especially in the form of Pamlico’s other portfolio companies — for solving challenges.

For example, SEI completed its first ever acquisition earlier this year in a deal for Compu-Fix, a third-party maintenance provider based in West Mifflin, Pa. In doing so, Harper said that SEI “really utilized Pamlico and their team. It went very smoothly.”

Harper anticipates the company will continue to bite off more acquisitions at some point in the future, but he expects them to be highly targeted and strategic.

As important as the new resources have been, what Pamlico has brought to the table — above all else — is a continued respect for SEI’s culture and employees, Harper said.

“They’ve been an outstanding partner for us since this started,” he said. “They ask great questions and allow us to try some new things. They’ve really just been fun to work with and thoughtful in how they approach us, but at the same time very clear in what their expectations are.” 

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