Merit Capital Partners

Lavelle Industries, Inc. is a leading manufacturer of rubber replacement parts. It sells these products to plumbing wholesalers and large hardware retailers such as Home Depot and Ace Hardware. Lavelle also manufactures a wide variety of mechanical rubber parts, which it custom designs for OEM end users in a wide variety of industries.

The company was purchased in a leveraged management buyout in 1987 by Prudential Capital. After holding this for roughly six years, Prudential wanted to exit its investment. However, Lavelle was a family-operated business whose family shareholders were not interested in selling the company. Therefore Lavelle approached Merit Capital directly to help the company refinance Prudential’s debt and repurchase its equity interest. We were impressed with the firm’s operations, family management and the strategic direction they were taking the company. Therefore we provided $5 million of mezzanine financing to repurchase Prudential’s equity and debt investments in Lavelle. Merit provided more than just capital, however, negotiating terms of the recapitalization with Prudential and helping the company secure an additional $5 million of senior lending.

Using mezzanine financing from Merit Capital in this recapitalization was a beneficial solution to all parties involved. It gave Prudential a viable exit opportunity. It allowed family shareholders to avoid a sale and to increase their ownership in the company post recapitalization. Finally, it gave Merit the opportunity to invest capital in a well-managed growing business.