MCM Capital Partners Acquires Cole Information Services and Plans Aggressive, Top-Line Growth

Published: March 4, 2008 | Topics: MCM News

Top Reference and Lead Generation Provider Poised for Expansion
March 2008

CLEVELAND, OHIO – MCM Capital Partners (“MCM”), a Cleveland, Ohio-based private equity firm and a leading investment firm dedicated to investing in microcap private businesses generating up to $75 million in annual revenues, is pleased to announce its acquisition of Cole Information Services (“Cole”), one of the nation’s leading providers of reference and lead generation solutions for small businesses.

Founded in 1947, Nebraska-based Cole’s products fulfill its customers’ needs for actionable marketing and reference information by enabling users to efficiently segment, target and convert new customers and locate previous customers. The Company achieves this by transforming source data into reference and lead-generating market intelligence through value-added data manipulation and segmentation. Constructed on a state-of-the-art technology platform, Cole’s database is comprised of more than 128 million household records representing 198 million individuals in the United States and Canada. This database also includes more than 19 million businesses.

Cole’s original reference and lead generation solution, the Cole Directory, is now offered in CD and online versions, which organize homeowner and business  information by geography rather than by name, allowing users to generate “neighbor” leads and referrals. These products are segmented to target specific vertical markets that include real estate, insurance, collections, law enforcement and home services, among others. The Company has since expanded its products to include MarketShare, a state-of-the-art desktop marketing tool providing demographic select and sortation features popular with direct marketers. Cole also provides outsourced publishing services, including data manipulation, print and bindery operations and fulfillment to major publishers from coast to coast.

According to Steven M. Ross, Managing Director and Principal, MCM Capital Partners, “Cole is widely regarded as a pioneer and technical leader in the lead generation and fulfillment field. Its revenue base is well balanced, represented by 16,500 current customers operating in a wide range of industries. That, combined with its high value-added margins and enormous potential for top-line growth, made it an attractive target for MCM.”

“Cole has demonstrated a strong history of generating positive cash flows, as evidenced by its ability to generate gross margins in excess of 50 percent and EBITDA margins in excess of 20 percent for each of the past four years,” said James C. Poffenberger, Managing Director and Principal, MCM Capital Partners. “Additionally, Cole’s superior products, high levels of customer service and subscription-based pricing strategy have enabled it to retain on average 81 percent of its customers on an annual basis. This demonstrates the importance of these products to Cole’s customers.”

MCM acquired Cole from Chicago, Ill.-based Sterling Capital Partners, L.P. and its MetroGroup Holding, LLC subsidiary with senior financing provided by Cleveland, Ohio-based Key Bank. Minneapolis, Minn.-based GMB Mezzanine Capital provided junior capital and co-invested alongside MCM in Cole’s equity. Financial terms of the transaction are not being disclosed.

Moving forward, MCM will work alongside Jim Eggleston, Cole’s CEO since 2004, and other senior executives to position the Company for its next phase of growth. According to Ross, the Company should continue to grow sales and EBITDA through the expansion of existing products, development of new, high-margin products and additional streamlining of current operations. MCM and Cole’s senior management will also evaluate potential strategic add-on acquisitions that could further enhance the Company’s current operations and help it expand its market reach.

“I am tremendously excited to work hand in hand with the professionals at MCM to pursue aggressive growth and generate new value-driven opportunities for the Company and its customers,” said Eggleston. “Now that we are a stand-alone business apart from MetroGroup, Cole is well-positioned to leverage its core strengths as a means to developing broader capabilities and greater market share.”

“Cole has developed a very loyal customer base and significant brand recognition in its marketplace,” added Poffenberger. “Given its history of innovation and the strength and expertise of Jim and his senior management team, we expect to achieve significant top-line growth moving forward.”

Cole is the fourth platform company acquired by MCM’s Principals using funds raised through MCM Capital Partners II, L.P. (“Fund II”), the Firm’s second institutional fund and third pool of investment capital. Capital committed to Fund II is being used to identify and acquire controlling equity interests in North American microcap manufacturing, distribution and service businesses with annual sales of $15 million to $75 million. MCM’s Principals anticipate investing Fund II capital in seven to ten companies over a period of three to five years.

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