- Financial Post Magazine

- Financial Post Magazine

- Financial Post Magazine

Toronto, Ontario 7 September 2010 – Let’s start with the good news. The long tail of the economic crisis is finally working its way through the private-equity sector. It may have taken longer for the shock waves of the meltdown to make their way to this end of the economy. But they hit hard, nonetheless. Now, finally, corners are being turned. Globally, private equity players have tapped investors for more money in the second quarter of this year than at any time since the start of the financial crisis. Even Canada’s beleaguered venture-capital sector — the hardest hit in the world — is finally seeing some lift as this year progresses.

But despite the recent cause for good cheer, private-equity players — the leveraged-buyout firms, the venture capitalists, the distressed-debt funds — have emerged from the financial crisis and the recession that followed with deep battle scars. The reasons are all to clear. In the years leading up to the financial meltdown, private-equity firms ruled the investment landscape, luring investors — typically pension funds, sovereign-wealth funds and wealthy individuals — with the promise of king-size returns on deals that often ran into the billions of dollars.

The trend in Canada reached its zenith in 2007 — when private-equity firms raised $370 billion dollars — and then over-reached with the failed $52-billion leveraged buyout of BCE Inc. by a consortium that included the Ontario Teachers’ Pension Plan along with U.S. private equity firms Providence Equity Partners Inc. and Dearborn Partners LLC. By the time that bid failed in December 2008, the party was over. The market crash was in full swing and private-equity firms were left with suddenly devalued assets on their books that they could not monetize to would deliver promised returns to their institutional investors. The result? Anger and frustration among backers, who first started to scale back their flow of investment dollars and then put pressure on their private-equity partners to improve their bottom lines.

The detente that followed has since warmed and relations between investors and private-equity firms are normalizing. But more than a few high fliers have had their wings clipped. Edgestone Capital Partners, a prominent Toronto-based private-equity firm, has seen change in its executive line-up. Winnipeg-based Richardson Capital no longer runs private-equity money for third-party investors and now invests only the money it holds in house. Venture West, once a dominant venture-capital firm with offices across the country, has essentially closed its doors.

More significantly, the landscape of the entire private-equity industry has shifted. Traditional investors are demanding more transparency from their private-equity partners and greater roles in the management of investments. Others, notably smaller institutional investors such as OP Trust, which manages the pension obligations of the Ontario Public Sector Employees Union, are starting to make their own direct investments, diminishing the potential capital available to the private-equity industry.

None of this is to say the era of private equity is under threat. Indeed, a recent report by London-based Coller Capital says that investors plan to speed up their commitments to private-equity funds in the next 18 months. But one thing is certain: With the boom years behind them, private-equity investors have become more selective, and the entire industry, going forward, is operating on a different dynamic.

If the increasing willingness of institutional investors to make direct investment points to one overarching theme, it’s that they may have lost a degree of confidence in private-equity funds as an investment channel, especially if they are expected to pay fees to participate in deals. And that’s not an unreasonable position in light of the circumstances, says Sebastien Burdel, a principal with Coller Capital. “What you saw develop in the boom years to some degree was a dilution of the quality of the private-equity industry as a whole,” he says. “It was driven by a lot of newcomers who arguably should not been able to raise capital and should not have been doing deals.”

The inevitable outcome of that population boom — as is the case with any such boom — is an eventual thinning of the herd. Burdel predicts the pool of funds will shrink over the next year or two. But is that a good thing? Industry reaction is mixed. On the one hand, Burdel believes a rebalancing is a healthy sign of a maturing market. Others worry that industry veterans might just walk away from their funds, leaving younger, less-experienced partners to pick up the pieces. That fear may be overstated, but this much is certain: The future leaders of private equity will be the fittest, those who avoided quick, slick, financial turnarounds, and focused on bringing real value to the companies they purchased. There will be fewer of them overall, but those that remain will have a laser focus on operations. Financial wizardry will be replaced by players with deep knowledge of the industry sectors who have a long-term investment horizon of five years to eight years, as opposed to the three-to four-year turnarounds done during the height of the bubble. Secrecy will be less tolerated. The remaining players will have to be more transparent, take smaller fees and be willing to cut investors into some of their deals.

But with change comes opportunity. A number of smaller companies are muscling up with fresh approaches to private equity. With less capital available from traditional players, they are taking on larger roles in the industry.

Among them is Toronto-based Kirchner Private Capital Group. A gun-for-hire firm, Kirchner originally built its brand as a turnaround specialist that larger private-equity groups would bring in to fix and sell broken companies within their holdings.

Today, with more funds under pressure, Kirchner has found a new line of work — massaging under-performing portfolios. Instead of fixing individual companies, Kirchner conducts an entire analysis of a private-equity company’s investment portfolio on behalf of the investors, and uses its experience in turnarounds to recommend which assets should be kept and which should be let go, with the eventual goal being to wind down the entire portfolio.

The economic crisis “exposed the weakness in portfolios,” says Les Lyall, a turnaround specialist who joined Kirchner during a recent, widespread recruitment drive. “The challenges have become more present and visible. In the past, [investors] had two options: do nothing or sell the portfolio to a secondary fund at a significant discount… We represent something in the middle, to continue working with the portfolio and maximizing the value.”

Meanwhile, in the struggling venture-capital realm, another Toronto-based firm, MMV Financial, has been gaining traction in the area of “venture debt” financing. Yet demand for this type of financing — essentially, bridge lending to smaller that firms can’t traditional bank financing — is growing. “As equity pools shrank [after the economic crisis], there’s been a squeeze on capital in the market,” says Ron Patterson, who co-founded MMV in the late 1990s with Minhas Mohamed, and now serves as the company’s executive vice-president. “Whenever VCs demand tougher terms, our loan option looks more attractive.”

The upside of venture debt is that it allows firms growing out of the startup phase to access funding without having to turn to venture-capital firms, which would take ownership stakes that dilute the equity in the company. (MMV, which specializes in tech firms, actually does demand warrants that can be converted to equity from the companies it lends to, but the stakes only add up to 1% or 2%.) Still, venture debt is not the easiest money to accept. Making loan payments on a monthly basis can be difficult for young firms, and MMVs interest charges of 12.5% to 13.5% — typical for this category of lending — are not cheap.

David Nyland, president and chief executive of Toronto-based BluePrint Software, an MMV client, warns that this form of financing is not for everyone. “It takes a lot of discipline to stay current and pay the debt,” he says. “Those who can’t continue to make payments go into default.”

That said, MMV’s track record for selecting companies for loans is strong. In the decade or so since its launch, the firm has had to take over and resell at least seven startups to recoup its losses. But MMV puts its overall losses at only US$5 million over the years — not bad considering that it has handed US$500-million worth of loans to more than 175 firms.

That track record hasn’t gone unnoticed. MMV has recently grown its capital base to US$200 million, thanks to a capital infusion from Laurentian Bank, HSBC Bank Canada, and ROI Capital and is now lending US$80 million to US$100 million each year to some 30 companies. It is now also doing the majority of deals in the U.S. and boasts five offices across North America. “Ours is a good example of how Canadian companies need to be part of the North American platform,” says MMV co-founder Mohamed.

True enough. And there’s no doubt more opportunity for new or growth-oriented smaller players to take larger roles in the industry. After all, the crisis did not kill the private-equity model; it brought the players back down to earth. The industry may be less sexy and secretive than it once was but the remaining players — both old and new — will be stronger. In the process, a new niche of firms managing distress portfolios and debt have emerged. And a new era has begun.

Karen Mazurkewich, Financial Post Magazine

Birmingham, Alabama 28 July 2010 - Kirchner Private Capital Group is pleased to announce its founder and Chairman has been featured on an episode of Scully/The World Show™ on PBS. Robert Scully who hosts the show has been described as “the best interviewer on television” delves into the career of W.B. (Bud) Kirchner touching on both his entrepreneurial work with the Kirchner Private Capital Group and his social entrepreneurship with The Christopher Douglas Hidden Angel Foundation, founded by Bud and his wife.

“It is a great honor to appear on such a distinguished show, especially in our 25^th anniversary year.” commented Bud. “I enjoyed my discussion with Bob and I am always happy to discuss our successes over the last several decades and hope that our story will resonate with some of the audience members.”

When asked about the portion of the show dedicated to his other passion, social entrepreneurship and his foundation, Kirchner stated, “There is nothing closer to my heart than the Hidden Angel Foundation, created in honor and recognition of our son Christopher.  The Foundation’s mission is to enrich the lives, health, and social well-being of people with cognitive, emotional, and physical challenges through the use of Multi Sensory Environments (MSE).  To be able to participate in the foundation’s work and witness so many lives being touched and enriched is one of the greatest gifts I have ever received.”

Scully/The World Show™ is devoted to one-on-one interviews with some of the world’s most significant and famous personalities. “Since its debut in   1983, the series has featured Nobel laureates, heads of state, royalty, authors, financiers, athletes, designers, diplomats and philanthropists.”

PBS Synopsis

Some businessmen just have a knack for success: they know how to create it, grow it, manage it and even snatch it back from the brink of failure. This week, Bob welcomes two-time Entrepreneur of the Year Bud Kirchner, an Alabama venture capitalist credited with having that golden touch. Kirchner has dedicated his career to helping companies achieve their potential by parachuting in his management team to tighten operations and generate momentum. Yet he may well have found his most satisfying work in social entrepreneurship, developing the Hidden Angel Foundation in memory of his son. It offers Multi-Sensory Environments (MSEs) so that disabled individuals can stimulate brain activity and better engage with the world around them. Through Kirchner’s efforts, we see how the entrepreneurial spirit pays dividends in so many more ways than just what appears on the balance sheet.

Kirchner Private Capital Group

The Kirchner Private Capital Group (KPCG) are partners, principals, agents and advisors to private companies, venture capital and private equity firms, and institutional investors. Through a multi-faceted, customized approach, we match our operational, transactional and investment skills to every portfolio management partnership, transition management engagement, and investment banking mandate. Our depth of experience, validated by a 25-year track record, enables us to assist both clients and partners achieve their objectives. www.kirchnergroup.com.

The Hidden Angel Foundation

The Hidden Angel Foundation is a nonprofit, charitable organization that works passionately to enrich the lives of people with cognitive, emotional and physical challenges.  HAF does this by funding and supporting the creation of Multi Sensory Environments.  To date, HAF has been involved with many projects across the United States and Canada. To learn more about the HAF mission, visit www.cdhaf.org

Conference on helping individuals with special needs

The Hidden Angel Foundation is pleased to host the 8th International Conference on Multi Sensory Environments in Birmingham, Alabama, October 1-3, 2010. The conference will bring together experts from over 12 countries featuring more than 30 renowned speakers who will offer thought-provoking lectures and workshops concerning the use of Multi Sensory Environments (MSE), sensory enrichment and for the first time a large section of the program will be devoted to the brain, its development, plasticity and the impact of the environment. For more information or to register go to www.isna2010.org

For more information please contact:

Andy Agrawal, Managing Partner
Kirchner Private Capital Group
(803) 548-1300
aagrawal@kirchnergroup.com

or

Sandra Fornes, Executive Director
Christopher Douglas Hidden Angel Foundation
(205) 313-9168
sfornes@cdhaf.org

Kirchner and Company, Inc. acted as M&A Advisor to The Pressure Pipe Inspection Company Ltd. (“PPIC”).

Calgary, Alberta 28 July 2010 – Pure Technologies Ltd. (“Pure”) (TSX-V:PUR) announced today that it has agreed with the shareholders of The Pressure Pipe Inspection Company Ltd. (“PPIC”) to purchase all of the issued and outstanding shares of PPIC for up to $34.9 million in cash and common stock of Pure. The Boards of Directors of both companies have approved the transaction, subject to certain conditions and to the approval of the TSX Venture Exchange. The transaction is expected to close on or before August 31, 2010.

PPIC, a privately-held company with headquarters in Mississauga, Ontario, is a leader in large-diameter water and wastewater pipeline condition assessment. PPIC is currently active in North America (including Mexico), South America, the Philippinesand Hong Kong. For the fiscal year ended September 30, 2009, PPIC had revenues of $14.6 million.

The base purchase price is $30,000,000 with provision for a maximum additional payment of $4,900,000 based on PPIC’s revenues exceeding $20,000,000 for the fiscal year ended September 30, 2010. It is anticipated that the consideration will be paid in the form of approximately 29% in cash and 71% in Pure common stock, to be issued, subject to TSX Venture Exchange approval, at $4.44 per share which issue price was negotiated as part of the transaction. Emerald Technology Ventures, PPIC’s largest shareholder, will have the right to nominate one director to Pure’s Board of Directors. Subject to TSX Venture Exchange approval upon closing the transaction, Scott MacDonald, Partner with Emerald Technology Ventures, will join Pure’s Board of Directors.

Dr. Brian Mergelas will remain the Chief Executive Officer of PPIC until the transaction close, to which point he has agreed to accept the position of Senior Vice-President, Corporate Strategy & Development, with Pure.

Canaccord Genuity acted as financial advisor to Pure on this transaction and Kirchner Private Capital Group acted as financial advisor to PPIC. Bennett Jones LLP acted as legal counsel to Pure and Heenan Blaikie LLP as legal advisor to PPIC and its shareholders.

About Pure Technologies Ltd.

Pure Technologies Ltd. is an international asset management technology and services company which has developed patented technologies for inspection, monitoring and management of critical infrastructure around the world. Pure’s business model incorporates four distinct but complementary business streams:

    -  Sales of proprietary monitoring technologies for pipelines, bridges
       and structures (SoundPrint(R), SoundPrint(R) AFO);

    -  Recurring revenue from data analysis and site maintenance for these
       technologies, and from technology licensing.

    -  Premium technical services including inspection, leak detection and
       condition assessment (P-Wave(R), SmartBall(R), Long-Range Robotics).

    -  Specialized engineering services in areas related to asset management,
       primarily in the area of pipeline condition assessment for water and
       wastewater infrastructure (Openaka, Price Brothers UK Ltd, and Jason
       Consultants).

About The Pressure Pipe Inspection Company

PPIC, a privately-held company with headquarters in Mississauga, Ontario, is a recognized provider of large-diameter water and wastewater pipeline condition assessment. PPIC was founded in 1997 to commercialize RFEC/TC, an electromagnetic inspection technology for prestressed concrete pipes developed by David Atherton, Professor of Physics at Queen’s University, Kingston, Ontario. In 2008, PPIC purchased the worldwide rights (excluding the United Kingdom and Ireland) to Sahara(R), a leak detection system for large-diameter pipelines developed by WRc plc.

Forward-Looking Statements

This release contains forward-looking statements. Forward-looking statements, without limitation, may contain the words believes, expects, anticipates, estimates, intends, plans, or similar expressions. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions and Pure’s actual results could differ materially from those anticipated. Forward looking statements are based on the opinions and estimates of Management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In the context of any forward-looking information please refer to risk factors detailed in, as well as other information contained in, Pure’s filings with Securities Regulators (www.sedar.com).

“Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.”

(R) Registered Trademarks, property of Pure Technologies Ltd.

For further information: To find out more about Pure Technologies Ltd. (TSX-V: PUR), visit our website at www.puretechnologiesltd.com; contact James E. Paulson, Chairman or Karen Keebler, Chief Financial Officer at (403) 266-6794; or e-mail to: info@puretechnologiesltd.com

Peoria, Illinois 2 July 2010 – Caterpillar Inc. has acquired all assets of Underground Imaging Technologies, Inc. (UIT) through its majority owned affiliate, Underground Imaging Technologies LLC. UIT is an advanced geophysical services company and technology developer based in Latham, N.Y. The acquisition will give Caterpillar the capability to provide geophysical services, specializing in providing three-dimensional representations of underground utilities and other targets.

“UIT’s geophysical expertise and advanced technologies will add dynamic new subsurface infrastructure capabilities to our Connected Worksite offerings,” said Hans Haefeli, vice president with responsibility for the Caterpillar Advanced Systems Division. “But most important, this service provides detailed information that enables design engineers and contractors to proceed on underground projects with a clearer picture of the subsurface environment, contributing to both project cost savings and increased safety on the worksite.”

“The use of advanced near-surface geophysical tools provides highly accurate three-dimensional images and digital maps of subsurface utilities and unknown objects,” said Mark R. Wallbom, CEO of UIT. “Our portfolio of proprietary software and geophysical means and methods has high value for both design and construction projects. Identifying underground impediments-before design and construction begin-speeds the work, saves money and enhances safety. The technology also has potential applications in road building quality control, site evaluation, environmental surveys, and mapping geologic layers for mining applications.”

In business since 2002, UIT has been instrumental in developing many advancements in three-dimensional mapping by integrating geophysical and geospatial hardware and custom software. UIT is the owner of a number of patents and proprietary geophysical technologies. UIT also has demonstrated expertise in using those geophysical tools, such as their multi-channel 14-antenna ground penetrating radar system called TerraVision II and their time domain electromagnetic induction (TDEMI) system called MetaVision II.

The extensive data from multiple geophysical and geospatial inputs are processed using a suite of UIT’s proprietary software that effectively integrates the acquisition, processing and analysis of these dissimilar datasets. The process is best defined as geomatic engineering, a modern engineering discipline that integrates acquisition, modeling, analysis and management of spatially referenced data that when fused into common information systems, provides a well-defined and accurate representation of the subsurface that is geo-referenced and tied to control points.

All of UIT’s subsurface mapping activities are tied to an extremely accurate global positioning system (GPS) or a robotic total station that provides the required spatial information and has the capability to provide the actual elevation-not just the depth of cover-of all targets. Extensive post processing and interpretation of the developed datasets, acquired from favorable soils, result in a foot-by-foot map with accurate three-dimensional target locations formatted for computer aided design (CAD) or other geographical information system (GIS) compatibility.

Currently, Underground Imaging Technologies LLC is focusing on working with customers in North America, but plans call for offering imaging services in many other parts of the world.

About Caterpillar

For more than 80 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at http://www.cat.com.

About UIT

Underground Imaging Technologies (UIT) originally was formed as a joint venture of Vermeer Manufacturing Company and El Dorado Investment Company, a subsidiary of Pinnacle West Capital Corporation. The objective of the joint venture was to develop geophysical tools used to better locate underground utilities in a wide range of soils and to be able to map the utilities in three dimensions. UIT was founded on the principle that no single geophysical tool would be effective in every environment or for every application. Because of this, UIT has developed new tools to further the art and science of subsurface utility mapping using multi-sensor technologies. For more information about UIT, visit http://www.uit-systems.com.

Press Inquiries:

Sharon Holling
Tel: 309-675-8995
Fax: 309-636-2738
Holling_Sharon_L@cat.com

Amber Santor
Tel: 309-675-4693
Fax: 309-636-2738
Santor_Amber_M@cat.com

- Chris Arsenault, Managing Partner & COO, iNovia Capital

- Bob Scully – PBS Interviewer

- Stephen W. Buchanan, General Partner – Dogwood Equity