SePRO Corporation is dedicated to discovering and developing sustainable solutions.  Founded in 1994 and based in Carmel, Indiana, SePRO is a research based specialty chemicals company that provides products and services for plant management, plant protection and specialty agriculture.  SePRO’s products and services are used in multiple end markets including aquatic invasive weed management, algae and water quality, turf and landscaping management, ornamental and greenhouse markets, as well as specialty agriculture.  The company acquires, develops, manufactures, and markets value-added products and is the industry-leading provider of application, lab testing and technical support services.  SePRO has partnered with several of the top agriculture chemical companies to develop chemistries for use in SePRO’s key markets.  Central to its product innovation and technical support services is a 410-acre SePRO Research & Technology Campus (SRTC) in Whitakers, NC.

Top-Down Investment Thesis

SePRO operates in the aquatic invasive weed management, algae and water quality, turf, ornamental, and specialty agriculture markets.  According to a market study, the U.S. aquatic herbicide and algae markets are sized at approximately $155 million and $515 million, respectively, and are expected to grow at 8.0%-9.0% and 4.5%-5.0% annually over the next five years.  Market growth is being driven by rising global temperatures, increasing both nutrient runoff in waterways and the severity of drought and flooding.  These conditions provide favorable environments for aquatic plants, increasing the prevalence of invasive weeds and algae blooms.  Invasive weeds and algae have negative impacts on property values, local economies, recreational activities, fish populations and native ecosystems. Customers, particularly state governments and large waterbody management agencies and companies, place a high level of importance on product performance, technical support and application expertise. SePRO is recognized as the market-leader with these capabilities.  Additionally, growing emphasis is being placed on sustainable solutions and reduced-risk profile technologies.  SePRO leads the industry in research and product innovation, advancing the aquatics industry with new, proprietary, and eco-friendly chemistries, such as ProcellaCOR, that meet these demands.

The U.S. market for cotton herbicides is approximately $265 million, with an estimated $80 million spent on pre-emergent herbicides.  Herbicides are critical to cotton growers’ ability to preserve yield, as invasive weeds such as pigweed can infest growing fields and reduce productivity by approximately 30%.  Given growing herbicide resistance issues, cotton agronomists have recommended the complementary use of pre- and post-emergent herbicides.  SePRO’s new, pre-emergent herbicide product, Brake, has proven to be highly effective and long-lasting with a different mode of action than existing herbicides driving adoption as a rescue tool for farmers facing resistance issues.  In addition, SePRO has several biological products in its development pipeline focused on other the specialty agriculture markets for use in both traditional and organic crops with demonstrated activity against viruses, fungi, mildew, foliar bacteria and/or soil-borne pathogens.

The $860 million U.S. turf and ornamental chemicals market is projected to grow at 1.6% annually, with fungicides and plant growth regulators (“PGRs”) outpacing the market growth at 2.5-3.0% annually.  Increased use of PGRs is being driven by golf course superintendents and landscaping companies seeking to reduce manual labor associating with cutting faster growing grass and hedges.  Increased use of fungicides is being driven by resistance issues to older chemistries as well as the introduction of new products for specialty solutions.  End users of this market typically buy through early order, bundled product programs due to a preference for rebates and desire to simplify purchasing.  SePRO has highly efficacious PGRs and has new fungicides in development to add to its portfolio that will create a more robust bundled offering.

Buy and Build Strategy

SePRO’s success over the years has been based on its product innovation, proprietary technology and unique technical expertise and service capabilities.  As a result, SePRO benefits from exceptional longstanding partnerships with its customers, distributors and suppliers.  SePRO is a highly compelling platform for acquisitions due to its industry-leading capabilities, channel relationships and national reach and reputation.  The Company is pursuing strategic acquisition and partnership opportunities in the specialty chemicals and agribusiness industries, including companies and technologies focused on plant protection/management, turf management, water quality, specialty agriculture as well as other environmental and horticulture markets.  Opportunities could include both traditional and bio-rational solutions, including but not limited to herbicides, fungicides, algaecides, insecticides/pesticides, molluscicides, virucides, biological enzymes, as well as PGRs, soil surfactants and agents, fertilizers and other specialty chemicals.

To the extent you are interesting in learning more about SePRO, please contact Patrick O’Keefe at or Matt Halverson at .

Founded in 1997 and based in Pacheco, CA, Biocare Medical (“Biocare”) is an oncology-focused developer of immunohistochemistry (“IHC”) and molecular reagents, as well as the associated instrumentation.  With a product portfolio of patented and licensed products, Biocare offers a comprehensive suite of reagents, equipment, and lab services to clinical laboratories, research organizations, and pharmaceutical manufacturers.  Serving nearly 2,000 customers worldwide with a catalogue of over 2,000 unique product SKUs, customers rely on Biocare’s product quality and consistency for their research and clinical needs.

Top Down Investment Thesis

Excellere’s investment in Biocare is a result of the firm’s disciplined top down investment strategy, driven by several factors including i) a compelling value proposition to medical and research professionals who can better identify cancer with enhanced specificity, ii) attractive industry growth driven by increasing cancer incidence rates and expanding testing and research needs, iii) IHC’s position as the most widely used platform in histopathology and standard of care for cancer diagnoses, and iv) the buy-and-build opportunity within a highly fragmented industry sector that Excellere pursued for approximately five years and established a list of over 100 acquisition candidates and industry relationships.

The reagents industry is large, global and fast growing with several drivers providing attractive tailwinds.  Biocare’s primary end-market is cancer research and detection, one of the most attractive sub-segments within the broader life sciences tools sector.  According to LEK, worldwide cancer incidence is expected to grow 2.4% per annum to nearly 17.1 million new cancer diagnoses in 2020.  Increases in the total number of new cancer diagnoses are driving an expanding number of U.S. biopsy procedures and ultimately growing consumption of reagents.  The worldwide IHC and molecular diagnostics market is expected to grow to $2.4 billion by 2021, reflective of approximately 5% annual growth driven by cancer incidence rate growth, development of new biomarkers, and pricing increase within the currently primary technology for the cancer diagnostic value chain.

Buy and Build Strategy

Consumable life science and diagnostic tools remains a highly fragmented industry with a multitude of organic and acquisition growth opportunities.  Since inception, Biocare has remained focused on providing world class immunohistochemistry and molecular products solely focused on the attractive, growing oncology market with an emphasis on cancer research, diagnostics, and monitoring.  Biocare’s significant historical investments in its research and development capabilities, manufacturing footprint, strong executive team and a global sales force provides the scale required to serve a substantial worldwide customer base.

To the extent you are interested in learning more about Biocare, please contact Ryan Glaws at , Justin Unertl at , or Nick Coleman at to discuss the life science tools sector further.

G2 Integrated Solutions is a provider of asset integrity solutions to midstream and downstream energy companies, offering a suite of services designed to help clients manage risk within their existing transmission and distribution networks, demonstrate regulatory compliance, and extend the useful lives of their infrastructure assets. The Company leverages customers’ internal data and records, its proprietary tools and methodologies, and a deep pool of highly trained professionals to solve complex operating problems for an extensive client base that includes a number of high profile North American pipeline operators and natural gas utilities.

Top Down Investment Thesis

Given the dramatic increase in activity in the domestic energy market, aging midstream and downstream infrastructure, and an increasingly stringent regulatory environment surrounding these assets, Excellere believes that there is an opportunity to establish a vertically integrated integrity management services provider that operates through a national footprint and broad suite of capabilities. Excellere’s investment into G2 Integrated Solutions is driven by a number of dynamics, including (i) the opportunity to deliver G2’s broad suite of advanced technical solutions to a diverse set of clients that are focused upon risk management solutions and regulatory compliance support, and (ii) attractive end market fundamentals, whereby new project build-out is resulting in an expanded installed base for service and an aging infrastructure is positioning high-quality integrity management services providers for future growth.

Increasing global demand, advancements in horizontal drilling and hydraulic fracturing technologies and new discoveries of economically viable basins have contributed to the continued emphasis on unconventional oil and gas production. In order to support this increased activity, energy companies are required to build infrastructure to integrate new producing regions into existing midstream and downstream networks, maintain and support aging infrastructure given increased throughput, and engineer complex solutions such as converting gas pipelines to liquids in order to respond to market conditions. Furthermore, given the increase in energy activity and the number of high profile catastrophic incidents, an increasingly stringent regulatory environment has evolved, which is driving higher compliance standards. As a result, the North American natural gas industry is currently projected to spend an estimated $20.0 billion annually through 2035 to build new infrastructure and maintain existing assets, resulting in substantial future opportunities for integrity management service providers with advanced technical capabilities and broad service offerings.

Buy and Build Strategy

The North American asset integrity market is highly fragmented with numerous independent product and service providers. As such, G2 Integrated Solutions is well-positioned to add complementary capabilities and extend its geographic reach via acquisitions. The fragmentation in this market, coupled with the increased importance of domestically produced oil and natural gas to the North American energy supply, has created an opportunity to build a full-scale integrity management solutions provider to midstream and downstream energy companies. Specific areas of interest within the systems integrity management industry include: (i) complementary high-end infrastructure engineering services, (ii) GIS products and services, (iii) data analytics and management, and (iv) safety services.

To the extent you are interested in learning more about G2 Integrated Solutions or the integrity management industry, please contact David Kessenich at or Brad Cornell at .

IPT is an oil and natural gas engineering services firm specializing in the integration of modern well completion, hydraulic fracture stimulation and reservoir engineering technologies. The Company is comprised of practicing petroleum engineers with extensive operator and service company experience throughout the United States and in select international markets. IPT is considered one of the foremost thought leaders in the hydraulic fracturing industry with over 20 years of experience working in most basins and major shale plays. IPT not only provides highly technical consulting services that significantly influence the economics of a well, but also represent an independent third-party expert at the well site that helps to ensure that all parties are performing their respective duties in a safe and efficient manner.

Top Down Investment Thesis

Recent discoveries of oil and natural gas reserves, increasing global demand and the evolution of horizontal drilling and well completion technologies have spawned a substantial increase in exploration and production activity in the United States. According to the Annual Energy Outlook 2012 as published by the U.S. Energy Information Administration (“AEO12”), U.S. dependence on imported petroleum liquids is projected to decline by more than one million barrels per day by 2020 driven primarily by growth in domestic oil production. In addition, net petroleum imports as a share of total U.S. liquid fuels consumed is projected to drop from 49 percent in 2010 to 36 percent in 2035 as the United States continues to harvest its natural resources in pursuit of energy independence. Technological advances and the increasing commercial consumption of natural gas will also drive increased exploration and production activity. Since 2000, U.S. shale gas production has increased 17-fold, currently comprising approximately 30 percent of the total U.S. production, and is projected to comprise 49% of total U.S. production by 2035 (according to AEO12).

In order to unlock the potential of the oil and natural gas resources trapped in tight formations and shale plays, exploration and production companies have enlisted the services of hydraulic fracturing experts that employ advanced completion and stimulation techniques to optimize the output of their wells. The pressure pumping market, which includes hydraulic fracturing and other stimulation services provided to oil and gas exploration and production companies, is expected to grow from $16.7 billion in 2009 to $51.0 billion in 2012, driven in part by the effectiveness of these services to enhance well production.

Buy and Build Strategy

The oil and natural gas engineering services market is highly fragmented with a limited number of institutional service providers capable of managing national programs for customers. Furthermore, the majority of service providers offer only one solution to customers, rather than providing a fully integrated suite of capabilities that spans the lifecycle of an active well. This fragmentation, coupled with the limited service offerings of most industry participants, has created an opportunity to build an integrated solutions provider with a broad set of complementary capabilities to better serve customers. Specific areas of interest within the oil and natural gas engineering services industry include: (i) complementary high-end capabilities such as seismic processing or well design (ii) technology enabled solutions and software (iii) data collection, management and analytics, and (iv) regulatory compliance.

To the extent you are interested in learning more about IPT, please contact David Kessenich at or Brad Cornell at to further discuss the oil and natural gas services industry.

U.S. Water Services (“USWS” or the “Company”) is one of the largest independent, fully-integrated, industrial / commercial water treatment companies in the U.S., serving a wide range of industrial, commercial and institutional accounts. The Company’s chemicals division offers a comprehensive line of approximately 350 proprietary, branded and blended chemical products and support services. These chemicals improve production efficiency, reduce utility and maintenance costs, protect against contamination/corrosion, enhance compliance regulation and are non-discretionary purchases for customers providing highly predictable and recurring revenue for USWS. The Company’s equipment division offers a complete line of engineered water treatment capital equipment (filtration, softeners, delivery systems, etc.), parts and consumable supplies (filters, membranes, etc.).

Top Down Investment Thesis

The increasing cost of water due to scarcity, quality challenges and environmental policies has driven manufacturers and other water users to employ increasingly sophisticated techniques to treat their water supply for industrial processes and/or discharge. Small and mid-sized businesses often do not have the in-house knowledge to apply more advanced technologies or properly adhere to the evolving regulatory environment. Leading water treatment providers offer customers this expertise on an outsourced basis and can provide the diagnostic support to continuously evaluate the clients’ needs and offer proprietary chemical blends and engineered equipment to meet each customer’s unique requirements.

Buy and Build Strategy

Having completed the recapitalization with Excellere in January of 2011, USWS is actively seeking to acquire and/or partner with other water treatment companies in the United States. Companies serving the food and beverage, utility, microelectronic and other commercial industries would complement USWS current customer base.

To the extent you are interested in learning more about U.S. Water Services, please contact David Kessenich at or Patrick O’Keefe at .

MTS Medication Technologies (“MTS”) is a leading international provider of pharmaceutical adherence packaging solutions focused on the long term care, retail and nutraceutical markets. MTS designs, develops and manufactures proprietary pharmaceutical adherence packaging along with a complete line of highly specialized automated equipment to assist institutional pharmacies and long term care facilities with pharmaceutical dispensing, inventory management, and storage. MTS serves more than 8,000 customers in the United States, Canada, Europe, Australia, and the Middle East.

Top Down Investment Thesis

Pharmaceutical adherence packaging (i) increases patient compliance for their drug regimens; (ii) enables pharmacies to dispense drugs more efficiently/reliably and store/handle drugs properly; (iii) makes compliance easier for patients, who often must consume multiple drugs, multiple times per day to comply with their doctor’s prescribed regimen; (iv) provides physicians, through greater patient adherence, with the comfort that their prescriptions are being followed properly; and (v) reduces healthcare costs through fewer emergency room visits/deaths/hospital admissions related to non-adherence. Estimates indicate 28% of emergency room visits are related to the misuse of drugs; 70% of which are preventable and 24% of which result in hospital admissions. In addition, U.S. healthcare costs related to treating patients due to medication non-adherence is estimated to be $60-$100 billion annually (Healthcare Compliance Packaging Council).

Buy and Build Strategy

Partnering with Excellere to pursue a buy-and-build strategy, MTS is currently looking for acquisition opportunities that would enable the company to add more products and services to its existing customers, as well as increase its reach through new customers and distribution channels both domestically and internationally.

For more information regarding MTS please contact Matt Hicks at or Ryan Glaws at .