Patty Tascarella, Senior Reporter, Pittsburgh Business Times
Talk about a deal that’s close to home.
One of Pittsburgh’s biggest private equity firms on Wednesday confirmed its most local deal to date.
Tecum Capital Partners has invested in JD Palatine LLC, located in the same building in Wexford.
“If I drilled a hole in my floor, I’d wind up in Chad Killian’s office,” Stephen Gurgovits Jr., Tecum’s managing partner, said.
Killian is founder and CEO of JDP, a provider of background check, employment screening and adjacent services to customers in a variety of industry sectors including health care, youth sports, education and finance. The company, launched in 2009, employs about 80 and has offices in Chicago, Atlanta, New York, San Francisco and Washington, D.C.
Terms were not disclosed but Gurgovits said Tecum’s investment was around the middle of its $4 million to $15 million range. JDP will use the money as growth capital, enabling it to add staff and selectively look at acquisition opportunities.
“There’s plenty of organic growth as they’ve demonstrated,” Gurgovits said. “But you can get there a little quicker if you find the right opportunity. We have the dry powder to accommodate if that makes sense.”
The deal also marks the last new investment in Tecum Capital Partners II LP, the $265 million fund Tecum raised four years ago. A third fund fund is expected to close soon.
Tecum is Pittsburgh’s fourth-largest private equity firm, as ranked by capital under management, which is $750 million. Founded in 2006, it was the region’s first SBIC fund, short for Small Business Investment Company, which means its fund can leverage matching dollars on a two-to-one basis from the U.S. Small Business Administration. The new fund is expected to be its largest to date.
Gurgovits said talks with Killian began even before Tecum moved into the building in early 2017. Tecum had been based a couple miles down the road previously.
“We kept an open dialogue, gave thoughts and opinions and met from time to time and it eventually started to come together,” Gurgovits said. “He’d grown and we’d grown and now was the right time.
”Business services is a familiar sector for Tecum and while JDP’s specific area was new, there were clear advantages.
“There’s a lot of recurring revenue and a customer base that’s growing,” Gurgovits said. “There’s a lot to like. It’s a hot space. If you look at the background checks for employment, for coaching kids’ sports or opportunities in religious areas, it seems like anything you do any more, particularly if it’s supervising children, you need background checks completed and I don’t see that changing any time soon. As a father of a 10-year-old, I’m fully supportive of that.”
The local appeal of the deal went further with more Pittsburgh-based firms or offices involved. First Commonwealth Bank provided senior debt financing. Confluence Advisors provided advisory services to the company in support of the transaction. Accounting firm Clifton Larson Allen provided financial due diligence services. Galanter Tomosovich LLC, Metz Lewis Brodman Must O’Keefe LLC and Clark Hill PLC provided legal services.
“It made all the sense in the world to partner with institutions like Tecum and First Commonwealth,” Killian said in a prepared statement. “I’ve got the capital to pursue new opportunities, a sounding board to help me along the way and the flexibility to continue running my business.”
Along with Gurgovits, Tecum’s deal team included Jack Surma and Austin Montevecchio.