Target Information

Alaris Equity Partners Income Trust (the "Trust", TSX: AD.UN) has announced a significant investment totaling $82.1 million across two entities: Berg Demo Holdings, LLC ("Berg") and Professional Electric Contractors of Connecticut, Inc. ("PEC"). The investment in Berg encompasses $21.0 million, with $17.15 million allocated as preferred equity which provides Alaris an initial annualized distribution of $2.40 million, and $3.85 million for a minority common equity stake. The investment in PEC amounts to $61.1 million, partitioned into $37.0 million in debt and preferred equity and $24.1 million in common equity. Notably, Alaris successfully redeemed its investment in Unify Consulting LLC with gross proceeds of $12.3 million.

Berg, founded in 1998 by David Berg and headquartered in Baltimore, MD, is a premier provider of demolition, hazardous materials abatement, and structural razing services in the DC and Maryland region. PEC operates as a full-service electrical contracting firm renowned for its broad capabilities, including commercial installations and large-scale solar projects through its subsidiary, North American Renewables, Inc.

Industry Overview

The demolition and electrical contracting industries have experienced robust growth, driven by increasing construction activities and infrastructure improvements in the United States. The rising demand for sustainable energy solutions has particularly fueled the growth of electrical contractors specializing in renewable energy projects, such as solar installations.

In the Baltimore and DMV metropolitan area, where Berg operates, the construction sector is bolstered by public and private investments in urban redevelopment, driving a continual need for demolition services. The construction industry’s expansion in this metropolitan hub creates a favorable environment for Berg's specialized services, enhancing their market position.

Likewise, PEC benefits from the Greater New England and New York area’s active embrace of green energy initiatives, positioning it well to capture the growing demand for solar energy solutions. The push for energy efficiency and regulatory support from government entities fosters favorable conditions for electrical contractors.

Despite the competitive nature of these industries, both Berg and PEC demonstrate a unique positioning through their established reputations and operational capabilities, which provide a sustainable competitive advantage in their respective markets.

Rationale Behind the Deal

The strategic investments in Berg and PEC align with Alaris’s objective of partnering with established entrepreneurs who exhibit a track record of success and a commitment to organizational growth. Both companies are expected to leverage Alaris’s financial strength and investment acumen to expand and enhance their operational efficiencies through potential acquisitions and organic growth efforts.

Moreover, Alaris's exit from its investment in Unify marks a successful yield with a return of CAD$38.6 million over eight years, substantiating its investment strategy and solidifying its capital base for reinvestment into high-potential businesses like Berg and PEC.

Investor Information

Alaris Equity Partners is a Calgary-based investment trust that focuses primarily on structured equity investments across various private companies. The Trust aims to generate predictable cash distributions and capital appreciation for its unitholders through strategic financial stewardship.

With a disciplined investment approach and an established partnership network, Alaris prioritizes businesses with strong management teams and growth trajectories that can sustain profitability. This investment strategy, combined with its robust capital resources, positions Alaris well to navigate market fluctuations while capitalizing on value opportunities.

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From an investment perspective, Alaris’s strategic partnerships with Berg and PEC are indicative of a calculated move towards sectors with promising growth trajectories. The investments appear sound given both companies' solid market positions and the continuing demand within their respective industries. Berg's legacy in demolition and PEC's innovative approach to electrical contracting provide a robust foundation for sustainable returns.

Moreover, the exit from Unify with a substantial IRR of 20% illustrates Alaris's ability to effectively manage its portfolio, making it an attractive option for investors seeking stable and predictable returns. The precise nature of the investments, structured to include both debt and equity components, enhances investment resilience.

As both companies are poised for growth in their markets, Alaris's investments are likely to contribute favorably to its overall performance. The ongoing trends in health and safety regulations, along with the need for sustainable energy solutions, suggest that these sectors will continue to flourish, potentially yielding significant dividends for Alaris and its partners.

In conclusion, the strategic nature of these investments aligns with Alaris's long-term growth strategy, indicating potential for a favorable ROI while enhancing its market footprint in high-demand sectors.

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