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Summary

In December 2007, The Gores Group acquired 100% of Tyco Electronics’ Power Systems which comprised two entities: Lineage Power and Vincotech. Through a complex carve-out process that involved 43 locations around the world, Gores created two standalone businesses and ultimately improved EBITDA by $84 million.

Background

Over the course of many years, The Gores Business Development group developed a close relationship with the M&A team within Tyco Electronics, a leading supplier of power and data related products and services. Gores identified a number of underperforming Tyco divisions, including its power division, Lineage/Vincotech, which Tyco was motivated to sell quickly. Lineage, a U.S.-based provider of power supply products and services, had historically been hampered by an uncompetitive cost structure that resulted in substantial losses over time. However Vincotech, a provider of power modules based in Germany, was growing and profitable and could potentially be spun out.

Transaction Summary

Months before Tyco began a formal sales process, Gores approached them about acquiring their power division. Tyco decided to sell and engaged an investment bank with whom Gores also had a close relationship to handle the sale. Gores and two other parties were invited to bid. Thanks to Gores' early identification of the opportunity, its existing relationship with Tyco, and its ability to complete the transaction quickly, Gores was able to take the lead and provide closing certainty. Gores successfully acquired the division at a competitive price from Tyco in December 2007.

Transformation Process

Recognizing that they faced different challenges, Gores’ first step was to separate Lineage Power and Vincotech into two distinct companies. At Lineage, Gores and the management team undertook operating initiatives including eliminating $60 million in cost, moving global sourcing to Asia, implementing LEAN manufacturing, launching a new go-to-market strategy, and harvesting balance sheet assets. In November 2008, Lineage acquired Cherokee International in an effort to broaden its product offerings and expand its global footprint, resulting in $15 million in synergies. Subsequently, in February 2010, Lineage completed an additional tuck-in, PECO II, resulting in $8 million in synergies. Separately, Gores grew Vincotech as a stand-alone business by strategically repositioning its focus to small and medium-sized enterprise customers in the industrial drives and solar power market. As a result of executing on key operational improvements and strategic M&A, Lineage and Vincotech experienced improved gross margins and a significant turnaround in EBITDA throughout Gores’ ownership.

Gores successfully exited Vincotech in December 2010 in a sale to Mitsubishi and sold Lineage Power to General Electric in March 2011. Lineage Power, formerly suffering from an uncompetitive cost structure and other operational deficiencies, now stands as an independent extension of GE, supplying the world with intelligent power conversion solutions.