Gatan, Inc. (Electron Microscope Product Operations)

Pleasanton, California

has been acquired by

Morgenthaler Ventures

Cleveland, Ohio
with secured financing provided by

Heller Financial

Chicago, Illinois

Capital Alliance Corporation initiated
this transaction and assisted in its closing.

Gatan, Inc. (Electron Microscope Product Operations)

The Selling Company: The electron microscope product operations of Gatan, Inc. manufactures several lines of proprietary, patented products that are used to prepare, hold, or analyze specimens used in electron microscopy. This company is the undisputed worldwide market leader in several of its product areas. This extraordinarily profitable company operates from facilities in California and Pennsylvania, along with wholly-owned subsidiaries in Europe.

Why the Company Was Sold: The company’s two founding shareholders are brothers. One has been pursuing other business interests for the last few years with very little involvement in the day-to-day activities of the company. The other wanted financial liquidity and to focus on product design, rather than continuing to address the day-to-day administrative responsibilities as the company’s CEO.

Capital Alliance’s Performance: Capital Alliance’s technology specialists took the time to understand the complex, state-of-the-art technologies and operations of the selling company so that well matched, technology-oriented acquirers could be targeted. Under time pressure to perform, Capital Alliance generated visits from nine financially qualified acquirers who had the expertise to understand the technology involved. Seven of these acquirers made offers. Capital Alliance provided extensive analytical analysis of each offer, negotiated improvements, and provided significant support during contract negotiations.

Terms of the Transaction: The cash received at the closing by the shareholders exceeded their initial minimum price goal. The former shareholders also received substantial deferred payments and a major minority equity interest in the new entity. Upon completing complementary acquisitions, the plan is to complete a public offering whereby the selling shareholders will be able to obtain a significant amount of additional cash for the shares they own in the new entity. The shareholder/CEO was able to resume full-time product design efforts one year after the closing when a highly qualified CEO was recruited.

The Security Capital Source: Heller Financial provided the most competitive loan program that met the needs of all parties. Heller Financial is a wholly-owned subsidiary of The Fuji Bank, Limited, one of the largest financial institutions in the world. With over 1000 employees in the United States, Heller Financial offers a very wide variety of financial services, involving billions of dollars of loan commitments.

The Acquiring Company: Formed in 1968, Morgenthaler Ventures is one of the leading venture capital firms in the United States, with committed capital in excess of $150 million. Its current portfolio of investments includes over 50 companies, many of which are technology-based. Several senior technical experts of the acquiring company provide support and insight into complementary technologies and business operations.