Meritus Ventures Announces First Arkansas Investment

Thursday February 19, 2009
Meritus Ventures announced today the closing of an investment in Arkansas Automatic Sprinklers, Inc. (AASI) of Cabot, Arkansas. AASI is a fire protection sprinkler company founded in 1984 that designs, manufactures, installs, maintains, and inspects fire protection installations principally in Arkansas.

Meritus Ventures announced today the closing of an investment in Arkansas Automatic Sprinklers, Inc. (AASI) of Cabot, Arkansas.  AASI is a fire protection sprinkler company founded in 1984 that designs, manufactures, installs, maintains, and inspects fire protection installations principally in Arkansas.  The Company provides its services to commercial, industrial, institutional and residential customers. In addition to Arkansas, the company is licensed in Tennessee, Mississippi, Louisiana, Texas, Oklahoma, Kansas, and Missouri.

Meritus Ventures co-invested in the transaction with three other venture funds; Diamond State Ventures (Little Rock, AR), which led the round, Kansas Venture Capital (Leawood, KS), and Midstates Capital (Overland Park, KS).  Collectively, the funds provided a combination of debt and equity to acquire AASI and supply growth capital for the business.  Bank of America was the senior lender in the transaction, which closed on January 22, 2009.

"We've looked at a number of prospective investments in Arkansas," said Grady Vanderhoofven of Meritus Ventures.  We were excited to find this outstanding company in rural, central Arkansas.  AASI has a history of success, a strong management team, hard-working employees, and tremendous potential for additional growth and increasing profitability.  We are also delighted to invest as part of a syndicate of exceptional venture funds, led by Diamond State Ventures."

Vanderhoofven concluded, "It's important to mention that we have been looking for investment opportunities in Arkansas specifically because we received an investment from the Arkansas Institutional Fund.  The State of Arkansas, through the Arkansas Institutional Fund, has done an effective job of attracting institutional investors to the state.  We aren't the only venture fund looking for opportunities in Arkansas, but I believe we may be the first AIF investee fund from outside the state to make an investment in Arkansas.  We will continue to look for additional investment opportunities in Arkansas."

"Diamond State Ventures is proud to add Arkansas Automatic Sprinklers to our portfolio and is very excited that the out-of-state co-investors have contributed their time and capital to an Arkansas-based company that will continue to grow, employ Arkansans, and benefit the state for the foreseeable future," added Larry Carter, Managing Director of Diamond State Ventures.

The U.S. fire and life safety services industry generates an estimated $12 billion in annual revenue, including $7 billion in design, fabrication and installation, $3 billion in repair, service, and inspection work, and $2 billion in alarm and detection systems installation.  The fire sprinkler industry has experienced significant growth in recent history.  The number of sprinkler heads installed annually increased from 14 million in 1983 to approximately 50 million heads in 2006.  In recognition of the proven effectiveness of fire and life safety systems, an extremely favorable legislative environment is playing a key role in the growth of the fire sprinkler industry.  Frequent high profile fires at bars and nightclubs, nursing homes, high-rise buildings, and on college campuses are fueling new debate about further changes in building code requirements.  Unlike discretionary consumer spending for lifestyle products, fire and life safety protection systems are essential components of new construction and existing buildings, and as such are less affected by economic slowdowns.  "Building on the foundation of this investment and the history of this company, AASI is well positioned for future growth and continuing strong relationships with our customers," said Tommy Clements, Chief Executive Officer of Arkansas Automatic Sprinklers.

About Meritus Ventures (http://www.meritusventures.com/

Meritus Ventures, L.P. is currently the only Rural Business Investment Company (RBIC) in the United States.  The $36.5M venture capital fund invests to realize attractive returns for the fund's investors while creating wealth and jobs in rural areas of central and southern Appalachia and Arkansas.  In addition to providing equity investment, the fund may provide operational assistance to its portfolio companies. For information about Rural Business Investment Companies:  www.sba.gov/aboutsba/sbaprograms/inv/inv_new_rural_business_program.html

About Diamond State Ventures (http://www.diamondstateventures.com/)

Diamond State Ventures is a private equity and venture capital firm with $125 million under management in two funds. DSV invests in small and lower middle market companies located in Arkansas and across the Midwest and Southeast United States.

About Arkansas Institutional Fund (http://www.arkansasinstitutionalfund.com/)

The Arkansas Institutional Fund (AIF) works to build the Arkansas economy by increasing access to venture capital for innovative Arkansas businesses. Established in 2005, the AIF program is expected to result in over $420 million of equity, near equity, and debt capital for Arkansas businesses through its first and second rounds of investment.  AIF is managed by Cimarron Capital Partners, LLC.

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