American Reprographics Company (NYSE: ARP) was already the nation’s largest and fastest growing provider of outsourced reprographics when the company came to CHS’ attention. In the three years prior to our investment, ARC had completed approximately 40 acquisitions and invested heavily in digital technologies to become the preferred national provider of business-to-business document management, document distribution and logistics and print-on-demand services.

Like other CHS investments, ARC offered an opportunity to consolidate a highly fragmented and growing industry. We anticipated that ARC’s development of a national footprint with regional expertise would provide significant purchasing power, the ability to invest in industry leading technologies and the resources to service large, national customers. ARC was a recapitalization transaction wherein CHS acquired a 50% interest alongside a proven management team. CHS entered this arrangement carefully, negotiating detailed governance provisions with springing control for CHS in the event that ARC underperformed.

CHS’ role with ARC was to coach management through its transformation from an entrepreneurially run business into a public company. Working with the management team, we assembled a Board of Directors with extensive public company experience and implemented formal budgeting, tracking and reporting systems across the company’s 177 reprographics service centers. We also implemented other public company disciplines including an audit committee and an internal audit function. In addition, we helped ARC negotiate and close nearly 53 additional acquisitions, including the acquisition of ARC’s then largest competitor on two separate occasions, and refinanced or amended ARC’s credit facilities on multiple occasions to optimize ARC’s financing structure and facilitate its acquisition strategy.

We also supported management’s investment in PlanWell™, a proprietary suite of internet-based technologies which create a seamless capability to document, store, manipulate, retrieve and print construction documentation. ARC’s goal was to promote PlanWell™ to become the industry standard for digital document management and online procurement of reprographics services.

In February 2005, these efforts resulted in a successful initial public offering of ARC’s common stock. Goldman Sachs and JPMorgan co-led the IPO. The IPO resulted in a realized return of 2.8x CHS’ invested capital including cash received at the offering and the value of retained shares at the IPO price. ARC was among the best performing initial public offerings of 2005. By year-end, ARC common stock appreciated 95% from its offering price.

In March 2007, CHS sold all of its common stock in ARC. ARC successfully executed a secondary offering co-led by JPMorgan and Goldman Sachs. The investment realized an IRR of 32.2% and a cash-on-cash return of 5.3x Fund IV’s original investment through IPO and secondary offerings.