We have discussed how private equity (PE) firms operate throughout the years, pointing out that the reputation created by the business media is more heavily weighted by the operations of firms that specialize in billion-dollar, mega deals rather than those that focus on companies in the lower middle-market size range. Firms that work in the latter arena have a “buy and build” strategy rather than the “buy and break up” philosophy that gets all the bad press.
I always keep my eyes open for real world examples of lower middle-market equity firms in operation, so the title of this press release caught my attention:
And here is the information about the transaction:
Pfingsten Partners, L.L.C. (Pfingsten) announces its portfolio company, Burton Saw and Supply Holdings, L.L.C. (Burton Saw), a manufacturer and distributor of consumable products and equipment to saw mills and wood product manufacturers, has acquired Global Tooling and Supply, L.L.C. (Global Tooling). Global Tooling, based in Eugene, Oregon, is a distributor of cutting tools, knives and associated products primarily for secondary wood product manufacturers in North America. The company sells a broad product portfolio of approximately 2,000 SKUs to an active customer base of over 800 customers.
"Global Tooling has supplied Burton Saw for the past 20 years and we are aligned with Burton Saw's culture, vision and values," said Global Tooling's owner Eric Allen. "This combination is a logical fit and we are very excited about the future." As part of the transaction, Eric and Patty Allen will become shareholders in Burton Saw.
"Global Tooling's diverse business model, impressive growth track record, outstanding customer service and strong cross-selling potential made the companyan ideal addition to the Burton Saw platform," said Craig Tompkins, CEO of Burton Saw. "The partnership also facilitates a strong entrée into the secondary wood products market for our organization."
This is Burton Saw's second strategic acquisition since Pfingsten became the majority shareholder in December 2014. The transaction is part of Pfingsten’ s strategy to CREATE the leading supplier of consumable products and equipment to North American wood product manufacturers.
I have taken the liberty of bolding several key segments of this release to emphasize salient points for business owners reading this article.
First is this: PE firms like Pfingsten make initial investments in an industry they believe they can consolidate and by doing so, create a solid return on investment for their investors. These initial investments are called “platform” or “portfolio” companies. After the initial investment is made, they then research the industry, get to know the portfolio company, invest in its growth, and look for logical “add on” investment opportunities.
This is exactly the scenario outlined above. Burton Saw was Pfingsten’s initial foray into the “consumable products and equipment for the wood products industry” in 2014. In two years they have made two add-on acquisitions to the platform company, Global Tooling being the second.
What is interesting to note is that Global Tooling is actually a supplier to Burton Saw and has been for several years. So this is a “down-stream” logical fit (read synergistic fit) that nicely meets Pfingsten’s goal of CREATING a leading supplier in this industry.
I have capitalized and bolded the words CREATE and CREATING twice because it really is important for business owners to realize that this is what private equity firms like Pfingsten focus on: building businesses.
Far too many business owners that we meet at our exit planning conferences have a dim view of equity firms. Based on what they read and hear, many fear that the legacy they have built in their businesses will be negatively impacted. They also often worry that the long-term employees, the loyal folks that have been with them for years, will most likely be affected by back office and operational consolidation.
Although these things do happen, more often than not, if you create a partnership with a middle-market equity firm like Pfingsten, you will actually see your legacy grow and your employees be given tremendous opportunities to do so as well. This is how Pfingsten describes their focus:
Pfingsten is an operationally focused private equity firm formed in 1989. From its headquarters in Chicago, IL, and representative offices in ChangAn, China, Chennai, India and New Delhi, India, the firm builds better businesses throughoperational improvements, professional management practices, global capabilities and profitable business growth rather than financial engineering. Since completing its first investment in 1991, Pfingsten has raised four investment funds with total commitments of approximately $1.0 billion and has acquired 110manufacturing, distribution and business services companies.
Again, key points of emphasis: First they are “operationally focused” and are dedicated to “building better businesses.” They do this not by tearing their investments apart and consolidating back office operations; rather, they invest, invest and invest in their holdings and look for very synergistic fits to add on to them. Again, Global Tooling is a perfect example of this in action.
Of course this is just one PE firm focusing on a specific industry. However, trust me, of the thousands of PE firms out there looking for synergistic fits right now, chances are good there is one operating in your industry as well. You may not even be aware of it because, as in this case, Pfingsten made the acquisition via its portfolio company so other folks in that industry may be under the assumption that Burton Saw is operating independently. As we have seen, nothing could be further from the truth. Having deep pockets and resources behind you can be very beneficial. Don’t just take my word for it, listen to a few Generational Equity clients who we have helped create similar partnerships for:
A common theme you hear throughout these video clips is this: My company is now poised for tremendous growth BECAUSE of our new partner, AND my employees now have even more opportunities available to them.
Whether your company is a good fit for an equity firm is an important issue to address. Time and space do not allow me to do so in detail; you need to hire a professional M&A advisor to help you make that decision. The firm you hire, if they have closed deals with a variety of buyers, will talk to you about your business goals, personal needs, and financial objectives in order to determine who the optimal buyer would be AND, just as importantly, what the appropriate deal structure will be to meet your personal and financial goals. These are conversations that are vital for you to have.
Generational Equity is here to help. We have closed dozens and dozens of transactions for our clients with a full range of buyer types. If you are interested in learning more about buyers for your business, reach out to us and one of our senior business advisors will walk you through your options and help you begin the process.
Keep in mind that odds are good that there are one (or many) firms like Pfingsten active in your industry.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2016 Generational Equity, LLC. All Rights Reserved.
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
Generational Capital Markets, Inc.’s affiliates are all part of one corporate family, they work with one another and may work together to provide services to you. The sharing of your information among affiliates enables Generational Capital Markets to serve you more efficiently and makes it more convenient for you to do business with Generational Group. Generational Capital Markets is permitted by law to share information with its affiliates. All of our affiliates follow similar privacy policies.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Generational Capital Markets, Inc. ("GCM"), member FINRA/SIPC, is wholly owned by Generational Capital, LLC ("GC"). Both GCM and GC are affiliated with Generational Equity, LLC; and all part of the Generational Group of companies. This website is solely for general informational purposes and is not guaranteed by us to be accurate and complete statements of fact and should not be relied on as such. Opinions in this website constitute the current judgment of the author as of the date and its last update. The content of this website does not necessarily reflect the opinions of GCM, and is subject to change without notice, and GCM is not under any obligation to update or keep current any information contained herein. This website does not constitute any personal recommendations and does not take into account the specific investment objectives, financial situation or particular needs of the reader. The information contained in this website should not be construed as an offer, or a solicitation of an offer, to buy or sell any securities or other financial investments. The information presented should not and cannot be viewed as an indicator of future performance. To the extent permitted by law, GCM does not accept any liability arising from the use or retransmission of the information in this website.
Furthermore, all information contained within this website is the property of Generational Group.
Honored to win Investment Banking Firm of the Year 3 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.