From time to time we like to bring you a real life case study that allows business owners to see how professional buyers operate. I learned recently that Wynnchurch Capital, a leading middle-market equity firm located in Chicago, had formed a new portfolio company (a.k.a. platform company) designed to invest in companies in a designated industry. So I thought I would provide you with some insight into how this type of equity firm plans to operate this entity.
This is how the press release regarding the new formation described the portfolio company’s focus:
Wynnchurch Capital, a $2.3 billion middle market private equity firm, today announced the formation of Wynnchurch Industries, LLC, a new platform company which has been established to invest in industrial materials companies.
John Hatherly, President and Managing Partner of Wynnchurch, said, "It is our desire to create a vehicle to deploy capital into high quality materials companies.”
In addition to the newly formed Wynnchurch Industries, the equity firm has 19 other portfolio companies that it has invested in ranging from Burtek Enterprises, a market leader in the design, production, testing, and integration of complex systems and applications for mobile military ground vehicles, radar platforms and other defense systems, to Vista Pro Automotive, a leading designer, manufacturer, and distributor of non-discretionary aftermarket automotive replacement parts.
The common theme across nearly all of its 20 platform companies is this: “The team will continue to pursue growth in existing and new platforms, as well as through new product lines and add-on acquisitions.”
This is how the private equity firm describes the growth strategy:
Wynnchurch Industries will deploy a "buy, grow, and hold" strategy focused on material manufacturers that serve industrial markets. Target business traits include niche market leadership, proprietary competitive advantages, strong barriers to entry, stable core cash flows, and high margins.
The key point to both of these descriptions can be found in the phrases “add-on acquisitions” and “buy, grow, and hold.”
Far too few entrepreneurs have a functioning knowledge of how middle-market equity firms like Wynnchurch effectively operate. Unfortunately, because the business press tends to focus on the billion-dollar transactions that often do not include a grow-and-hold strategy, business owners exclude equity firms when they begin to consider buyers or investors for their businesses. You see, folks running equity firms like Wynnchurch (and there are hundreds of them out there) know that they can generate the greatest return for the limited partners by successfully building up and adding on to a platform business. They do this all the time and are quite successful in doing so.
This is what Wynnchurch brings to the table for companies it partners with:
In addition to our proven track record, letting company management retain control when possible, flexible communication style, responsiveness and genuine concern about the companies we partner with, Wynnchurch Capital offers business owners and investors the tools and support to achieve their operational and financial objectives:
The important thing to consider as you look at this list is the reality that equity firms in the middle-market truly seek out win-win scenarios where existing management is retained and investment in the form of capital, people, processes, and connections are made in order to help the newly acquired firm achieve goals that without the involvement of the equity firm would have been nearly impossible.
You will hear each of these fellows say essentially this: At the outset of their engagement with us at Generational Equity, the idea of a sale to an equity firm was a novel idea. But it turned out to be the best option for them, their company, and their future.
So when you hear about a firm like Wynnchurch creating a new platform business with the stated goal of “buying and building,” recognize the opportunity you may have if your business is a match for what they are planning to invest in.
That, of course, is the key: Finding the synergistic fit that works both for your business and the equity firm. Generational Equity dealmakers have been making that connection for years (for some of our older folks, decades).
Carl Doerksen is the Director of Corporate Development at Generational Equity, part of the Generational Group.
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
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