Private equity firm buys Plastic Components Inc.

MPE Partners has purchased Plastic Components Inc. in Germantown, Wis., from Tom Duffey.

Duffey said he will maintain a “significant financial interest” and remain active in the custom injection molder that he founded in 1989.

The deal was announced March 10. Terms were not disclosed.

Cleveland-based MPE, a private equity firm, is buying a custom molder known for a high level of automation in its main molding plant, and a fully automated, “lights out” operation in another building nearby in the same industrial park.

PCI runs 61 injection molding machines, in clamping forces ranging from 35 to 400 tons — 46 in the main factory and 15 fully automated cells at the lights out plant.

Duffey owned 100 percent of the molder. “I am going to remain as president and CEO through a transition period. I'm going to be a member of the board of directors of PCI and remain in a position with MPE Partners. “And I am maintaining a significant financial interest,” he said.

That means the 60-year-old Duffey is not cashing out and retiring, he said. “As part of the transaction, I'm rolling over a significant portion of the proceeds into the new ownership structure of the company,” he said.

Plastic Components Inc. employs 70. Duffey said the company generated sales of $29.3 million in 2016.

PCI won Plastics News' 2008 Processor of the Year Award, and seven years later picked up the newspaper's Sustained Excellence Award.

Cleveland-based MPE Partners — which also owns dlhBowles, an automotive plastics supplier — targets lower-middle-market companies with transaction values of $25 million to $150 million, and is most active in high-value manufacturing and industrial services. In another plastics-related deal, MPE also recapitalized Polytek Development Corp., a maker of liquid rubber molds and casting plastics, resins and foams.

Stout Risius Ross Inc. served as financial adviser to PCI on the transaction.

The deal does not include the Engineering Resource Center, which PCI started in 2013 in a building next door to the headquarters plant. Tom Duffey's son, Ryan Duffey, is president and owner of that business, which builds prototype molds. The Engineering Resource Center will continue to work closely with PCI, Tom Duffey said.

MPE's website said the private equity firm partners with existing management teams, supporting them as they build their companies. That was important for Duffey.

“What's very exciting about the process is the MPE Partners' offer to acquire PCI was contingent on the retention of the full management team. They weren't interested in buying PCI unless the entire management team remains in place,” he said.

Duffey said he made the decision to look for a buyer at the end of 2015. He told key members of the management team the first day back to work after the holidays, on Jan. 4, 2016, right at 8:30 a.m. “So they were fully involved in the process right from the start,” he said.

Duffey started a manufacturers' representative firm with his father in 1980, shortly after graduating from college. He got exposure to many different varieties of manufacturing operations, including plastics — which stuck in his mind as a promising area.

Duffey got an MBA from Northwestern University, then decided to start a custom molder. Highly automated from the beginning, the company grew steadily over the years, based on large customers near its Wisconsin headquarters.

Many customers moved work to China in the late 1990s, including PCI's biggest customer, small-appliance maker West Bend. So Duffey pivoted and bought a former mold supplier, moving it into the molding plant as a toolroom to do mold maintenance.

PCI beefed up marketing, including hiring a full-time marketing manager, which is an unusual move for a small molder. That generated lots of new customers.

Now PCI has gotten much bigger. Its markets include plumbing, small engines, automotive, filtration, consumer products and controls. And Duffey said he “might not be the right guy to take the company next level.

“I'm absolutely willing to admit that there might be people out there at MPE Partners who are much, much smarter than I am at managing growth into the future,” he said.

PCI's sales have nearly tripled in the nine years since the company won the Processor of the Year Award.

“We've had a pattern of rapid growth over the last four or five years,” Duffey said. “And the forecast for the next year or two looks like we are going to continue to grow at least as fast as we've grown over the last four or five years.”

He was looking for a “partner who could not only bring the financial resources that would be required to support the growth, but also to provide the talent, the leadership and the guidance to help manage that growth.”

Karen Tuleta, a managing partner at MPE Partners, said PCI's management team “is very passionate about their business” and said that “Tom and the management team have built an impressive business over the years, and we are very enthusiastic about the company's future growth opportunities.”

Duffey said keeping the PCI leadership group in place is critical.

“In the management presentation we made to a number of private equity groups, one of the really important considerations in our decision-making process to connect with MPE Partners was the value they saw in the culture of our organization, and the strength of our management team,” he said.