Chicago — Being part of an acquisition isn't always easy, but it's worth the effort.
That was the message from plastics market veterans Jay Radtke, Al Ridilla and Mark Faber at Plastics News Financial Summit 2017, June 8 in Chicago.
Private equity firm Mason Wells of Milwaukee combined blown film makers Charter Films Inc. and NEX Performance Films Inc. in 2012 to create Charter NEX Films Inc. That firm then acquired cast film maker Bloomer Holdings Inc. of Bloomer, Wis., and soon grew to have annual sales of $400 million.
Mason Wells sold Charter NEX in 2015 to private equity firm Pamplona Capital Management. Pamplona then turned around and sold the business in April to private equity firm Leonard Green & Partners LP of Los Angeles for an eye-popping $1.5 billion.
The first step, Radtke said, was getting Charter together with NEX. "NEX had a diverse customer base, but older equipment," he said. "They operated based on gut feel, with limited metrics and sales focused on filling lines."
NEX also needed new financial reporting and information technology, according to Radtke. It took a big step in acquiring Charter, which he described as NEX's "No. 1 competitor and acquisition target," since the two firms had similar business, culture and products.
The combination soon allowed for significant operating improvements. The combined Charter NEX saw its scrap rate fall from 8.9 percent to 2.2 percent from 2011-14. Its quality returns fell from 0.7 percent to 0.4 percent in the same comparison, while its resin savings increased from $800,000 to $6.1 million.
Al Ridilla has seen similar changes at Parkway Products LLC, the Florence, Ky.-based injection molder where he serves as CEO. In 2006, Parkway management and Oxford Financial Group bought out the Willig family, which had founded the firm.
Parkway then in 2009 bought the automotive injection molding business of Nypro Inc. It followed in 2013 by selling off its own aerospace and defense unit. Private equity firm Capital Partners of Norwalk, Conn., then bought a majority stake in Parkway in 2015.
"We doubled our sales and then sold in two parts," Ridilla said. "That wouldn't have happened under our prior ownership."
He added that it's important when making deals to focus on assimilation after the transaction. "Everyone has to feel from day one they're part of Parkway," Ridilla said.
Ridilla also recommended meeting with numerous partners before agreeing to a deal. "Make sure you have as many dates as you can before you get married," he said.
CM Packaging Group — founded as a maker of metallic bakery containers in Chicago in 1898 — grew by acquiring thermoformers Packaging Direct Inc. and Stone Plastics Inc. in 2005 and 2006. CM itself then was acquired in 2011 by fellow thermoformer D&W Fine Pack LLC.
"There was some fallout at first," said Faber, who spent 24 years at CM, including the final six as president and CEO. "Some owners didn't see things our way, but the acquisitions had a good effect on the company over time."
Faber now is co-owner of Integrated Packaging Films Inc., a film and sheet extruder based in Ayr, Ontario.
The acquisitions of Stone and PDI fueled organization growth at CM and helped CM with "cross-selling and cross-relationships," he added.