Mearthane Products stays on acquisition trail, gets new PE partner

Polyurethane product manufacturer Mearthane Products Corp. kicked off 2023 with its seventh acquisition in five years, while also adding a private equity partner.

MPC announced the acquisition of Precision Elastomers Inc., an Ipswich, Mass.-based manufacturer of custom thermoset polyurethane and silicone components Jan. 3. The purchase of PEI follows the company's strategic acquisitions of Bay City, Mich.-based Snyder Plastics Inc. in May 2022 and Polyurethane Molding Industries of Woonsocket, R.I., in 2020.

From there, Cranston, R.I.-based MPC established a strategic partnership with St. Louis-based private equity firm Compass Group Equity Partners in mid-January. MPC and Compass Group entered into the partnership to move organic and inorganic initiatives forward, including enhanced sales operations and further expansion of product and service offerings via strategic acquisitions.

Alejandro Martinez, director of marketing for MPC, was quick to note that the latest acquisition and strategic partnership were not related or dependent on one another, though Compass Group did participate in the final decision to acquire PEI. The private equity firm is intrinsically tied to financially and strategic decisions made by the Cranston-based manufacturer.

"Conversations with PEI have been going on for much longer than (partnership discussions) with Compass Group," Martinez said.

MPC and PEI long have had a close working relationship. PEI President and Owner Steve Edington and MPC CEO Pete Kaczmarek have built a strong professional relationship that dates back more than a decade, Martinez said. The two companies have shared and referred business opportunities in the past based on differing areas of expertise.

The acquisition of Precision Elastomers offers depth for Mearthane, as it brings expertise in cast silicone molding as well as some unique machining capabilities, Martinez said. PEI also specializes in custom molding polyurethane and silicone components widely used in mission critical applications, serving diverse and growing industries such as semiconductor manufacturing, robotics and medical devices.

"It's a great addition to our family because there is virtually no overlap with customers and specialties," Martinez said. "Any of our [acquisition partners] must have a deep knowledge in the thermoset polyurethane industry, plus be a very good cultural fit for us."

And that's exactly what Mearthane found in PEI.

Kaczmarek added that PEI's unique precision manufacturing processes and molded silicone technology expands MPC's thermoset materials capabilities.

"The PEI portfolio introduces MPC to new customers in high growth applications who will benefit from our expertise and broad technologies," Kaczmarek said.

The industry, in general, is "fragmented," according to Martinez, who notes that many privately owned manufacturers develop niche expertise in specific custom areas. The acquisition of niche companies allows for more organic growth down the line, he said.

All 20-plus Precision Elastomers employees are expected to join MPC, and they will remain working at PEI's former headquarters in Massachusetts. Combined with MPC's current work force, the company will employ roughly 150 professionals.

PEI will operate as a division of MPC, retaining its brand, Martinez said.

"Our first rule with acquisitions is to not change what isn't broken," he said.

Compass Group Equity Partners was founded in 2015 and over the last eight years has a record of success in partnering with and building lower middle-market companies.

The benefit for MPC is that adding Compass Group as part of the ownership will better position the company for its next phase of growth, which likely will include future acquisitions. Compass Group now is a financial and strategic part-owner incentivized to help fuel future growth initiatives, Martinez said.

In announcing the partnership with Compass Group, Kaczmarek said that the vision of MPC's leadership team is to have the broadest set of thermoset polyurethane formulation and processing capabilities in the industry. "Compass shares our passion for this growing market," he said in a statement, adding that the private equity firm will be key during MPC's next phase of its growth and diversification strategy.

Martinez agrees, saying that Compass Group was bullish about MPC's role in the growth of the custom thermoset polyurethane and silicone components market.

The quality of the manufacturer's leadership team and staff was an important consideration in the investment made by Compass Group, according to Director Bobby Bryan.

"We are confident MPC has the right management team and capabilities to capitalize on multiple opportunities for continued expansion in the advanced materials sector," he said.