Why Work with Ironwood Capital
We know Manufacturing.
We know manufacturing and we believe niche manufacturing represents an ideal opportunity to partner private capital with proven management teams to achieve excellent outcomes. Our two decades of experience as a mezzanine lender tell that positive story.
The manufacturing industry is comprised of a series of sub-categories, each with its own unique characteristics. Because we understand the industry and many of these sub-categories, we can be quick and flexible in underwriting and structuring transactions that lead to long-term relationships with our portfolio companies.
- The Ironwood Capital team has nearly two decades of investment and mergers and acquisitions experience in manufacturing.
- Our experience offers management teams and business owners a combination of intelligent capital and strategic advisory expertise.
- We invest non-control capital in the form of subordinated debt and preferred stock in amounts ranging from $5 million to $30 million.
- We work with manufacturing business owners and financial sponsors to provide growth financings, full and partial recapitalizations, generational transitions and buyouts.
Benefits Derived from Mezzanine Capital
Mezzanine Capital allows business owners to achieve their objectives, without giving up control. The benefits of mezzanine include:
- Patient Capital: No amortization allows for reinvestment in growth
- Long-term horizon: Typical investment horizon of 5+ years
- Flexible use of proceeds: Including “chips off the table”
- Less dilutive or non-dilutive: Less dilutive than an equity-only solution
- Improved bankability: Banks view institutional junior capital favorably
If your company meets our Niche Manufacturing investment criteria, please contact us:
- REVENUES: $20 million to $250 million
- EBITDA: $3 million to $15 million, with margins of 10% or better
- MANAGEMENT TEAMS: Proven management teams with a significant equity stake
- COMPETITIVE ADVANTAGES: Growing market share with sustainable margins
- CAPITAL STRUCTURE: Adequate liquidity, capitalized for growth
- STABILITY: Three years of positive EBITDA with strong forward visibility
- CASH FLOW DIVERSIFICATION: By customer, product line and channel
Case Study: Niche Manufacturing Company
A venerable Connecticut manufacturing company (“Company A”) had moved from basic manufacturing into the design and manufacture of specialized tools for the industrial, commercial and military markets. As part of a private equity buyout, Ironwood Capital became an investor in the company in early 2014.
During the first 200 days of our investment, Company A made systemic financial, operational and personnel improvements. Enhancements included streamlining reporting, a faster contract closing process, reduction of debt and an improved working capital position. In addition, Company A implemented an ERP system, eliminating two physical inventories and had multiple Kaizen events to improve flow at one of its divisions. The company also implemented succession planning for the retirement of key managers.
In late 2014, when the company approached our firm about additional funding to enable the purchase of a smaller, high quality contract manufacturer (“Company B”) of complementary and custom made products, Ironwood saw it as an opportunity for the company to further penetrate a niche market. We worked with Company A to develop its strategic plan and encouraged Company A’s other lenders to be supportive as well.
Ironwood Capital recognized that the purchase of Company B would:
- expand Company A’s existing product line to increase market share in both overlapping and adjacent niche markets;
- create an opportunity to develop more integrated, higher value-add products than currently manufactured at either business on a stand-alone business;
- move Company A from a niche component company to being the provider of complete systems, increasing the win-rate of the combined company;
create new cross-selling opportunities between existing customers of Company A and Company B;
- streamline the ordering process and reduce overhead for existing customers of both entities by offering a “one-stop shopping” experience; and
- improve revenue outlook due to backlog at Company B that was not subject to contract delays, unlike the situation at Company A.
Ironwood worked with Company A leadership, the equity sponsor and the senior lender to negotiate the purchase of Company B and provided additional capital with terms that allowed the new combined entity to grow without being hindered by debt.
During the successful integration of Company B under parent Company A’s banner, Ironwood maintained its hands-on involvement, working closely with the new CEO to set goals and develop further growth plans.
A Strategic Split
In 2015, parent Company A created two distinct operating subsidiaries. One subsidiary then acquired a complementary fiber optic testing manufacturer, expanding its product suite in a growing market niche and adding testing capabilities to its existing portfolio of hand tools. This purchase also expanded the shared base of telecom end users. Ironwood Capital again provided additional capital to facilitate this acquisition.
Good Planning, Excellent Execution and Patient Capital are Rewarded
Parent Company A continued to execute on its strategic plan and each of its subsidiaries became an attractive acquisition target. The equity sponsor hired an investment banker, who ran a successful sale process in 2018 for one of the subsidiaries.
In summary, over the course of several years the Ironwood Capital team worked closely with the sponsor and management of the parent company to develop a shared vision that would strengthen and grow all divisions of the company. Ironwood Capital provided a consistent voice and financing arm and strategic guidance at each critical juncture. Company A’s revenues grew at an annual compounded growth rate of 22% from Ironwood Capital’s initial investment in 2014 to the successful sale of one of the subsidiaries in 2018.The hand tools subsidiary was not sold and remains a separate Ironwood portfolio company. It continues to grow revenues and EBITDA, showing strength in its niche manufacturing market.
Every Deal Starts With a Conversation. Give Us a Call.
Ironwood Capital’s “patient capital” sets us apart from many other kinds of capital providers and our expertise in niche manufacturing has enabled us to participate as true partners with our portfolio companies.
Ironwood Capital is always interested in opportunities to invest in well-managed, profitable and growing companies. The firm’s expertise can add value and may lead to further growth. If you’d like to learn more about how we can work together, please get in touch