Investment Activity Presents Industry Growth Opportunity

We've all witnessed the mergers and acquisitions activity within the moldmaking industry over the past few years. I've had conversations with a number of people involved in two recent acquisitions highlighting that these transactions better position businesses to serve a customer base that continues to focus on long-term growth.

For example, these investment firms infuse the business with capital to improve employee benefits, introduce new products and enhance manufacturing capabilities to provide enhanced solutions for customers. Plus, this consolidation by firms with operational resources and financial backing can help the moldmaking industry gain a bigger voice when it comes to challenging or fighting for specific government policies. That sounds like some growth potential to me.

Two recent acquisitions involve MoldMaking Technology's 2019 Leadtime Leader Winner X-Cell Tool and Mold of Fairview, Pennsylvania, and Custom Mold & Design of Forest Lake, Minnesota, whose technology and culture we've covered quite a bit throughout the past few years.

The velocity of growth at both X-Cell Tool & Mold and Custom Mold & Design, Teamvantage and Paradigme Engineering is changing.

 

Focus on Efficiency and Technology

It’s no surprise these days that mold builders known for their expertise in designing and building high-precision medical molds are at the top of the list for many acquisition firms. Let's face it: COVID-19 put the importance of these niche manufacturers in the spotlight.

X-Cell was acquired by SyBridge Technologies (Southfield, Michigan), and Custom Mold (along with sister companies Teamvantage and Paradigme Engineering) were acquired by Graham Partners (Newton Square, Pennsylvania).

Both businesses are in the early stages of two different acquisitions with original ownership still involved at both shops. However, they each still have insight and advice to share.

“Part of my long-term exit plan was to set the business up with good people in place to manage the operation, so I don't have to be there all the time. And that is exactly where X-Cell stood as interested investors inquired about the sale of the business,” X-Cell President Ron Novel says. SyBridge CEO Tony Nardone even noted that Ron's confidence in his team running the company while he was away was an attractive business aspect.

Often, when acquiring a business, the firm is also acquiring a hands-on owner, which can complicate matters as the acquisition moves forward and requires any change, according to Novel. “Right now, I'm on for six months to see how it goes. In these deals, you're selling the quality of your customers and employees anyway,” Novel says.

Sybridge is focused on the automotive market, mostly with the acquisition of Concours Technologies in 2019, so X-Cell is its flagship medical mold builder. The strategy is to have more medical mold builders, more tool shops and mold repair shops across the country.

“I have to say that being MoldMaking Technology’s 2019 Leadtime Leader Award Winner helped tremendously with finding a buyer. The coverage gave us widespread exposure and showcased our facilities and capabilities,” Novel says. “Marketing is key.”

Right now, Sybridge is focused on getting X-Cell as efficient as it can be, and that means technology investment. For example, another five-axis machine with automation and a cleanroom are on the way. “They are taking us to a different level of precision,” Novel says. The firm signed a 10-year lease.  

 

Operational Approach to Growth

Over at Custom Mold & Design, Owner Ray Newkirk decided to put something more formally together as he moved towards the end of his career. “Ray wanted to put the company and the employees in the best possible hands,” Tom Caron, vice president of Sales, Teamvantage, Custom Mold & Design and Paradigme Engineering says.

This sale started back in 2019 at the MD&M show in Anaheim, California. Newkirk and his partners started thinking about a plan and instantly had a group of interested suitors. They interviewed Graham Partners first, and liked what they saw and heard.

Caron explains that Graham Partners provides behind-the-scenes, hands-on assistance to help companies grow—providing resources, strategic direction and financial backing. In addition to providing financial support, Graham Partners seeks to accelerate the growth of the companies it acquires through its activist, operational approach. They build for the long haul, so when they ultimately sell the platform to another growth-oriented owner, they're selling value to the next investor who wants to buy that company. And, they're rewarding their investors for their money and patience during that timeframe.

“We believe they are very different from most investment firms. It's all about growth and building healthy, safer companies that will be around for a while—for example, Medbio, which is another Graham Partners portfolio company. Before our deal, we spoke with the father and son owners to get their insight. Medbio had a similar pre-acquisition family ownership dynamic, and they have enjoyed the partnership while experiencing significant growth,” Caron says.

With much bigger backers, they can now make decisions faster, speeding up growth, which in the end will make the moldmaking industry stronger.

Alongside Graham Partners, Caron and the management team of Teamvantage, Custom Mold & Design and Paradigme Engineering called key customers in advance to inform them of the sale. “We let them know that this is going to help accelerate our customer value proposition and make us an even better supplier to them,” Caron says.

The acquisition has been seamless so far as they work through onboarding with the Graham Partners team to get aligned, but Caron notes that COVID-19 complicated their employee announcement. 

“We set up a few conference rooms and scheduled meetings over a two-day process between the three companies and explained what was happening. We gave everybody in the company a bonus for years of service as a thank you too,” Caron says. A week later, Custom, Teamvantage and Paradigme had an all-employee meeting to introduce the team to the new managing partner via video—emphasizing that this is a partnership.

Caron notes that it'll be ‘business as usual’ except for a ramp-up of technology investment and expansion plans already underway. “We're going to build a very large cleanroom, move some of our decorating into the mezzanine in our building and then expand our silicone molding,” Caron says. This acquisition sped up their planned growth, including hiring more salespeople, customer service personnel and more support staff throughout the organization and expanding geographically.

One thing that was made very clear was that Graham Partners wants everything automated. They don't want people mining data and running spreadsheets. So their access to data mining metrics is vital. Graham Partners owns several companies that use IQMS, which will help to fast track the implementation process at Custom, Teamvantage and Paradigme. “With this acquisition, we now have depth in so many areas that you can't have in a private company,” Caron says.

The velocity of growth at both X-Cell Tool & Mold and Custom Mold & Design, Teamvantage and Paradigme Engineering is changing. With much bigger backers, they can now make decisions faster, speeding up growth, which in the end will make the moldmaking industry stronger.