MCM led the acquisition of Zinkan in October 2011 as part of its proactive search for specialty chemicals manufacturers. From 2011 to 2017, the Company navigated unfavorable market dynamics primarily driven by legislative changes governing the coal industry and a glut of inexpensive natural gas, resulting in more than a dozen bankruptcies from its traditional coal customers. Recognizing the need for a long term shift, collectively MCM and management repositioned Zinkan’s core business, transitioning away from coal and commodity markets to focus on high-value water treatment solutions. This strategic shift leveraged the Company’s expertise in chemical formulation, technical problem-solving, and high-touch customer service—offering not only a more resilient business model but also stronger margins to support sustainable growth.

To facilitate the transition, the Company divested several noncore business segments in coal related and other commodity chemicals, freeing up capital to further expand its higher margin water treatment line and service offerings.  The divestitures laid the foundation for the development of the ChemREADY brand as a separate water treatment line devoted to technical commercial and industrial water treatment solutions positioning the company for long term success.

ChemREADY’s expansion was driven primarily through organic growth, leveraging digital marketing initiatives and technology to position itself as a go-to resource for boiler, cooling tower, legionella treatment and AAMI ST-108 compliance. To further enhance its value proposition, management added ultra-concentrated chemicals to its product line, improving the customer experience with easier application and enhanced cost and efficiency.

In addition to organic growth, ChemREADY expanded inorganically through two strategic add-on acquisitions (Gilligan Technology and Waterra Corporation) both funded through internal operations. The acquisitions strengthened the Company’s market presence and built a critical mass of recurring water treatment customers.  Ultimately, these growth initiatives positioned the Company as a premier industrial water treatment solutions provider, creating an attractive platform for future acquisitions and compelling opportunity for potential acquirers.

“I could not be happier for the ChemREADY team. While the first several years were particularly challenging, weathering those storms developed a resilience in the team enabling us to execute our goal of reshaping the business into what it is today,” stated Greg Ott, Senior Operating Partner at MCM Capital.  “I look forward to watching ChemREADY continue to develop into one of the Midwest’s leading industrial and commercial water treatment providers.”

About MCM Capital Partners

Based in Cleveland, OH, MCM Capital is a lower middle market private equity fund focused on acquiring niche manufacturers, value-added distributors and specialty service businesses possessing significant competitive advantages and generating between $1.5-$6 million in EBITDA. MCM is currently investing out of its fourth committed fund and actively seeking additional platform and add-on acquisition opportunities.

AIM Processing, which specializes in highly automated production of small injection molded parts with complex geometries, operates 37 machines 24/7 in the Denver area, with a proven track record in efficiency and quality in custom molding services.  With this advanced operating model, AIM maintains high production yields and near-zero returns on millions of parts shipped each month.

Kelly Hazzard, the retiring president of Technical Molded Products, expressed his satisfaction with the acquisition, “Finding the right strategic partner for our customers was paramount in this decision. I was thoroughly impressed with the efficiency and quality at AIM Processing. Its dedicated customer service team is a real differentiator in the industry, which gave me confidence that our customers would be in excellent hands.”

Jon Gelston, president of AIM Processing, added, “This acquisition aligns perfectly with our technical production capabilities, allowing us to bring our advanced injection molding processes and automation technology to TMP’s customer base. We’re excited about the opportunities this provides and are committed to delivering the highest level of service to our new customers from TMP.”

Greg Ott, senior operating partner with MCM Capital Partners, a manufacturing-focused private equity firm that invested in AIM Processing in 2023, highlighted the strategic importance of the acquisition, “This transaction supports our earlier investment strategy in AIM Processing where we saw the enormous potential to leverage AIM’s operational excellence to accelerate growth. This acquisition is a testament to AIM’s commitment to that strategy and will further strengthen AIM’s leadership in the injection molding industry.”

The integration of Technical Molded Products into AIM Processing is expected to be seamless, with a focus on maintaining the high levels of quality and service that customers of both companies have come to expect.  More than 85% of AIM Processing’s orders, even for custom parts, ship from stock.

About AIM Processing: AIM Processing is one of the leading custom molders in Colorado, operating a state-of-the-art, highly automated facility north of Denver. With 37 machines running 24/7, AIM serves a diverse range of industries with precision and efficiency with a specialization in difficult-to-manufacture small components. Learn more at www.aimprocessing.com.

About MCM Capital Partners: MCM Capital is a private equity firm focused on investing in and growing small to mid-sized companies. With a strong track record of successful investments, MCM Capital partners with management teams to drive operational improvements and achieve sustainable growth. Learn more at www.mcmcapital.com. After recently raising its fourth committed capital fund, MCM aims to continue acquiring differentiated lower middle market manufacturers and distributors serving aerospace, defense, medical device and industrial customers.

MCM acquired RMB in 2010 as part of its direct sourcing effort to acquire thermoplastic manufacturers possessing unique capabilities in processing highly engineered resins. The Company’s deep material, product and process development expertise positioned it to capitalize on lightweighting trends in the commercial and military aerospace industry as OEMs sought to increase fuel efficiency by replacing alloy components with lighter weight composites and plastics. These unique processing capabilities also provided opportunities in the defense, biopharmaceutical, semiconductor and chemical processing markets. 

During our hold period, the RMB team grew its market share in several end markets, most notably commercial aerospace, where its proprietary resin is sole sourced for all rotationally molded aviation HVAC ducting. RMB also entered the biopharmaceutical and semiconductor markets with its innovative high purity containers and won several defense programs utilizing its 3D printing capabilities.  

To facilitate this growth, RMB built out a well-rounded management team, specifically adding several talented financial and business development professionals. The Company also made significant capital investments to expand capabilities including new rotational molding equipment, 3D printing equipment, and building out a cleanroom to service the biopharmaceutical and semiconductor markets.  

“It was very rewarding to be involved with the RMB team and see the company mature from an entrepreneurially managed job shop into a professionally run, strategically focused high value added business ready to capitalize on a number of its growth initiatives.  We wish the team and its new owners continued success,” stated Mark Mansour, Senior Managing Partner at MCM Capital.  

“MCM was extremely supportive of RMB’s growth initiatives, making continuous investments in both the human capital and equipment we needed to achieve our goals. We enjoyed the camaraderie and collaboration with MCM during our partnership and are excited about what’s next for the business.” Said Ryan Lengerich, Chief Operating Officer at RMB. 

MCM Senior Operating Partner Harry Shimp, who led the management of RMB, added, “The sale of RMB Products marked the end of one of MCM Capital’s most interesting investments. Primarily a commercial aerospace company, RMB was successful because it was able to rapidly adapt to the dramatic swings in customer demand through product and market diversification.  The credit for that that belongs to RMB’s management team and their focus on quality, delivery and communication.” 

About MCM Capital Partners 

Based in Cleveland, OH, MCM Capital is a lower middle market private equity fund focused on acquiring niche manufacturers, value-added distributors and specialty service businesses possessing significant competitive advantages and generating between $2-$6 million in EBITDA. MCM is actively seeking additional platform and add-on acquisition opportunities. 

Higher Borrowing Costs and More Discerning Lenders Resulting In Lower Multiples

Rising interest rates translate to a higher cost of capital for both debt financing and equity returns. This translates to a more cautious approach from acquirers and their lenders. In addition to senior debt being pricier, we’ve seen a reduction in the amount of leverage lenders are willing to approve for a given transaction, as evident in reported capital structures. Through June of 2024, private equity manufacturing platform acquisitions consisted of 26% senior debt compared to 33% in 2023, with the difference made up by an increase in more expensive subordinated debt and a significant increase in equity. The increased cost of capital negatively impacts rates of return investors are able to underwrite to, which results in lower valuations. Indeed, since 2022, average EBITDA multiples for lower middle market manufacturing buyouts have reportedly decreased by 7-20 percent.

Unsurprisingly, this resulted in valuation gaps, which gave way to an overall slowdown in the lower middle market. Specific to MCM Capital, which focuses on $1.5-6 million EBITDA companies, we saw an 11 percent decrease in relevant deal flow. In the past six months as the Fed has continued to hold rates, we’ve seen relevant deal flow decline by another 8 percent. Many business owners we speak with also mention uncharacteristically poor performance during the past 12-18 months as their customers aim to keep inventories low due to heightened borrowing costs.

One way to bridge valuation gaps is with creative deal structures based on company performance shortly after a transaction. These structures are most applicable to leveraged recapitalization transactions where the business owner plans to retain a minority portion of the equity in the business and are more common during times of economic uncertainty when it becomes increasingly difficult for buyers and sellers to properly allocate risk within ordinary deal structures. Three of the more common tools for bridging valuation gaps, particularly when a company may either be underperforming in a down market or is on the cusp of landing a significant new program include:

• Contingent Consideration: a contractual provision providing the seller of a business additional compensation if the business achieves certain pre-defined performance thresholds.
• Equity Clawback: gives one party the right to repurchase a certain amount of equity at a predetermined value if certain conditions are met.
• Performance Based Stock Awards: Equity awards typically given to members of the management team provided certain performance criteria are met

Despite increased capital costs and uncertainty causing M&A deal activity to stall, there is still strong demand for quality assets in the lower middle market. At MCM Capital, we acquired two niche manufacturers, Tech NH Inc and AIM Processing in 2023 and will look to continue acquiring niche B2B manufacturers and value-added distribution based businesses possessing sustainable competitive advantages and talented management teams in 2024 and beyond regardless of the interest rate environment.

For further discussion on this topic, please reach out to Chris Hren at 216-514-1848 or chris@mcmcapital.com

AIM Processing is a custom plastic injection molder specializing in small, tight-tolerance parts and are experts in overmolding, insert molding, and metal replacement serving the medical device, industrial, water treatment, government, laboratory and veterinary industries. In addition to its technical molding acumen, the Company is highly focused and adept at employing cutting edge automation to their production processes running 37 presses, 24-hours a day, 7 days a week.

“We have been targeting highly engineered thermoplastic component manufacturers for nearly ten years and AIM, our fourth platform investment in this space, is an ideal fit. We are excited about the opportunity to partner with Jon and the management team from both a business and cultural perspective,” stated Robert Kingsbury, Managing Partner at MCM Capital. “We look forward to augmenting their technical molding and automation capabilities with strategic sales and marketing initiatives to drive outsized growth.”

Jon Gelston, President of AIM, who retained a significant equity share of the Company commented, “It was important to find a partner that recognizes AIM’s leading capabilities and passion for customer service to complement our team and help us grow into all that we are capable of.  We are very fortunate to have found MCM and are excited for the opportunities this represents for our customers and our team.”

“We are excited to welcome AIM to the MCM Capital family. AIM has an outstanding reputation in the marketplace and is recognized as a leader in the production of small, thermoplastic parts utilizing highly engineered resins with demanding tolerances,” said Greg Ott, Senior Operating Partner at MCM Capital. “AIM’s commitment to industry leading automation will allow them to grow more rapidly than the competition. Their technical expertise in this area is what differentiates them as one of the few manufacturers who can achieve this level of operating efficiencies for not only themselves, but their customers as well.”

AIM is the second platform investment in MCM Capital Partners IV, L.P., which held its second close last month.

Plastics-focused investment banking firm MBS Advisors of Florence, MA represented AIM Processing in the transaction.

Calfee, Halter & Griswold LLP served as legal counsel and Key Bank was the senior lender on the transaction.

About MCM Capital Partners

For three decades, MCM has partnered with lower middle market businesses to support and accelerate growth, creating opportunities for business owners and their employees. We drive growth by applying a unique and powerful approach, going far beyond a “deal” mindset to inject extensive market and technology insights, along with proven best practices in operations, finance, and business development.

If you would like more information about this transaction or MCM’s acquisition criteria, please call Chris Hren at 216-514-1848, or email chris@mcmcapital.com.

The transaction provides Tech NH with substantial capital and resources to continue to provide best-in-class services to its existing customers, while increasing business development resources to accelerate its growth. To date, much of Tech’s growth has been by word of mouth and traditional direct sales efforts. In fact, one of Tech’s most reliable sources of new business has historically been engineers at existing customers transitioning to roles at new companies and insisting on utilizing Tech for its injection molding needs, a testament to the Company’s technical expertise and exceptional problem solving capabilities. Partnering with MCM will provide Tech access to proven sales strategy, digital marketing and business development expertise.

MCM Senior Operating Partner, Greg Ott added, “We are excited to welcome Tech NH to the MCM Capital family. Tech has an outstanding reputation in the market and is recognized as a leader in the production of thermoplastic parts utilizing highly engineered resins with geometrically demanding profiles and tight tolerances. Tech NH leading the way in the green energy market and their technical expertise in this area differentiates them as one of the few manufacturers who can address this market’s demanding needs.”

Greg Gardner, President of Tech commented, “It was important to find the right partner to respect and maintain Tech NH’s legacy while also having the professional skillset to compliment our team and help us continue to grow. We are very fortunate to have found MCM and excited to work with them to continue to provide top notch service to our customers and growth opportunities for our Tech team.”

Calfee, Halter & Griswold LLP served as legal counsel and First Commonwealth was the senior lender on the transaction. The opportunity was directly sourced with the assistance of REAG, a boutique Midwest M&A advisory firm. 

Tech is the first platform acquisition MCM Capital Partners IV, L.P.

 1. Does the Private Equity Fund have experience and success in your industry and/or end markets? 

Private equity funds vary significantly in the types of businesses they focus on. While some successful firms are industry agnostic, others target specific industries and end markets. If you are planning to retain significant equity in the business post-transaction, a considerable stake in your financial future will be tied to the private equity partner you choose. Seek out a PE firm with a successful track record in your space.  

A good start for screening potential private equity investors is to explore a firm’s website to identify end market experience through their current and prior holdings, the firm’s stated acquisition criteria, and experience residing with current team members.  

• Are there similarities between their current and former portfolio companies and your business?  
• Do they have prior experience investing in a similar space? What was the outcome?
• Does your business fall within the revenue and/or EBITDA range of companies the firm prioritizes? If so, how long has the firm been focusing on businesses of your size? 
• Does the firm employ operating partners? If so, do you think any of theirs could add value to your team?
• Does the fund demonstrate a firm understanding of your business and the industry’s competitive landscape?   

2. How does the Private Equity Fund interact with its portfolio companies? 

If you anticipate selling a controlling stake in your company, you will have a boss for the first time in a while (possibly ever). Consequently, it is important to understand the firm’s management style and how they interact with their portfolio companies. Ask the firm if they will put you in touch with references in the form of previous owners they have partnered with. If the firm does not make them readily available, this could be a red flag. In this case, consider investigating through LinkedIn and other resources to identify former CEOs and schedule conversations. After connecting with the former CEOs and learning about their experiences working with the firm, assess whether you could envision yourself operating under similar conditions.  

Some private equity funds are more hands-on than others. Additional questions to ask may include:  

• What should a portfolio company expect from a communication and reporting standpoint? You can assume quarterly board meetings, but will there be daily, weekly, or monthly calls?  
• How often will representatives from the firm be at the company?
• What types of issues should be raised to the private equity partner vs. decided by management?  

Make sure the firm’s management style, communication and reporting expectations fit with your organization. While a prospective partner may subject your team to more structured and thorough reporting and accountability requirements, be open to the idea that this may benefit your business through optimization of your internal processes and procedures.  

 3. How does the Private Equity Fund approach value creation at its Portfolio Companies? 

If you retain equity after the transaction, you and your PE partner will share a strong financial interest in increasing your business’s enterprise value over the next 5-7 years. Before selecting a partner, you should understand how the PE firm envisions growing the company and how they support growth within their portfolio.  

Some PE firms have earned a reputation over the years for acquiring companies only to run them on shoestring budgets, reducing labor and overhead to squeeze everything they can to the bottom line before reselling the company for a quick profit. Fortunately, not all firms follow this playbook. Increasing a small to midsize business’s enterprise value typically requires top-line organic growth, which usually necessitates additional labor, equipment, and business development resources. To that end, ask the firm for data on employee headcount at their portfolio companies at acquisition and at exit. Inquire into capital expenditures they have undertaken at their portfolio companies in recent years and key hires they have made to strengthen management teams. This will give you an idea of whether the firm typically supports the type of growth at their portfolio companies that will drive maximum value to your remaining equity share of the business.   

Once you have an idea of whether a PE firm has a history of supporting growth, familiarize yourself with their vision for growing your company by asking some of the following questions:  

• Do they see an opportunity to improve the leadership team? If so, did their model for the transaction budget for supplementing key personnel?  
• If new market penetration is a key cog in their growth strategy, can they cite portfolio companies they have previously helped enter that vertical?  
•  How does the firm approach add-on acquisitions? Some PE firms specialize in buy-and-build type strategies while others are more selective in their add-on requirements. Does their view of inorganic growth align with yours?  

• What is their average hold period? Do you feel it allows for enough time to accomplish the goals you have in mind for this next phase in your company?

4. What is the Fund’s History and Background?

Next, you will want to learn more about the fund itself—its culture, longevity, structure, life cycle, and future plans. Any serious buyer will want to visit the company and spend time with the management team (or at least the business owner) prior to making an offer. During these meetings, gauge whether you could envision yourself and your team working with the private equity group. Do you get the sense their culture and values align with your own? 

Ask the firm’s partners how long they have been working together and how many funds they have raised. Private equity is a competitive industry, with hundreds of funds competing for investors. In fact, most groups do not go on to raise second funds, much less third or fourth funds. A firm’s longevity speaks to its ability to make keen investment decisions, grow its portfolio companies, and generate outsized returns—all things of critical concern for a business owner retaining equity.  

Partnering with a private equity firm is sure to have a transformative effect on a business. Whether that transformation is beneficial or disastrous hinges on whether the company and PE partner are aligned strategically and culturally. Gaining clarity on the topics discussed above will help determine whether a private equity suitor can be a potential long-term growth partner.  

“Over the last 6.5 years we worked closely with PPL’s senior leadership to develop a sustainable growth strategy targeting high value applications which leveraged PPL’s unique technical capabilities.” Stated Mark Mansour, Senior Managing Partner at MCM Capital. “PPL is another example of how MCM can work closely with our portfolio teams to drive positive change.”

MCM acquired PPL in 2015 as part of its direct sourcing effort to acquire manufacturers possessing expertise in processing highly engineered thermoplastic resins. PPL was a prototypical MCM investment, possessing highly differentiated capabilities, serving growing, high-value end markets, but had not yet fully realized its full potential due to historically underinvesting in sales and marketing.

Given the Company’s minimal business development efforts, at the time of acquisition its new program pipeline was underwhelming. To drive qualified prospects to PPL, the MCM team created a strategic marketing program inclusive of actively rewriting the Company’s website and implementing extensive digital marketing programs positioning the company as a solutions provider for potential customers’ most challenging thermoplastic components. Additionally, the Company recruited a VP of Sales and Marketing (position did not previously exist) and subsequently added two full-time sales and marketing professionals. To support the resulting growth, the Company added six engineers, an Operations Manager and a Quality manager.

PPL’s reputation and culture had always centered around outstanding quality and its ability to tackle difficult to manufacture components. We made substantial capital investments to strengthen this competitive advantage including, but not limited to, adding a state-of-the-art metrology lab with 3D CT Scanning capabilities, several fully automated work cells featuring robotic handling and vision inspection systems. A few years into our hold period, PPL doubled the size of its facility, enabling the installation of several specialized work cells, the consolidation of offsite warehousing and a more efficient manufacturing flow.

“From the beginning, MCM partnered with the PPL leadership team and supported our growth efforts. This just wasn’t adding the necessary capital equipment, but more importantly, building out the next generation of problem solvers. This was critical and key in the maturation of the business and to support an aggressive growth plan.” Said Chris Lawson, Chief Operating Officer at PPL. “Their Operating Partners were invested in the development of our team and challenged PPL to ‘think out of our box.’  This shift in philosophy led to a significant increase in both the quality and quantity of new business opportunities, and as importantly, positioned the company to execute on those opportunities.  As critical as they are in selecting businesses to invest in, they had the same emphasis on finding the right partner for PPL to continue our growth and support our staff moving forward.”

Greg Ott, MCM Senior Operating Partner and Chairman of the Board at PPL, added, “It was both personally and professionally rewarding being part of such a talented management group at Performance Plastics. Our collective skillsets and personalities meshed exceptionally well and their execution of our strategic initiatives dramatically elevated PPL’s market presence as well as benefited its existing customers.”

About MCM Capital Partners

Based in Cleveland, OH, MCM Capital is a lower middle market private equity fund focused on acquiring niche manufacturers, value-added distributors and specialty service businesses possessing significant competitive advantages and generating between $2-$8 million in EBITDA. MCM is actively seeking additional platform and add-on acquisition opportunities.

“TGC experienced tremendous growth over the past five years, and it has been our privilege to work with such an exceptional team.”  stated Bobby Kingsbury, Managing Director at MCM Capital.  “The business has truly transformed through a dedicated investment in people, facilities, processes and systems. Kaulig Capital is inheriting a great business with even better people.”

MCM acquired TGC in 2016 as part of its direct sourcing effort to acquire businesses positively affected by the trends in the home renovation and remodel market.  At the time of our investment, Torsion Group Corp was a fragmented family of companies, each operating independently, but boasted best in class fulfillment, differentiated products and served a fragmented and growing market.  MCM partnered with the incumbent CEO and minority shareholder Marc Calcaterra to support a common strategic vision and accelerate growth.  In concert with MCM, Mr. Calcaterra built out an exceptional management team, and the outstanding results of the past five years have been a product of numerous decisions, actions and efforts by Marc and his team.

During MCM’s ownership TGC upgraded and expanded its manufacturing footprint three times, from 5,000 sq. ft. to 60,000 sq. ft., to accommodate its vertical integration strategy and moved its headquarters into a modern 70,000 sq. ft. distribution center to strengthen its already best-in-class lead time and fulfillment. Additionally, the Company added rubber extrusion, injection molding, thermoforming and robotic automation to round out its manufacturing capabilities.

Finally, MCM directly sourced the add-on acquisition of North Shore Commercial Door (“NSCD”), an online retailer of garage door parts and accessories, after identifying the DIY e-commerce market as a strategic growth opportunity. The acquisition provided a new sales channel, significant cross-selling opportunities and allowed the Company to leverage North Shore’s marketing expertise across its OEM, aftermarket and dealer channels.

“The TGC team executed the strategic plan flawlessly, greatly expanding its manufacturing capabilities through a series of facilities and systems integrations while improving their already best-in-class lead time and fulfillment to its customer base.” said MCM Senior Operating Partner Greg Ott and Chairman of the Board at TGC.

Marc Calcaterra, CEO of TGC, added, “It’s been an amazing five years.  We exceeded our financial goals, but more importantly transformed the business into something we can all be proud of.  Through a collective effort, we’ve made significant progress in professionalizing the business and setting it up for continued success.”

Calfee Halter & Griswold served as counsel and Hennepin Partners served as the investment banker to TGC and MCM Capital. Chief Financial Officer Kevin Hayes was also a key member of MCM’s investment team.