DYNAMIC SYSTEMS INC.
Dynamic Systems Inc.
Dynamic Systems Inc. of Poestenkill, NY has been recapitalized by HCI Equity Partners of Washington, DC. Sperry, Mitchell & Company initiated this transaction, assisted in the negotiations, and served as exclusive financial advisor to Dynamic Systems.
Overview
Dynamic Systems Inc. (“DSI” www.gleeble.com) is the leading designer and manufacturer of dynamic thermal-mechanical testing and physical simulation systems for the metallurgy industry worldwide. The company’s highly-engineered systems are designed to heat metal specimens at variable temperatures while simulating, testing and measuring a range of physical performance criteria.
HCI Equity Partners (www.hciequity.com) is a private equity firm investing in middle-market, growth-oriented industrial product companies. HCI Equity Partners provides extensive operating support to its portfolio companies, in partnership with management.
Situation
- DSI’s owners received an unsolicited approach from a large strategic buyer seeking to add the company’s product lines to its portfolio of industrial testing equipment.
- Both owners of DSI were receptive to the offer, but each had different goals. One was interested in selling his 50% stake and retiring. The other wanted to continue running the business but was unsure whether he wanted to work for a large, corporate buyer. In any event, the owners did not know how to evaluate the fairness of the submitted offer.
- After consulting with us for valuation guidance, the owners decided to explore other sale alternatives, while maintaining a dialogue with the original bidder.
Sperry Mitchell Solution
- We provide business owners with a comprehensive review of their sale options. We listen to what each client is seeking to achieve in a sale, consider both their economic and non-economic goals, and generate a universe of buyers that can meet those goals. We understand the strengths and weaknesses of the various buyer types, including strategic buyers, financial buyers, and international buyers. In this instance, one of the two owners had no interest in remaining as part of a large corporate entity. Thus, we suggested the owners consider a financial buyer, which would leave the company and its management team intact. However, the owners were initially concerned that a financial buyer could not meet the price offered by the strategic corporate bidder.
- We develop a tailored strategy for presenting client businesses to buyers. In order to secure a premium valuation, we needed to help potential buyers: a) understand and appreciate the technical capabilities of the company’s products; b) reconcile the fact that most of the company’s revenue is derived from the sales of only a handful of systems per year; and c) deem the company’s recent rapid growth in sales and earnings to be sustainable. Through written materials and conversations with buyers, we sought to describe the products’ capabilities in simple, understandable terms and demonstrate that growth was driven by fundamental operational changes, such as DSI’s newly standardized product line and new network of international dealers. Ultimately, our clients received offers from a number of motivated, qualified financial buyers, resulting in a deal with HCI at a price that was more than twice what the strategic buyer had originally offered.
