Preferred Compounding Corp.
Preferred Compounding Corp.
Preferred Compounding Corp. of Barberton, OH, a portfolio company of The Watermill Group of Lexington, MA, has been acquired by Wingate Partners of Dallas, TX. Sperry, Mitchell & Company initiated this transaction, assisted in the negotiations, and served as exclusive financial advisor to Preferred Compounding Corp.
Overview
Preferred Compounding Corp. (“Preferred” preferredperforms.com) is a leading provider of highly-engineered, high-performance elastomeric compounds. Founded in 1973, the Company provides turn-key compounding services to rubber component manufacturers in a diverse range of end markets, including construction, consumer, energy, infrastructure, medical and transportation. Watermill Group (www.watermill.com) is a private investment group which acquires North American-based middle-market companies, primarily focusing on the manufacturing, distribution and service industries.
Wingate Partners (www.wingatepartners.com) is a private equity firm focused on control investments in manufacturing, distribution and service businesses with sales between $50 million and $250 million. Wingate specializes in partnering with management in companies facing an industry transition.
Situation
- Watermill Group bought Preferred Compounding in 1997, when the company was a small, regional provider of elastomeric compounds. Soon after the acquisition, the Watermill team began to focus the business on the higher-performance, higher-value end of the market, eliminating lower-margin commodity products. This strategy worked well, and the market responded, with a corresponding growth in both sales and profit margins. Like most industrial businesses, Preferred suffered during the Great Recession, but recovered quickly. By 2010, the team at Watermill believed that they had achieved their original goals, and decided to sell the company.
- We have enjoyed a long, fruitful relationship with the Watermill principals, dating back to the early 1980s, and have handled a number of sale assignments for Watermill portfolio companies. Since they acquired Preferred in 1997, we continuously engaged in discussions with Watermill regarding sale options and timing.
- To achieve significant tax savings, Watermill needed to close the sale of Preferred by year-end of 2010.
Sperry Mitchell Solution
- We cultivate relationships and focus on the long-term. Our long-term, relationship-oriented approach appealed to Watermill. They benefited by having on-going conversations with an external advisor, to get a trusted outsider’s perspective on the company’s progress. Also, by informing us of developments throughout their period of ownership, they ensured that we were fully abreast of the company’s history & performance, and could act as the best possible representative when the time came to sell.
- We leverage a broad network of potential buyers. In this instance, though we generated interest from a range of potential buyers, we quickly identified Wingate as the party that could pay a premium price and close a deal within the prescribed timeframe. Once the decision was made, we closed the transaction within 60 days, weeks before the end of the year.
