From 2003 to 2011 Hamilton Robinson Capital Partners (HRCP) transformed a troubled one-factory, 170 employee plastic machinery business in Fulton, NY into the leading global supplier of highly-technical extrusion and converting systems serving the attractive flexible packaging industry. During this period sales grew from $30 million to $308 million; earnings grew from $3 million to over ten times that; and productivity more than doubled. In a series of transactions HRCP invested $53 million of equity and returned $238 million to its institutional and management investors and co-investors through a combination of dividends, recapitalizations and with the final exit in December 2011.
This performance was achieved through a combination of strategies including a dramatic change of corporate culture, the introduction of lean operating practices, and multiple add-on acquisitions. Eighty management shareholders participated heavily in the value creation they were so instrumental in achieving, realizing $51 million of proceeds on their $7 million investment.
The foundation for this business transformation and value creation began with two privately-negotiated HRCP transactions. First was the 2003 purchase of the assets of Black Clawson Converting Machinery from a second-generation family owner in a standard management buyout format for a value of $13 million on $3 million of earnings. Second was the very unusual JV structure with Chemtura Corporation (NYSE: CHMT), the public parent company to Davis-Standard, to effect the merger of Davis-Standard into Black Clawson under shared ownership but the control and guidance of Hamilton Robinson. This included HRCP personnel chairing the board and the audit and compensation committees, as well as the appointment of an HRCP Executive Affiliate as CEO of the business. Davis-Standard was a Black Clawson competitor but a perennial underperformer. D-S had earned $5 million on $185 million of revenues when the two companies were combined in April 2005.
Applying the same strategies from the HRCP tool box - culture change, lean operations, and more add-on acquisitions - the performance of the combined business improved dramatically. In late 2006 these operational improvements were driving excellent financial performance and the investors chose to recapitalize the business. Chemtura, a large chemical company, chose not to reinvest, having successfully monetized their non-core asset. Most others did reinvest to participate in the powerful business trend and the global growth of the now efficiently combined business.
Acquired earnings from Black Clawson ($3 million) and Davis-Standard ($5 million) had grown over four times when HRCP considered exiting the investment in 2008. The recession hit this capital equipment business hard but a strong equity capitalization and a strategy to maintain work force strength even during this slow sales period, allowed the business to capture market share as the global economy recovered in 2010. It was clear that Davis-Standard had the best workforce in the industry and combined with a motivated and skilled management team, the business outperformed its industry peers. Hamilton Robinson hired Blackstone Advisory to auction the business in 2011, and with earnings surging, the business was sold for $198 million to an excellent buyer, Oncap of Canada, who, just as we had, again capitalized the business well for its next stage of successful growth for the new investors and the company’s now 800 associates.