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Sunday, 15 October 2017 22:30

Stein’s ‘tenacity’ drives dealmaking for Blackford Capital

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Martin Stein of Blackford Capital. Martin Stein of Blackford Capital. Photo: Katy Batdorff

MiBiz 2017 M+A Deals & Dealmakers Awards Winner: Executive

With three acquisitions and two exits under his belt in the last year and a half, Martin Stein continues to drive a steady pace of deal activity at Blackford Capital.

The founder and managing partner of the Grand Rapids-based private equity firm credits a continually booming economy both locally and regionally with driving a solid year for his company. That strong economy also has created a strong pipeline of deals for the firm to pursue. 

“We had solid financial performance, plus a (solid) business model, plus a great, healthy economy,” Stein said. “You get good traction and high valuations, and we were the beneficiary of those. 

Martin Stein

  • Company: Blackford Capital

  • Annual sales: Between $400 million and $450 million

  • Workforce: 2,300 across the portfolio of companies 

  • Brief business description: Blackford Capital is a Grand Rapids-based private equity firm focused predominantly on investing in Michigan manufacturing companies with annual revenues between $20 million and $100 million.

  • Best practices for effective dealmaking: 1) Review a lot of deals to ensure you find the right opportunity. Blackford Capital reviews roughly 5,000 deals each year. 2) Establish a connection. Blackford Capital prides itself on its relational approach to investing. We look for founder and family-owned businesses that need a partner to help them experience significant growth. 3) Be creative: There are an unlimited number of ways a transaction can be structured. Blackford Capital prides itself on finding unique and attractive transaction structures that help both sides accomplish their respective goals.

  • Personal information: Four children — Cooper, Noa, Asher and Wynn

  • Academic degrees: Undergraduate degree from University of Chicago, MBA from Harvard University 

  • Community involvement: Board of directors at Junior Achievement of West Michigan and Association for Corporate Growth Western Michigan chapter

“I think we definitely had a little bit of luck (on the exits), but these were multi-year processes to get the companies into a position where they could get those amounts.”

For its exits, the firm sold its interests in Brooklyn Park, Minn.-based manufacturer Staging Concepts and Westlake Village, Calif.-based Key Health Medical Solutions Inc., both for undisclosed sums. 

“I think I am as proud of those (exits), if not more proud, than the deals that we closed,” he said. 

Stein, the winner of the 2017 MiBiz Dealmaker of the Year Award in the corporate executive category, pegged the firm’s overall economic activity between acquisitions and exits at about $250 million. 

According to active M&A professionals in West Michigan, Blackford Capital’s dealmaking activity is indicative of the firm’s focus on driving results. 

“It illustrates to me that it’s a good sellers market and that even professional buyers like Blackford recognize that they pick their spots for exits,” said John Kerschen, managing partner of Charter Capital Partners, a Grand Rapids-based investment bank. “That is the purpose: to acquire, improve, grow, increase the value and then realize a return on that investment for the limited partners. The two transactions have helped Martin and Blackford demonstrate that the model works.”

Moreover, the exits represent a broader deal trend playing out globally, according to the 2017 Global Private Equity Report released by Boston-based Bain & Company Inc., a private equity and management consulting firm.

“The remainder of deals that had been on hold during the global financial crisis and its immediate aftermath, and many deals invested since then, wound their way to daylight. Corporate buyers, flush with cash, remained willing to pay a premium for assets that would expand their reach or create synergy. PE firms and corporations were eager buyers during the year, offsetting the uncertainties of public markets that led to a stall-out in initial public offerings,” according to the report. 

THE ‘CONSUMMATE DEALMAKER’

On the buy side over the last 18 months, Stein and the Blackford Capital team invested in three new companies. 

The firm acquired Addison, Ill.-based hotel furniture and design firm Snowhite Hospitality Inc., Fort Wayne, Ind.-based commercial bakery Ellison Bakery, and Chesterfield-based manufacturer Davalor Mold Corp. 

Both Davalor Mold and Ellison Bakery are part of Blackford’s Michigan Prosperity Fund, a fund that targets regional companies with the goal of keeping jobs and investment in the Michigan area. 

Tracy Larsen, a veteran M&A attorney and partner at the Grand Rapids office of Honigman Miller Schwartz & Cohn LLP, advised Blackford Capital on its transaction for Ellison Bakery. 

Larsen described the negotiations with both the sellers and other co-investors as quite complex and one of the larger transactions the private equity firm had undertaken. 

“Martin is a consummate dealmaker. That was a very complicated transaction,” Larsen said. “I have extremely high regards for Martin’s abilities as a dealmaker. He is tireless, he’s thoughtful, he’s resourceful, creative. I’m really impressed with his tenacity to bring a transaction to close that, candidly, many people would not have been able to do.”

Larsen also noted that he’s been an investor in a handful of Blackford Capital’s deals and has received significant returns from his investments. 

MORE DEALS TO COME

Particularly with its Michigan Prosperity Fund that targets Michigan companies for investment, Stein and Blackford Capital see an opportunity to combine the private equity firm’s two main goals — profitability and generating returns for its limited partners — with keeping the deals close to home. 

For Stein, that investment technique somewhat flies in the face of the strategies at other PE firms where the numbers are paramount. 

“You know, private equity funds have done an amazing job for our economy and helping grow businesses, helping companies be more financially sound. With that said, there’s certainly private equity firms that … (buy businesses) and companies seem to get shut down,” Stein said, noting that companies go out of business all the time for numerous reasons. “But private equity firms are an easy sort commentary because we’re so clearly motivated by being profitable.”

As Blackford Capital has acquired companies from a wide variety of industries, the firm has sought to assemble an “all-star” board of directors that aims to bring well-tested governance processes and professionalization to the various companies, Stein said.

With about 65 directors spread across the firm’s portfolio of companies, Blackford Capital stands as a leader among private equity firms seeking to master the field of corporate governance, Stein said. 

“There are reasons that executives get to those levels, and it’s because they hold themselves to a higher standard,” Stein said of some of the people who serve on the boards of Blackford Capital’s portfolio companies. “When they are then involved in the governance process of an organization, it similarly helps that organization do even better.”

To that end, Stein said he would likely be seeking out new directors in the coming months, as the firm currently has signed letters of intent for several companies and expects to announce between three and six more acquisitions in the next year. 

“This could be our even bigger year than last year,” Stein said.

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