The “secret sauce” that separates Auxo Investment Partners from other private equity firms comes down to hard work.
That’s according to Jeff Helminski, a managing partner at the Grand Rapids-based Auxo, which has completed four deals in the last 12 months, with more on the way. The firm plans to invest in another 10 to 15 companies over the next three years, he said.
Managing Partner at Auxo Investment Partners
In the dealmaking process, Auxo seeks to hold itself to “the highest standard in the industry” by deploying a strategy that reflects the values of the partners, whose aim is to help companies unlock their growth potential, according to Helminski.
“For us, it starts with a good small company that knows how to do what they do really well that hasn’t evolved or developed themselves into a scalable platform yet,” Helminski told MiBiz. “Our approach is pretty unique, and we really pride ourselves on doing business the right way, the West Michigan way, if you will.”
According to Helminski, who partnered with Jack Kolodny and Fred Tedori to start the firm, Auxo typically targets North American industrial companies that have annual earnings before interest, taxes, depreciation and amortization (EBITDA) of $1.5 million to $15 million. The private equity firm seeks to acquire companies whose owners want to transition to retirement over time, may lack a next generation in the family to take over the business, or need capital to grow.
The company’s strategy appears to be paying off. Auxo acquired Elkhart, Ind.-based Atlas Die LLC and Rochester Hills-based die maker Bernal LLC simultaneously in August 2017, and followed it up with a deal for M/G Transport Services of New Orleans in November. Auxo further added to its die manufacturing platform on June 29 with a deal to acquire Williamston-based Midway Rotary Die Solutions.
The four transactions totaled nearly $100 million in enterprise value.
For the company’s active dealmaking period and his vision of an investor-centric private equity model, Helminski was selected as a finalist in the 2018 MiBiz M&A Dealmakers of the Year Awards in the corporate executive category.
After the close of the award period, which ended June 30, Auxo subsequently completed the $50 million capital raise for its first fund.
Helminski said he’s focused on identifying dynamic “small family-owned businesses” that could grow into a “much larger, more scalable business” by partnering with Auxo.
“We’ve got a pretty unique approach in the world of private equity, and we started from scratch when we built this,” Helminski said. “When you’re starting from scratch, it’s a challenge like no other. … With Auxo, we had that set of challenges we had to overcome on top of the standard set of challenges you have on the dealmaking side of things in our business. It kind of feels like we were fighting on two fronts and have been fortunate to be successful at both of those.”
Before identifying possible deals, Auxo goes through a heavily structured process, according to Helminski.
“We have sort of a standard evaluation process where we’ll evaluate a potential opportunity based on a number of metrics that are important to us and our thinking,” he said.
Auxo considers the financial metrics of a possible asset, such as revenue, gross profit and profit margin, as well as its end markets. Other considerations include whether the firm is owned by the founder, operates as a family business or has received prior private equity investments.
“We’ll sort of evaluate and rank deals based on a set of criteria that we know to lead to successful opportunities for us,” Helminski said.
The majority of the firm’s acquisitions are spurred on by “some sort of intermediary,” such as an investment banker, an attorney, an accountant — “someone that’s formally acting on behalf of the owner,” he said.
“We get connected to an ownership either through a personal relationship — one of our investors or their families knows somebody, the accountant or attorney reaches out to us — (or) a company’s owners will reach out to us,” Helminski said. “There are times when we reach out to them if we see something of particular interest to us. Typically, for us, that would be more of an add-on situation to one of our platforms than a brand-new platform.”
According to Helminski, the firm is structured to fill a gap in the market for investors who want more transparency in their investments. For example, Helminski said the firm’s limited partners also have an ownership stake in the private equity firm, which does not charge management fees.
“We wanted people that could be strategic in addition to the capital they’re entrusting us with,” he told MiBiz for a prior story. “When we think about the kinds of companies we invest in, and the places where these kinds of companies tend to be, we wanted an investment base that reflected that. They’re people who understand these industries. They can be helpful with customer connections, diligence, connecting with industry experts, and they are people that are in the markets where the kinds of businesses (Auxo invests in) exist and are located.”