Published in Finance

Blackford Capital exits Custom Profile, creates ESOP to take company ‘to its next chapter’

BY Friday, April 26, 2019 09:15am

WALKER — Seven years after buying Custom Profile Inc., Blackford Capital Inc. was ready for an exit.

In seeking to sell the company, the Grand Rapids-based Blackford Capital evaluated a variety of options. Those options included finding a strategic buyer, a deal with another private equity firm, or selling to Custom Profile’s management and employees under an employee stock ownership plan.

Martin Stein, managing partner of Blackford Capital MIBIZ FILE PHOTO

Blackford Capital opted for the latter option, seeing Custom Profile as capable of handling an ESOP under CEO John Boeschenstein. The transaction closed April 19, making Custom Profile an employee-owned company through a partnership with Mosaic Capital Partners LLC, a Charlotte, N.C.-based private equity firm that specializes in financing ESOPs.

“We felt this was the best of all the available options,” said Martin Stein, the founder and managing director of Blackford Capital, which acquired Custom Profile in April 2012. “Under John’s leadership, under the management team that he’s got, with the culture that they have and with the strength of their business model, it seemed like a great option.”

An extruder of plastic components, Custom Profile under Blackford Capital’s ownership expanded from primarily the office furniture and appliance industries into the automotive, recreational vehicle and health care sectors. The company in October 2016 acquired the extrusion assets of Wisconsin-based Bemis Manufacturing Co.

Walker-based Custom Profile has two facilities in the Grand Rapids area and one in Juarez, Mexico. Sales under Blackford Capital’s ownership grew to $49 million in 2018 from $21 million in 2012.

“We’ve accomplished a lot of what we wanted to accomplish. We had a great growth trajectory and the business has doubled (in revenues) under our ownership, representing a really strong growth curve,” Stein said. “It has a great management team and a great employee base and we felt like they were in a strong position and that it was appropriate for us to allow (Custom Profile) to move on to its next chapter.”

The deal provides Custom Profile additional capital to continue growth plans, Boeschenstein said. The company grew sales an average of 15 percent annually over the last five years.

Custom Profile employs about 400 people: 250 in Grand Rapids and the rest in Juarez. The company is presently scouting for sites for a fourth facility that it plans to base in the southeast U.S., where a client in the appliance industry recently awarded Custom Profile a contract worth “several million dollars of work,” Boeschenstein said.

The planned fourth facility also opens growth opportunities across all markets in the southeast U.S., he said. A decision on a location should come by the end of the second quarter, with an opening by the end of 2019, he said.

The decision to pursue an ESOP was made mutually between Blackford Capital and Custom Profile’s board, Boeschenstein said.

Like Blackford Capital, Custom Profile viewed an ESOP as the best option for employees, many of whom have been with the company for several years.

“We’ve always been employee focused. This is just another opportunity for us to share the prosperity of the company with our employees,” Boeschenstein said. “We have a lot of long-term employees and it’s just another way of rewarding the longevity and the retention of employees.”

Shares in the ESOP will “move little by little to our employees over time” through annual distributions into retirement accounts, said Christa Bird, chief people officer at Custom Profile.

Blackford Capital connected with Mosaic Capital Partners through Chicago investment bank Stout Risius Ross LLC, which represented Custom Profile.

“We were consistently impressed, from start to finish, by the culture instilled by the Custom Profile management team. For as deeply invested as they are in their customers and products, they are equally as focused on their community, employees, and overall impact. Everything about them screamed employee ownership from our first interaction,” said Keith Butcher, the lead partner at Mosaic Capital Partners on the transaction.

Mercantile Bank and New York City-based mezzanine lender Graycliff Partners LP also participated in financing the transaction. GreatBanc Trust Co. in Chicago serves as trustee for the ESOP.

The Custom Profile exit generated a “very, very positive return for our investors” at Blackford Capital, Stein said.

Custom Profile was the first acquisition made by Blackford Capital’s Michigan Prosperity Fund, which invests in companies in the state, and is the second exit. The private equity fund in November sold Dickinson Press LLC to Brainerd, Minn.-based CJK Group Inc. after three years of ownership.

The Michigan Prosperity Fund, which has deployed about $70 million in capital, continues to hold seven portfolio companies and “we may add a few more,” Stein said. Blackford Capital is presently in “very active” negotiations on a number of potential acquisitions, he said.

“We have more LOIs signed than we ever have before,” Stein said.

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