Published in M&A Award Profiles
Martin Stein, managing partner at Blackford Capital Martin Stein, managing partner at Blackford Capital File Photo by Jeff Hage

Blackford Capital investment in Grand Equipment helps accelerate growth

BY Tuesday, October 18, 2016 12:06pm

Finalist | Deal: $25M-$150M

  • Company: Grand Equipment (acquired by Blackford Capital)
  • Top Executive: Martin Stein, managing partner at Blackford Capital
  • Annual sales: $30 million to $50 million
  • Total employees: 15 employees and seven operating partners (Blackford)
  • Business description: Grand Equipment sells, leases and repairs new and used heavy construction equipment and parts
  • Advisers: Buyer – BDO and Aon Corp. (financial); Varnum LLP (legal), Seller – DeLong & Brower CPA (financial); Nicewander, Beres & DeVries PLLC (legal)

Martin Stein always noticed Grand Equipment Co. alongside I-196 when he drove through Hudsonville.

The managing director of Grand Rapids private equity firm Blackford Capital got to take a closer look at the company earlier this year when it began seeking a partner to maintain its growth trajectory.

First introduced to the company by an investment banker, Blackford Capital took a quick liking not only to the company and its industry and market, but also to founder and owner Jeff Grasman. Stein describes Grasman as a “very dynamic” entrepreneur and individual “who created one of the faster-growing companies within the industry.”

Grand Equipment – which sells, leases and repairs new and used heavy construction equipment and parts – was recently named to the Inc. 5000 list of Fastest Growing Companies in America. The company even maintained growth during the recession as the construction industry declined.

The growth of the construction industry today in Grand Equipment’s core West Michigan market added to the deal’s attractiveness.

“We saw a very dynamic entrepreneur that knew the industry inside and out and knew his business inside and out, and we felt there were macroeconomic indicators and trends that were going to be very favorable for the company,” Stein said. “The right industry, right time, right management team, right leader and the right business model all made a lot of sense to us, so we were very anxious to find a way that we could work with Jeff.”

Blackford Capital’s Michigan Prosperity Fund last December bought a majority stake in Grand Equipment. The deal was the sixth by the Michigan Prosperity Fund, which invests in industrial companies based in the state. Blackford Capital was named a finalist in the 2016 MiBiz M&A Deals and Dealmakers of the Year Awards in the category for transactions between $25 million and $150 million.

Grasman retained a “very large” but minority equity stake in the company. He’s the largest individual shareholder in the business and continues to run the company, Stein said.

The two parties financed the deal with a decade-long seller’s note, enabling Blackford Capital to pay a “very high price” for the company – perhaps another 20 percent to 30 percent – and for Grasman “to participate in the upside of the business,” Stein said.

“What it said for us was, ‘Hey, here’s a long-term commitment from Jeff.’ We need to make sure that we partner with the management team and the management team has aligned with incentives, and we know that Jeff is incented to make sure the business is producing as much money as possible because he gets a good portion of that money in the future.”

Once the transaction closed, Blackford Capital recapitalized the company and helped Grand Equipment obtain the largest line of credit it’s ever had with senior and mezzanine lenders. Grand Equipment, which employs 37 people, tapped the line of credit to expand its equipment fleet by 40 percent.

“We’ve been able to invest in more equipment, more parts and more service employees so our offering is even better than what it was in years past,” Stein said. “We’re able to support Jeff in a way that he had not been supported before, and as a result the company will have its best year ever this year.”

Stein placed Grand Equipment’s annual sales “in the $30 million to $50 million” range.

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