Middle-market private equity firms Saw Mill Capital and Falcon Investment Advisors have partnered to pursue investments in manufacturers with help from a former CEO they worked with previously.
The ex-CEO, David Westgate, headed Jason Inc. and successor Jason Industries Inc.—a manufacturer that Saw Mill and Falcon had invested in. Westgate led Jason, a Milwaukee-based maker of automotive products, from 2004 to 2015. Saw Mill, based in Briarcliff Manor, New York, had acquired Jason in 2000; Boston-based Falcon invested capital in Jason in 2010. Both firms substantially exited their Jason investments in 2014, selling to Quinpario Acquisition Corp. (Nasdaq: QPAC) for about $539 million. Scott Rivard, a partner at Saw Mill, describes Westgate as “an exceptional leader and hands-on operator with whom we have had a long and profitable relationship.”
The new partnership will pursue investments in manufacturers with annual revenues of $400 million to $1 billion. That’s more than double the size of companies that Saw Mill usually pursues, in the $25 million to $200 million range for annual revenue, according to the firm’s web site. Falcon, with more than $2.6 billion under management, invests $25 million to $75 million per deal.
The PE firms are shopping for divisions or subsidiaries of publicly traded or large privately owned manufacturers selling to a range of industrial markets in the U.S. and globally. The firms are also looking for situations where operational or senior management changes are needed. John Schnabel, Falcon partner, says they are looking for opportunities for Westgate to do what he did at Jason: instill a culture of continuous improvement.
Saw Mill will invest from its new Saw Mill Capital Partners II fund while Falcon will invest from Falcon Strategic Partners V.
Before Jason, Westgate was CEO at Rieter Automotive Systems, which makes automotive noise control and thermal management systems, and at Solvay Automotive/Inergy Automotive Systems LLC, a supplier of automotive fuel and air management systems.
PE firms teaming up with ex-CEOs to target and manage acquisitions isn’t unusual. In February, Chicago private equity firm GTCR announced its partnership with Ed Fiorentino, a pharmaceutical industry veteran and ex-CEO it has worked with twice before, to target potential acquisitions of specialty pharma companies and products.
GTCR took a similar approach in 2014, partnering with health care industry veteran David Snow, former CEO of Medco pharmacy benefit manager and ex-president of Empire Blue Cross Blue Shield, to form Cedar Gate Technologies LLC in Darien, Connecticut, to buy up and operate health care information technology businesses.