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Private equity and the fabricator
- By Tim Heston
- May 1, 2012
According to company sources, the private equity firm gets high-mix, low-volume manufacturing. In Roberts' case, the company is benefiting from major company investments, including a new, 90,000-square-foot fabrication facility that opened late last year. The company prepared for the upswing during the downturn, and Roberts' current growth projections are evidence that the gutsy strategy worked.
Moreover, it's evidence that private equity's reputation perhaps isn't fully deserved, at least these days. Of course, private equity has a history of management horror stories and over-leveraging. For many, the very idea of private equity just doesn't sit well. Private equity firms undergo a cycle (at least ideally) of buy low, improve, and sell high. It's about multiples; it's just business; it's just numbers.
But then I read quotes like this: “You make investments in people. We believe that North American manufacturing deserves to exist.”
That didn't come from a manufacturing advocacy group or union leader. That was John Stewart, an executive at Monomoy Capital Partners, which now owns Heat Transfer Products Group in Scottsboro, Ala. This week's Bloomberg BusinessWeek cover story tells the story of a reporter who spent a week at HTPG to aid in efficiency efforts. He wasn't there to see heads roll, but instead assisted the metal products manufacturer in its lean manufacturing initiative.
The article's point: Private equity isn't always about hatchet men and layoffs. Everyone has bought into the concept of identifying and eliminating waste. It's great to see terms like muda, 5S, and—for that matter—the details of a metal fabrication operation make the cover story of a major business weekly. The reporter describes how Mike Bray, a manager at HTPG, excess work in process.
“Bray sees waste in the copper stacked at the loading bay. He knows it make sense to leave it there—the plant turns over its stock of copper 13 times a month—but it bothers him to see so much inventory … Bray is a type-A obsessive masquerading as a good ol' boy.”
Bray is why investors see so much value in manufacturing. One day, that stack of copper may be gone, and HTPG's balance sheet may look even better.
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The Fabricator is North America's leading magazine for the metal forming and fabricating industry. The magazine delivers the news, technical articles, and case histories that enable fabricators to do their jobs more efficiently. The Fabricator has served the industry since 1970.
start your free subscriptionAbout the Author
Tim Heston
2135 Point Blvd
Elgin, IL 60123
815-381-1314
Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.
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