Republic Companies, an electrical and HVACR distributors based in Davenport, IA, received an investment from Graycliff Partners. This New York-based private equity firm invests in small to mid-sized companies and they typically makes $10-50 million invest in companies.
And the company is already seeking “add-ons” , indicating that they are seeking acquisitions in either, or both, the electrical and HVAC space.
Republic is a five location IMARK distributor (with branches in Cedar Rapids, Davenport, Dubuque, and Des Moines IA, and a location in Peoria, IL. According to a press release, Republic was founded in 1916 (107 years ago!). The company is a third generation company. Here’s an informative video on Republic. In 2014 Republic acquired Yeomans Distributing, an HVACR distributor.
According to a press release, Republic was founded in 1916 (107 years ago!). The company is a third generation company.
According to a case study from its advisor, Uplift Partners, “When it became evident the incoming generation was not going to take the reins of the family business, the idea of transitioning ownership had become increasingly part of discussions among family members.”
Uplift took the company, and the family, through its process and identified core principals and then found prospective partners who met the criteria. … and eventually a partner, in the form of Graycliff Partners, emerged.
Frequently in these types of deals, ownership stays involved and still retains an equity position, enabling them to have “two bites of the apple” … this sale and hopefully a future sale as they help grow the business.
And according to the Uplift Partners case study “With a strong private equity partner, the family was able to achieve everything they were looking for in a transaction, including upholding the “must have” principles highlighted above (in the case study), while also participating in the future potential of the business by rolling over some equity alongside the new partner. This last piece, the idea of continuing in some ownership of the business, proved to be a real difference-maker as it allowed the family to announce to the employees, customers and suppliers alike “we’re not going anywhere”.
With the business, in advisory terminology “recapitalized”, the opportunity is positioned as a “forming a new platform”.
According to Uplift Partners’ website, one of the sectors that they specifically focus on is HVAC and related trades.
(This posting has been updated with additional information that was unknown at the time of writing. Some information has been removed as it was dated from public sources.)
Takeaways
- So, 2023 is off to a fast start. At this pace there would be more acquisitions than 2022, however, industry prognosticators have shared that they would take the “under” for 2023. Only time.
- PE firms appear to like the HVACR space given The Master Group’s recent acquisition of RSC (with TMG backed by Novocap) and Munch’s deals (BellSimons, Total Air Supply, Wholesale Sheet Metal and Pile Protections Tops) after it had been acquired by Genstar-backed Marcone)
As the Republic deal shows, there are private equity firms that are looking for “smaller” distributors due to the cashflow potential as well as the potential to grow platforms. In the electrical industry there are a few PE firms making mid/small market deals.
Unfortunately privately-owned distribution is disappearing at a faster rate then new businesses are being formed. Much of this is due to generational change. Ensuring business perpetuity requires a next generation that is in, and passionate, about the business.
If you’re company is coming to the crossroads or looking over the horizon and wondering “what could be next”, give us a call. The decision doesn’t need to be binary – sell or not. We’ve helped companies by conducting a valuation while at the same time helping develop a strategic plan and identifying strategies to enhance profitability to increase business valuation. Then companies can decide to sell now, hold and improve to position for a sale in the foreseeable future or invest in a growth strategy. It’s all about identifying options. And if you know you want to sell, we also know some M&A people we can refer you to … all confidentially.
So, with deals happening, how many do you think will occur this year?
