CLEVELAND—The private equity parent of Quality Synthetic Rubber Inc. has completed a purchase that will expand QSR's medical business and provide tooling capabilities to benefit the firm's automotive and industrial units.
Cleveland-based Blue Point Capital Partners L.L.C. finalized the deal early this month to buy Quadra Inc., which mainly does business under the Limtech name as a custom molder of silicone products. Limtech employs about 150 and operates out of a 75,000-sq.-ft. facility in Sturtevant, Wis., serving the medical, dental, industrial and consumer markets. Terms of the deal weren't disclosed.
Blue Point said the acquisition will bolster QSR's medical subsidiary, Medical Elastomer Development Inc., which is based at QSR's headquarters factory in Twinsburg, Ohio. Limtech will bring added technical capabilities, rapid prototyping and added clean room capacity to the MED business.
“Since our acquisition in 2007, QSR has made significant investments to strengthen the MED platform,” said John LeMay, a partner with Blue Point. “The acquisition of Limtech further supports our strategy by broadening the company's medical product offering and significantly diversifying QSR's customer base.”
QSR CEO Randy Ross said the deal will benefit customers in several ways, “including faster time to market with new products as a result of incorporating Limtech's state-of-the-art tooling capabilities, an increased array of production capabilities and a second manufacturing location for medical products.”
Limtech fit mold
Blue Point had set a goal when it acquired QSR to have its combined businesses—including the medical unit—grow to $100 million in sales. When Ross was hired as CEO in February 2010, he told the owners he thought the firm could reach $75 million organically, but would need a bolt-on acquisition for the remainder. He said earlier this year QSR was on pace to reach record sales of about $65 million in 2011.
So the team kept looking at potential acquisitions, but most of the candidates offered just molding capabilities, according to Ross. “There are a lot of small silicone molders that we considered, but we kind of kept working back to Limtech because they bring some things to the party that should also benefit our automotive/industrial business,” he said.
While Quadra has been in business for 60 years, the first 40 were spent strictly as a mold maker. “They sold tools to a lot of medical molding companies,” Ross said. “They were a very successful tool builder and very well respected in the industry.”
For a variety of reasons, Quadra started molding silicone goods, sometimes because a molder would go out of business and a medical OEM would ask Quadra if it could mold the component in its shop, he said. At some point, Quadra officials liked the molding side of the equation more than the tooling, and formed Limtech in 1992.
Prior to the purchase by Blue Point, Quadra still sold tooling to a couple of outside molders, but the rubber goods part of the business accounted for roughly 95 percent of revenues, which Ross said are about $15 million annually.
The QSR chief said he likes to do deals where both sides gain something.
“There are a lot of reasons to make this acquisition work,” Ross said. “You can make it work because we want to grow our molding business in medical. It definitely brings us a nice piece of business there, and it diversified our revenues.”
At the same time, QSR was having difficulty securing molds for its automotive/industrial business because a number of tooling firms didn't survive the recession. He said that limited QSR's ability to launch new products because it couldn't get molds fast enough.
The Sturtevant-based firm's tool shop has capacity to produce 12 times the amount of molds it currently does, Ross said. “Their tool shop would benefit by building molds for us, and our molding business will benefit by having access to those tools.”
The medical businesses of the two firms also are complementary and should thrive in a market where OEM device builders are consolidating, as is the supply base of medical molders.
“When we looked at Limtech, one of the things that was very appealing is they do business with a lot of the major medical OEMs,” he said. “If you overlay their customer base with our MED customer base, there are only a couple of accounts where they overlap. And when you combine them together, suddenly we'll have direct access as a supplier to about 60 percent of the top 30 medical OEM builders.
Limtech also has more experience in lower-volume orders, Ross said, with QSR/MED more comfortable with high-volume repeatable business. Limtech also brings QSR the ability to mold polyisoprene, which he said isn't as predominant as silicone in medical but is used in some difficult-to-mold applications.
Ross expects QSR to continue to operate Limtech's plant in Sturtevant and retain its staff.
The two main changes will be in re-branding the medical business as MED/ Limtech and in consolidating the business development functions for medical, headed by Nick Brust, MED vice president of business development. Brust previously had been a long-time Limtech employee before joining QSR/MED last year.
The QSR/MED facility in Twinsburg, in fact, is quite cramped with little room for capacity expansion, Ross said. One option had been to move MED into a new location, which would be costly and time-consuming. Limtech, on the other hand, had a lot of underutilized capacity and a fair amount of open space to grow into at its facility.
Long term, the company may look into “centers of excellence,” relative to some of the processing technologies to take advantage of the strengths of each operation, he said.
The Med/Limtech business now will account for about 35 percent of QSR's revenues. Automotive stands at about 45 percent and general industrial the rest. The deal also gives the company the right number of facilities and technologies to reach its $100 million goal without further acquisitions, although Ross said it wouldn't shy away from another purchase if it made sense for QSR.