WASHINGTON—Many companies don't have a good experience after being acquired by a private equity firm.
But that hasn't been the case with NRP-Jones L.L.C., according to officials from the manufacturer of hose and fittings, which was purchased in December 2011 for $15 million by Main Street Capital Corp.
They report that Main Street has invested about $2 million in the business—previously owned by Terry Jones—for such things as adding new machinery and refurbishing production equipment; putting in a new computer system; and updating a boiler system so that it will be powered by natural gas instead of coal.
"There's a new found excitement within our whole organization," said Mark Prast, vice president of operations and a 32-year company veteran. "There's a natural momentum that's created in that, and we're trying to capture and utilize that momentum both with customers and our internal people."
Prast and Product Manager Bob Hansen discussed the changes at the firm during NAHAD's annual convention, held April 20-23 in Washington.
NRP-Jones makes hydraulic, industrial and oilfield hoses, fittings and assemblies for sale both to original equipment manufacturers and hose and fittings distributors. It's headquartered in LaPorte, Ind., where it produces its line of fittings. The company's hose products are manufactured in Nephi, Utah. That location previously operated as Nephi Rubber Products Inc. before Jones purchased it years ago.
Main Street primarily invests in lower middle market companies with revenues of $10 million to $150 million, according to information on its website. Factors it considers when pondering an acquisition candidate include: seasoned and proven management team with meaningful financial commitment; positive historical cash flow with reasonable margins and return on assets; traditional/basic businesses; niche market position and potential for market leadership; defensible competitive advantage; and reasonable exit alternatives.
Prast said Main Street bought NRP-Jones because it has a history of being profitable, and the owners have been letting them operate with the management team that was in place, with some changes because of retirement.
"They're an equity group that's very successful because they understand when they buy a company, why would you want to change what's working?" he said. "What they do bring to the table is an open-mindedness: 'We want you to think outside the box. If you could build a wish list, what is it that you want, and we want to help you achieve that goal.' And that has been needed at our company."
Among the items that topped NRP-Jones' wish list was the addition of a new rotary hose line, along with the modernization of the two existing lines, Prast said. The firm also redid two of its processes on its hydraulic hose lines and brought in new equipment that helped its whole operation become more efficient and drive down costs.
Additionally, the company hired new engineers for both locations and hired a new quality assurance manager who will oversee both plants, something the vice president of operations said will improve communications between the two sites.
As a result, customers are seeing reduced costs, Prast said, noting the firm hasn't had a price increase for 28 months.
Hansen has been at the Nephi site since before Jones purchased it. "We operated through good years and bad years," he said. "It was a good family-owned business. It was always enjoyable working there because you knew who the owner was, and you could talk to him personally if there was some situation that needed to be brought to his attention."
But he said he has seen positive change in the short time that Main Street has owned NRP-Jones. "We've had more capital to do some expansion and upgrade some manufacturing lines and some processing lines that hadn't been addressed for awhile," he said. "This group has come in and has the vision to see the business grow, and they're willing to put the money in there to make those changes that are necessary."
Main Street also hired its first director of marketing, Katie Smith, Prast said, a move that puts forth a unified strategy for the firm as a whole. "We're all about being a team right now—a team of executives," he said. "It makes sure we're all on the same path, and we all know what direction we're headed in, and this is how we're going to get there."
In general, he said the new owners operate as a "buy and hold company," noting that some holdings have been in the Main Street portfolio for 13 years.
Company going forward
NRP-Jones employs about 190-200 combined at the two facilities, including all four of Jones' children, Prast said. He sees that number staying steady.
Much of the company's strength comes from its diversification, he said, serving such sectors as oil and natural gas drilling, agricultural, transportation, construction and mining.
"Oilfield brings a huge attraction now, especially in a demographic where the footprint has changed from a three-state area to all over the country," Prast said. "So if you're not looking into that right now, you're probably making a mistake."
The hydraulic hose business also continues to grow, a market dynamic he doesn't see ending in the near future.
"We're in an ever-changing world right now, and the engineering staff is one of our keys," Prast said. "We will probably look to add more engineering staff this year. That's one thing we would like to key on is being out ahead. I think we had grown into a state with the old owners where we were reactive, and we'd like to have a more proactive approach to our business."
Hansen said not too many rubber hose makers have oilfield, hydraulic and industrial hose production under one roof. And while NRP-Jones is a small company trying to compete with larger manufacturers, some of its niche products have helped it be successful over the years.
He also sees good things for the hose and fittings maker in coming years.
"The new ownership is interested in putting more money in," Hansen said. "They just want to make sure they get a return on investment so we get some of these manufacturing things lined up, maybe in equipment or new products to keep us a viable, moving forward company—maybe more so than what we'd seen in the recent past."