Singer Equities, originally founded by Paul Singer, started on its acquisition path in 1999. After a time, the founder wanted to exit the business and retire, so the group turned to its first private equity owner.
When it grew to a certain point and needed to go to a higher level, that's when Fritzinger said it became part of AEA Investors. “They are a very strong group of people,” he said. “They help us with having a strong financial dry powder available to us for making acquisitions.”
The criterion Singer Equities uses in evaluating acquisition candidates is simple. Businesses must be profitable and have at least 50 percent of revenue driven by some degree of value-added processes, such as cutting and coupling hose, installing conveyor belts or cutting gaskets.
A specific geography isn't a top priority, as Singer isn't obsessed with having coverage in each region of the U.S.
Culture, though, is very important. The owners' motives for selling may be different. Some may be looking to retire and don't have anyone to leave the business to; some may not have been able to grow the business to the extent they wanted; and others may not have been as aggressive as they should have been.
“At the end of the day, we like to be able to understand what the culture has been within that individual business,” Fritzinger said. “And we like to be able to see some of the employees and meet the employees. In some cases, the original owner wants to stay on and will continue to run the business. In other cases they retire, and we need to make sure there are some good people there in place to keep that moving.”
Singer comes upon the potential candidates in various ways. The firm reaches out to some, vendors sometime provide an introduction, and in other cases companies approach them, he said. It also runs an ad in the NAHAD convention booklet to inform people that Singer is interested in good businesses.
“We take a subtle approach,” he said. “We don't press people and try to annoy them with constant calls.”
The best testimonials normally come from previous owners who are still working for Singer. “We let them talk, and they'll find out how we operate the business and how we do things. These predominantly are family-run businesses. If an owner is retiring, in most cases their No. 1 concern is what's going to happen to the employees. And we understand that.”
While Fritzinger said there is some assistance from the corporate level on such efforts as sharing best practices and business expansion, it does not dictate how the platform businesses are operated. “They're all in the hose business, but they may sell different products, and as a result have been engaged with one vendor for many years,” he said. “We don't come in and try to homogenize the vendor base.”
Singer doesn't release its sales totals, but said size doesn't always factor in when evaluating a business. Fritzinger said acquisitions have been as small as $2 million in sales, but he added that Singer has been targeting larger firms simply because diligence costs aren't much more for a $50 million business than for a $2 million one.