Flexan's Fitzgerald focuses on expanding customer base

CHICAGO—After a busy 2015 where Flexan Corp. got both a new owner and a new leader, the firm has set the foundation to reach new heights.

After Linden Capital Partners L.L.C., a private equity firm with a focus on the health care industry, acquired Flexan in early 2015, Jim Fitzgerald was appointed CEO in June. He replaced Scott Severson, who chose to retire and remains a member of the firm's board.

Fitzgerald began his career with Baxter Healthcare in 1991, serving as a sales associate. While the firm transitioned into Allegiance Healthcare and then Cardinal Health, Fitzgerald moved into management positions during his 16 years there. He became the CEO of silicone medical goods producer Vesta Inc. in 2008, spending five years helping RoundTable Healthcare Partners take the firm from a single-platform organization to an international platform.

Lubrizol Corp. purchased Vesta in August of 2014.

The good news for Flexan is that Fitzgerald intends to bring that same approach. The better news for him is that the firm already has a head start. Flexan has been present in China for more than a decade and recently completed an expansion that added 55,000 square feet to its operation. Its primary facility in China consists of a 35,000-sq.-ft. facility with about 225 employees. Fitzgerald said Flexan will manufacture more than 100 million units out of its Chinese facility in 2016.

“We have some really good fundamental strengths in quality and engineering, and we have some really good understanding of raw materials,” he said. “The first thing that we're going to look to do is to grow our market share by expanding into either some additional customers or some adjacent segments that would also benefit from the work that we're currently doing. I think that we've been a little bit narrow in our approach as an organization that was sort of gradually improving. So we're going to look to accelerate our focus, get out and sell our approach to some new customers.”

With Flexan, Fitzgerald will be exposed to some new industries. The firm has two rubber product manufacturing units—the FMI side focusing on making silicone components for the medical device market, and the Flexan side for industrial applications. Based in Chicago, its 65,000-sq.-ft. operation houses the industrial business while FMI is located at a 20,000-sq.-ft. facility nearby. The company employs about 275 in its Chicago operations.

Bruce Cohen remains president of Flexan while Frank Sullivan continues to run FMI.

Flexan has both industrial and medical capabilities in China as the 35,000-sq.-ft. building is complete with a clean room. Fitzgerald said the firm is beginning to add capacity to its new building. He said the company has seen an expanded interest in liquid silicone molding in China for some of the components that historically have been using high consistency rubber.

“It's a huge advantage,” Fitzgerald said of the Chinese operation, “not only the fact that we're there, but the length of time that we've been there. We have an established team with a general manager who has run the operation for more than a decade.

“That's been a big driver in our ability to be successful—when you have evidence of your ability that you're going to do what you're going to say you'll do and you can showcase that with work that's actually being done gives your current and prospective customers a greater degree of confidence.”

With Flexan settled in to its new ownership and Fitzgerald in place, the firm is ready to target additional capabilities. Fitzgerald said the firm intends to find new opportunities that complement the work it already does, increasing its value as a supplier.

“We don't want to stray too far from what we know has made us good, but there are a lot of other capabilities that we think will fold nicely into that and our customers have asked us to explore in the past,” he said. “Whether that's by starting them up on our own or through a merger/acquisition strategy, I think this year you'll see us be able to bring some other capabilities to market.”

Fitzgerald said Flexan currently doesn't have extrusion capability and does very limited assembly work. But he stressed that the firm intends to stay within the polymer space.

The executive said the strength of FMI is tight tolerance precision molding, and it has developed a reputation for producing long-term implant components.

Most of the operation is focused on molding silicone components that go into devices such as pacemakers or defibrillators.

“We spend a lot more time around the rigor of process development, capability studies and partnership with our customers,” Fitzgerald said. “We're making a relatively inexpensive component that goes into an expensive device.”

Quality is another strength of the firm.

“We've been able to build stock-to-stock programs with many of our customers,” he said. “They don't have to re-inspect the product after we ship it. We're meeting such a high quality standard, doing a final quality inspection at our location, shipping to them, and it's going directly to the next step in their manufacturing process without requiring additional inspection.”

Fitzgerald said Flexan has a strong European customer base that continues to grow. The medical device space has a lot of growth opportunities, the executive said, as many major original equipment manufacturers have moved some of their product development strategies to European-based regions.

The firm has been able to support them with domestic representation to this point, but Fitzgerald said he expects more European-based opportunities to present themselves. Part of the firm's long-term strategy is to have a more pronounced presence in Europe.

“Based on the trends that we see in the medical device space and the prominence of Europe in the medical device world going forward, we have clearly not only not ruled it out but kept it on our radar as a strong possibility for future investment,” he said.

Having Linden as its owner certainly should help. Fitzgerald said the equity firm intends to support Flexan's growth potential with necessary investments. So far the company has made some internal upgrades, but Fitzgerald stressed that Linden isn't just bringing capital to the table; the private equity parent has a deep network of contacts in the medical industry that Flexan can draw from.

Linden focuses exclusively on the health care and life science industries, investing in middle market platforms that specialize in medical products, specialty distribution, pharmaceutical and services segments of the health care industry.

“Their investment model is to get a positive return on their investment,” Fitzgerald said. “But it's growth with a clear mindset on creating value that will be appreciated by some partner at whatever point in time it makes sense for Linden to exit. They have a long-term mindset. They're not asking us to do anything erratic just to hit an annual result, but instead they want to build a valuable business.”