DETROIT—Huron Capital has its sights set on the adhesives market.
The firm has launched Brudner Polymer Corp., an ExecFactor partnership with a goal to build a platform company in the adhesives and sealants industry.
Brudner will be the latest vehicle to execute Huron's buy and build strategy through its ExecFactor program, which targets businesses with revenues between $20 million and $200 million with at least $5 million in EBITDA. First it will acquire a platform business and from there invest to grow it primarily through bolt-on acquisitions, but also with capital investments to facilitate organic growth.
Huron's ExecFactor companies are a partnership between Huron and an executive sponsor. The Detroit-based private equity firm finds a seasoned executive and together they create an investment company with a specific market focus.
"We envelop the company with all of Huron Capital's resources to develop strategic plans and send them down a growth track," said Mike Beauregard, senior partner at Huron Capital. "We're a solution for the owners because they care about how much they're selling. We really envelop the company with lots of operation, strategic planning and capital to buy new equipment, plants or pursue add-on acquisitions."
In this case, Huron has partnered with David Brunori, who will serve as Brudner's CEO. Brunori first came to Huron in 2006 when he was working for Matrix Systems Automotive Coatings. That company was acquired by another Huron ExecFactor program—Quest Specialty Chemicals—and Brunori stayed on, eventually becoming the president and general manager of the Quest Automotive Products Group. Quest was sold to Audax and Moelis Capital Partners in March 2011, and then in June 2015 Brunori's unit was sold to Valspar.
The name Brudner was derived from taking part of Brunori's name and mixing it with that of Kent Gardner, the founder of Matrix and who Beauregard said was a mentor to Brunori. He died in 2009.
Since 2001, Huron has launched 18 ExecFactors. Of those, 15 have been funded with capital to buy companies. Only two have been terminated because they couldn't find a company to fund.
On average, Huron owns 75 percent ownership stakes, and the former owners/management own the remaining. Huron generally seeks to acquire stakes in the 75-100 percent range.
Beauregard said Huron's ExecFactor program provides an avenue for small to medium sized business owners who are ready to retire, but don't want to sell to a large company that might carve up their operation.
"The ExecFactor programs really appeal to family businesses," Beauregard said. "If they're a family owned business, we'll go after them more aggressively. It's an alternative to selling their company to a big corporation who might shut down their plant or integrate their volume into other existing plants."
As for Brudner, Beauregard said Huron has reserved about $50 million to finance its balance sheet when the time comes. Brudner is actively pursuing its platform business and anticipates acquiring it by the end of the summer. Once complete, Beauregard expects the add-on acquisitions to begin shortly after.
Huron forecasts the adhesives/sealants market to generate about $18 billion in annual North American sales. Beauregard said the participants in the market are highly fragmented with a variety of small or medium sized companies that control unique adhesive formulations.
Trends that are facilitating growth include lightweighting in automotive, where the bonding material or device is much lighter than its predecessor. Adhesives are constantly replacing more mature applications such as fasteners or welding.
"It's a very large industry," Beauregard said. "The market is more stable than others, and growing, with favorable trends. It has significant end-use markets that provide potential diversification to the manufacturers. That diversification helps protect a company from macroeconomic influences."