Gryphon Gooses MSD Platform –

When Gryphon Partners launched its Autotronic Controls Corp. platform in the performance auto space, the firm canvassed much of that industry, which ultimately led to its April 2004 investment in MSD Ignition, a maker of performance ignition systems. Gryphon recapped the company last fall, and most recently acquired its first add-on, buying Superchips, a company Gryphon first looked at during its initial thumb through the sector.

MSD Ignition, based in El Paso, Texas, manufactures and markets ignition controls and coils, distributors, spark plug wires and other related auto components. The company caters to the professional and enthusiast markets and has made a name for itself in racing, with nearly every NASCAR team using MSD’s products. The addition of Superchips brings to the platform a product line more focused on the average-consumer as opposed to the professional market, and its products are sold in AutoZone, Summit and other auto part retailers.

Superchips, as the name implies, manufactures chips and performance programmers for late-model automobiles that are plugged into the engine to electronically modify the performance of the car. The products are primarily designed with gear heads in mind that want an extra kick from their autos, but there is a commercial demand as well as the products are used to increase the hauling power of trucks.

“This is an add-on, but it’s substantial in that it adds a 50% pop in EBITDA to the platform,” Gryphon Managing General Partner David Andrews said. He added that the company’s revenues have grown in excess of 30% annually in recent years.

Through the Autotronic Control platform, Gryphon is trying to carve out a niche in the automotive aftermarket, which is free from OEM pricing pressures and less cyclical as well. Additionally, Gryphon feels the space is further buoyed by positive trends in the industry. “This is best reflected by the continued strong growth of Nascar, both as an industry and as a form of entertainment,” Andrews described. “There has been phenomenal growth in the fan base and that points to a bigger consumer trend in which more people are working on and modifying their cars.” He cited movies such as The Fast and the Furious as further evidence of this, and identified that the industry is expected to grow in the high single digits for the next five to 10 years.

Gryphon will look to take advantage of the manufacturing and marketing synergies that arise from the merger, and Andrews added that the separate products from MSD and Superchips will be able to be integrated and sold to consumers in one bundled package. Also, both companies, Andrews said, will benefit by combining their engineering programs.

Ultimately, Andrews sees the Autotronic platform becoming a “couple hundred million” dollar annual revenue company, with future growth coming organically and through additional acquisitions. Potential exits could lie in either a strategic or financial sale, and Andrews left open the possibility of a public offering.

Gryphon used its 1999-vintage, $424 million Gryphon Partners II fund for the transaction, which is nearly tapped at this point. The firm has started the fund raising process for its third vehicle, Gryphon Partners III, and is said to be targeting approximately $600 million.