Cleveland-based MCM Capital Partners last month acquired Primary Packaging (PPI), partnering with PPI management in a recapitalization that will provide the company with additional resources to boost its manufacturing capacity. The deal will also allow PPI management to remain actively involved in the day-to-day operations.
MCM and PPI management supplied the bulk of the equity, while First Merit came through with the senior debt. DN Partners contributed a minority interest of equity.
The investment is part of MCM’s 1998 fund, which is the firm’s first third-party fund and has so far invested roughly 75% of the original $50 million of capital. The fund focuses on middle-market companies, defined by MCM as having annual revenues of $15 million to $100 million and EBITDA ranging from $2.5 million to $8 million, with EBITDA margin typically higher than 10%.
Jay Poffenberger III, a managing director with MCM, said that PPI fits into MCM’s aforementioned financial criteria. The company is a containers and packaging concern, focusing on the flexible packaging space, or more specifically, the production and distribution of heavy-duty polyethylene bags. PPI services the insulation, lawn and garden and industrial product industries and distributes its products on a national basis. Poffenberger said PPI typically shows annual earnings and revenue growth of roughly 20% and, going forward, he expects the company’s future performance to remain consistent with its historical gains.
MCM supplied an initial investment of $4.5 million, which, Poffenberger said will be put toward the facility expansion needed for PPI to boost its manufacturing capacity. Poffenberger expects PPI to grow organically, but he added that MCM would also be looking for possible add-on acquisitions to help foster expansion both geographically and with the introduction of new products.
MCM intends to leave current PPI management in place, with Mark Martinez, who founded the company, remaining as Primary Packaging’s chief executive. Poffenberger cited PPI’s “exceptionally strong management” team as one of MCM’s attractions to the company.
In other recent MCM deals, the firm acquired steel tubing provider MicroGroup in May and in October 2001 led the management buyout of Stylecraft Lamps, a provider of mid-priced portable lamps.