Target: Flow Solutions
Sponsor: Morgenthaler Partners
Fund: Morgenthaler Partners VII
Seller: Company management and private investors
Purchase price: undisclosed
Advisor: Sponsor: Seller: D.A. Davidson
Legal Counsel: Sponsor: Jones Day Reavis & Pogue
With a background in filtration systems and a focus on the middle market, Morgenthaler Partners was a natural candidate to buy Livermore, Calif.-based Flow Solutions. The transaction closed earlier this month.
Morgenthaler is keeping the company’s management in place and counts Flow CEO David Patterson as a co-investor. Morgenthaler bought control of the company from the Patterson family and a group of private investors. The firm declined to disclose the price of the buy, but said it was made with 60% debt and 40% equity and fell within the firm’s range of between $75 million and $250 million. The investment is the last from the firm’s Morgenthaler Partners VII fund.
Flow Solutions provides filtration and fluid-control products and services to high-tech manufacturing companies in the semiconductor and biopharmaceutical industries as well as to general industrial manufacturers and food and beverage makers. It had revenues of approximately $90 million last year. Morgenthaler aims to use the company as a platform for bolt-on acquisitions that will eventually bring its revenues to $250 million per year.
General Partner John Lutsi told Buyouts that Morgenthaler is looking at two potential acquisitions to add to the Flow Systems platform and that both add-ons could be folded into the company within the next 12 to 18 months.
The firm said that the market for higher end filtration systems is forecast to grow significantly over the next five years at the same time that companies that serve the market are ripe for consolidation.
Lutsi and General Partner Al Stanley will join Flow Systems’ board of directors. Morgenthaler expects the company, which has a history of growth through acquisition, to be able to expand its product and service offerings.
Lutsi noted that the continued need for manufacturing companies that use filtration technologies in order to lower their production costs is going to present more opportunities to providers like Flow Systems.
“You have to really minimize the amount of waste and defective products and the high filtration products will have a big impact on manufacturing companies,” he said. “It’s a need that will not go away, not in my lifetime anyway.” —M.S.