When Blackford Capital acquired Quality Aluminum Products (QAP), a building products company, it inherited a third-generation family business that needed liquidity and a resolution to succession uncertainties.

“This was a family-run operation. The company did not have a CFO and they would supply a lot of their financial records to a local accountant. We needed to spend a lot of money bolstering the financial infrastructure of the business,” says Jeff Johnson, managing partner at Blackford.

QAP is headquartered in Hastings, Michigan, with a second location in Flat Rock, Michigan. The family-run business – which manufactures aluminum and steel products that include soffits, fascia, trim coils, aluminum siding and more – was founded by brothers George and Bob Clark in 1990 after nearly 50 years of experience in the building products industry.

By 2011, the Clark brothers started to consider retirement and a succession plan to pass on the business responsibilities to their sons Mike, Bob and Eric Clark.

Vendor diversification

Five years later in 2016, private equity investment firm Blackford Capital, based in Grand Rapids, Michigan, came knocking. The firm specializes in acquiring and growing lower-mid-market companies that are usually founder- or family-owned.

“We made an educated bet that demand would rebound once the pandemic restrictions were lifted, and we positioned the company to respond effectively to our customer demand as the market reopened” Jeff Johnson, Blackford Capital

In August 2022, Gibraltar Industries acquired QAP from Blackford for $54 million in cash, subject to adjustments for working capital. Gibraltar makes products for renewable energy, residential, agtech and infrastructure markets. The publicly traded company has a value of approximately $1.66 billion.

Blackford’s work with QAP made the family-owned business an attractive target, particularly in finding new product sourcing. “We found that the company was buying 100 percent of its raw material from only one vendor. Quite frankly, that vendor was taking advantage of the company. We instituted a competitive process to develop relationships with other vendors,” says Blackford’s Johnson, former chairman of QAP.

An expanded network of vendors meant that QAP was now able to increase its margins.
From there, scaling the business and gaining a competitive edge was easy. Johnson says that Blackford added financial reporting protocols and key employees in specific areas and “methodically embarked on an annual strategic planning exercise to allow for hyper growth at the business.” A new board of directors was also put in place, of which the majority were independent directors.

By July 31, 2022, QAP recorded trailing 12-month revenue of $93 million with adjusted EBITDA of $11.5 million. QAP tripled its revenue under Blackford’s ownership, grew earnings five-fold, almost doubled its workforce and created an interesting enough investment opportunity to attract a strategic acquisition from a billion dollar publicly traded company.

Under Blackford’s ownership, 100 percent of the company’s growth was organic.

Pandemic strategies

With Blackford’s guidance, QAP grew three facilities in Michigan and was able to scale its business rapidly. Despite significant sector difficulties during the pandemic, QAP and Blackford doubled down and didn’t implement any layoffs. In fact, the firm grew employee count to around 160, from 80. Maintaining employee numbers positioned the firm to be well-equipped to handle the sudden increase in demand for building supplies during covid lockdowns.

10x

Return on invested capital

3x

Increase in QAP’s revenue during Blackford’s ownership

$54m

Price Gibraltar paid to acquire QAP

And Blackford and QAP had an eye on the post-covid world: “We made an educated bet that demand would rebound once the pandemic restrictions were lifted, and we positioned the company to respond effectively to our customer demand as the market reopened,” says Johnson.

The pandemic was also the first time in the company’s history that aluminum had to be purchased outside of the US.

Johnson says they turned to Asia to piece together suppliers who could fill their customer’s orders, and despite pass-through retail price hikes, QAP was able to retain their customers. Johnson says they were able to achieve this by being upfront and clear with their customers about why the supply crunch led to price hikes.

Importantly, under Blackford ownership the Clark family was able to retain a significant equity position in the company they built. “The Clark family represented our largest equity co-investors and retained a 30 percent interest in the business” says Johnson.

The investment paid off. Blackford’s investment into QAP generated a 10.7x return on investors’ capital and 44 percent net internal rate of return over the investment period.