Strategy – Watermill http://www.watermill.com A Strategy Driven Private Equity Partnership Mon, 05 Nov 2018 19:17:57 +0000 en-US hourly 1 Watermill Completes the Sale of C&M http://www.watermill.com/watermill-completes-sale-cm/ Wed, 03 Jan 2018 16:09:34 +0000 http://www.watermill.com/?p=2217 LEXINGTON, Mass — The Watermill Group, LLC (the “Watermill Group”), a strategy-driven private investment firm, today announced the sale of C&M Corporation to Winchester Interconnect Corporation (“Winchester”), a portfolio company of Snow Phipps Group (“Snow Phipps”), a private equity firm focused on middle-market control investments. The transaction took place on December 22, 2017. C&M is...

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LEXINGTON, Mass — The Watermill Group, LLC (the “Watermill Group”), a strategy-driven private investment firm, today announced the sale of C&M Corporation to Winchester Interconnect Corporation (“Winchester”), a portfolio company of Snow Phipps Group (“Snow Phipps”), a private equity firm focused on middle-market control investments. The transaction took place on December 22, 2017. C&M is a leading designer and manufacturer of wire & cable and coil cords for performance-critical applications. The company serves blue-chip customers across a variety of growing markets including industrial automation, medical and military. Based in Norwalk, Connecticut, Winchester is a designer and manufacturer of connectivity solutions, including both connectors and cable assemblies, for diversified end markets including medical, military, aerospace and semiconductor.

C&M has transformed its business over the past nine years, following its acquisition by the Watermill Group in 2008. Management focused on establishing a scalable platform for growth and shifting its sales focus to high-growth industrial market segments, creating a strong customer pipeline that continues to expand today. In addition, C&M upgraded its facility, equipment and capabilities, including completing a major facility move and retrofit process. A new management team has also taken the helm to ensure engineering leadership, along with the delivery of high-performance products and exceptional customer service.

“The C&M of today is quite different from the firm we originally acquired, and we have been proud partners through their strategic journey,” stated Timothy Eburne, Partner, the Watermill Group. “As a result of Watermill’s strategy development and implementation process, C&M evolved from a family owned job shop in an aging facility serving increasingly commoditized end markets into a professional, tightly run operation in a modern facility with a unique position in custom wire and cable. Their transformation is evidence that the application of strategic vision combined with hands on operational support can create lasting impact for businesses and employees.”

Watermill and C&M were represented by M&A Advisor Sperry, Mitchell & Co and legal advisor K&L Gates LLP

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Steven Karol on the Importance of Safety http://www.watermill.com/steven-karol-importance-safety/ Tue, 28 Jun 2016 16:02:17 +0000 http://www.watermill.com/?p=2026 “If we’ve developed an industry-leading safety program, then that company is most likely better at manufacturing than their competition,” Steven Karol, Managing Partner and Founder, The Watermill Group We sat down with Watermill Founder and Managing Partner, Steven Karol, to discuss the safety program at Tenere – a Watermill company that last month expanded internationally...

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“If we’ve developed an industry-leading safety program, then that company is most likely better at manufacturing than their competition,” Steven Karol, Managing Partner and Founder, The Watermill Group

We sat down with Watermill Founder and Managing Partner, Steven Karol, to discuss the safety program at Tenere – a Watermill company that last month expanded internationally with the addition of a facility in Monterrey, Mexico – as well as his thoughts on safety as an investment priority.

Does Watermill’s emphasis on safety illustrate how Watermill approaches employees and management?

Steven:  Absolutely.  We have a deep interest in the employees and management at our portfolio companies.  Of course, there is the philosophical aspect, where you ask, “Why should anyone come to work in the morning and go home hurt?”  Even if it is a dangerous work environment, like making steel, bending metal, or operating a hot mill, it ought to be done in a way in which you shouldn’t have to worry about getting hurt every day.

Then, there’s the rational side:  how do you achieve safety?  The answer to that question is the “secret sauce.” In order to be safe, the process that you use needs to be thought-through, organized and disciplined.  If these requirements are met, then it is more likely that the whole manufacturing process will be effective and efficient. That’s why Watermill looks at safety as a leading indicator of performance for all companies we work with or diligence.  It is a rule of thumb that people with a lot of manufacturing experience will be able to tell, without even visiting the company, whether or not its manufacturing process is effective simply by seeing its safety record.

At Watermill, we are interested in both sides.  We don’t want people to get hurt, and if we’ve developed an industry-leading safety program, then that company is most likely more efficient and effective at manufacturing than their competition as well.

Can you reflect on Tenere’s safety program, and the discipline they bring to it?

Steven: For Tenere, their safety program is their credo.  There are so many ways the program differentiates the company from a safety standpoint.

I’d liken it to when your mother said, “Go outside, but play safe.”  Of course that had no impact on you whatsoever.  Just like in this context, a manager can’t just simply tell their employees to be safe.  It doesn’t work.

The first way employees will be safe is if the equipment is organized in a safe manner and we’ve created a safe work environment.  If you have a machine that has a big, heavy lever coming down and stamping something, and it has a guard on it so that an employee can’t get their hands in the way, then that precaution is a good thing.  If it doesn’t have a guard and employees could get their hands in the way, then there is likelihood that someday, one way or another, someone might get their hand stamped.  When initially touring one of our companies, we saw, among other things, machines without guards.  Clearly that needed to be addressed.

The second way employees will stay safe is through work rules and organizing procedures.  The third way is by everyone taking personal responsibility and taking responsibility for the guy next to them. That’s when we know we’ve nailed it.  Then, hopefully, there starts to be peer pressure for everyone to be safe.  This type of peer-to-peer responsibility is more effective than if safety practices came down as an order.

Tenere is really good at that final aspect – the cultural shift toward responsibility. They organize safety teams made up of workers that push safety through the factory, not the management.  Obviously, management is supporting these teams and their organizing initiatives, but it is primarily driven at the employee level making it more likely to integrate into the cultural fabric of the company.

Would you say it takes a combination of having good processes in place and getting everyone to buy into the safety culture?

Steven: We want everyone to embrace the safety culture, not merely buy into it.  Culture is not something you can set; it is something you can only inspire.

How and when in the evaluation process do you try to determine if safety is already a company focus?

Steven: Watermill starts placing emphasis on safety far before acquiring the business. We will conduct a safety audit as part of our due diligence. Once under our ownership, we will insist that the business benchmark against not only other Watermill companies, but also against their industry and best in class businesses.  We make sure to set very aspirational goals.

If you have a new portfolio company that has had safety issues in the past, what are some of the first steps Watermill takes to address those issues?

Steven:  We immediately put employees – and their safety – first.  For instance, with a company in our current portfolio, when we were walking through the plant prior to purchase, we noticed a lot of aspects of the plant that we didn’t think were safe.  We insisted on immediately implementing a new safety program following the close. We actually helped them develop this program and we funded it with a sizable investment before we even closed the deal.  So if you are an employee, and you get new owners, and the first thing they do is tell you that they are investing in safety, you as an employee understand that safety is very important.  You also know that the new owners are interested in your health, safety and well being, which indicates they are taking a long term perspective on the people and growing the business.

During one of our most recent acquisitions, Mike Fuller, one of our principals, toured the company with the president on the day of closing.  Mike introduced himself to employees and made it a point to emphasize that Watermill’s main concern is safety and we would be asking them, the employees, to commit to health, environment and safety.  We do this with every new acquisition.

Is there one instance that you can reflect back on where you are most proud of the safety measures that Watermill put in place with a portfolio company?

Steven: I am proud of all of them.  Every single one of our portfolio companies has raised its safety levels.

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The Watermill Group Named Private Equity Firm of the Year by The M&A Advisor http://www.watermill.com/the-watermill-group-named-private-equity-firm-of-the-year-by-the-ma-advisor/ Mon, 23 Nov 2015 22:44:43 +0000 http://www.watermill.com/?p=1848 On November 17, The Watermill Group was named Private Equity Firm of the Year by The M&A Advisor, the premier global network of M&A, turnaround and finance professionals. The M&A Advisor Awards are widely respected as a pinnacle of achievement in the M&A industry. The Watermill Group was recognized along with its fellow deal making,...

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  • On November 17, The Watermill Group was named Private Equity Firm of the Year by The M&A Advisor, the premier global network of M&A, turnaround and finance professionals.
  • The M&A Advisor Awards are widely respected as a pinnacle of achievement in the M&A industry.
  • The Watermill Group was recognized along with its fellow deal making, restructuring and financing nominees at the 2015 M&A Advisor Awards Gala in New York City.
  • Lexington, MA — November 23, 2015 —The Watermill Group, a strategy-driven private investment firm, today announced that it has been named Private Equity Firm of the Year by The M&A Advisor, the premier global network of M&A, turnaround and finance professionals. The honor recognizes Watermill’s accomplishments of the past year, which have included the ac
    quisition of Quality Metalcraft Inc. (QMC), the sale of Global Tubes to AMETEK, Inc. and the acquisition of Mountain Molding, LLC by Watermill’s portfolio company, Tenere Inc.

    The M&A Advisor Awards, widely respected as a pinnacle of achievement in the M&A industry, recognize excellence in deal making, restructuring and financing, and celebrate the contributions and achievements of leading firms and prof
    essionals. Watermill was chosen as Private Equity Firm of the Year from among a distinguished group of finalists. The 14th Annual M&A Advisor Awards gala was held November 17th in New York City.

    “We’re honored to have been selected as the Private Equity Firm of the Year by The M&A Advisor, an award which is especially humbling knowing we were considered along with an incredibly accomplished group of fellow finalists,” said Steven E. Karol, Managing Partner and Founder of The Watermill Group. “Core to Watermill’s success over the past 35 years has been our incredible team here at Watermill, along with our outstanding portfolio management teams, investors and advisors – we jointly celebrate this award with them, and are grateful for their contributions.”

    Watermill is a third-generation family firm and one of the oldest independent sponsors. The firm is known for leading with strategy and collaborating closely with the management teams of the companies it owns to chart a new course for growth. Watermill excels at complicated transactions, whether they involve first time sellers, are in out of favor industries, contain complex deal dynamics or require experience leading significant operational improvement. By maintaining a laser focus on creating value, The Watermill Group consistently delivers above average returns.

    “Our firm’s passion is helping companies achieve their full potential and become enduring leaders in their respective markets,” added Karol. “Many of our team members have taken an unconventional path to private equity and this broad range of skills and deeper diversity gives us a competitive edge when it comes to tackling traditional challenges in non-traditional ways. We pride ourselves on seeing opportunities others may overlook.”

    Watermill was also named a finalist for three additional cate2015-ma-awards-winner-logogories:  Industrial Manufacturing and Distribution Deal of the Year (from $10 to $100MM); Buyers/Sellers Dealmaker of the Year; and M&A Deal of the Year (over $75MM to $100MM). For a detailed list of all of the Award Finalists for the 14th Annual M&A Advisor Awards, please click here.

    The M&A Advisor is the preeminent organization recognizing excellence, honoring achievement, presenting thought leadership and facilitating connections among the world’s leading dealmaking professionals. The organization was founded in 1998 to offer insights and intelligence on M&A activities and over the past seventeen years, the organization has established the premier global network of M&A, turnaround and finance professionals.

    About The Watermill Group
    The Watermill Group is a strategy-driven private investment firm that helps companies achieve their full potential through strategic transformation. For more than three decades, Watermill has been acquiring, operating and improving companies. Watermill looks for businesses in which it can apply a unique combination of strategic insight and management expertise to re-imagine their future and drive growth.

     

     

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    Watermill’s Global Tubes Acquired by AMETEK, Inc. http://www.watermill.com/global-tubes-acquired-by-ametek-inc/ Fri, 08 May 2015 13:26:34 +0000 http://www.watermill.com/?p=1792 Global Tubes is comprised of two businesses – Superior Tube Company, Inc. (Collegeville, PA) and Fine Tubes Ltd. (Plymouth, UK) – and was created in 2012 after they were acquired by The Watermill Group Sale price of $200 million represents significant return for The Watermill Group and its investors EBITDA more than doubled as a...

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  • Global Tubes is comprised of two businesses – Superior Tube Company, Inc. (Collegeville, PA) and Fine Tubes Ltd. (Plymouth, UK) – and was created in 2012 after they were acquired by The Watermill Group
  • Sale price of $200 million represents significant return for The Watermill Group and its investors
  • EBITDA more than doubled as a result of Watermill’s innovative approach to helping companies achieve their full potential through strategic transformation
  • The Watermill Group, a strategy-driven private investment firm, today announced the sale of Global Tubes to AMETEK, Inc. (NYSE:AME), a leading global manufacturer of electronic instruments and electro-mechanical devices, for approximately $200 million. With annual sales of approximately $120 million, Global Tubes is a leading manufacturer of highly specialized precision metal tubing from a wide variety of metals and alloys including stainless steel, nickel, zirconium, and titanium. Its products are used in highly engineered applications serving the aerospace, energy, power generation, and medical markets.

    At the time Watermill acquired the businesses in 2012, Fine Tubes Ltd. and Superior Tube Company, Inc. were operated independently by a family holding company. Since uniting the two companies under the Global Tubes name, Watermill and management overhauled both production facilities in order to streamline manufacturing operations, increased production capacity, upgraded equipment, and decreased product lead times to provide enhanced value to customers. As part of a Watermill-led strategic planning process, the firm also re-focused on the needs of key customer and market segments, with a corresponding strengthening of capabilities and engineering resources. The refreshed strategy, operations excellence initiatives, and key management hires under Watermill ownership built a strong foundation for accelerated sales growth.

    “We are very pleased with the Global Tubes transformation. In just under three years, the business has developed from two disparate entities that were challenged to keep up with production demands, into an integrated global tubing platform that is adept at anticipating market needs and delivering mission-critical products for its customers. This reinvention is reflected in the fact that revenue has improved by 16% and EBITDA has more than doubled,” stated Steven E. Karol, Managing Partner and Founder of The Watermill Group. “We believe Global Tubes will be a strong fit for AMETEK.”

    “With Watermill, Superior Tube and Fine Tubes have made significant advancements in service levels and built a strong foundation for accelerated global growth,” stated David Robinson, Chairman of Global Tubes and a Watermill advisor. “Utilizing AMETEK’s four key strategies, Global Tubes will bring its customers an even more enhanced specialty metals offering.”

    Global Tubes joins AMETEK as part of its Electromechanical Group (EMG) – a differentiated supplier of electrical interconnects, precision motion control solutions, specialty metals, thermal management systems, and floor care and specialty motors.

    Goodwin Procter LLP provided legal counsel on the sale of Global Tubes to AMETEK.

    About The Watermill Group

    The Watermill Group is a strategy-driven private investment firm that revitalizes companies to reach their full potential. For more than three decades, Watermill has been acquiring, operating and improving companies. Watermill looks for businesses in which it can apply a unique combination of strategic insight and management expertise to re-imagine their future and drive growth.

    About AMETEK

    AMETEK is a leading global manufacturer of electronic instruments and electro-mechanical devices with annual sales of $4.0 billion. AMETEK’s Corporate Growth Plan is based on Four Key Strategies: Operational Excellence, Strategic Acquisitions, Global & Market Expansion and New Products. AMETEK’s objective is double-digit percentage growth in earnings per share over the business cycle and a superior return on total capital. The common stock of AMETEK is a component of the S&P 500 Index.

    About Fine Tubes, Ltd.

    Fine Tubes Ltd., located in Plymouth, United Kingdom, is a leading European manufacturer of high-precision metal tubing in stainless steel, nickel, titanium and zirconium alloys. The company has a fully integrated facility for the manufacture, research and development of high-quality metal tubes in seamless, welded and welded-and-drawn forms. Fine Tubes’ tubing solutions are designed for use in environments that endure extreme temperatures, pressure, dynamic stress and corrosion, including critical-tolerance applications in the aerospace, medical and energy industries. Incorporated in 1943, Fine Tubes’ long history of success stems from its proven ability to consistently develop and manufacture complex, high-performance engineered tubing that meets the stringent quality requirements of the world’s most demanding applications.

    About Superior Tube Company, Inc.

    Superior Tube Company is a leading North American manufacturer of high-precision, small diameter metal tubing used primarily in highly engineered applications in the nuclear, aerospace, medical and durable goods markets. Superior Tube manufactures tubing to tight tolerances and to custom specifications using stainless steel, nickel alloys, high-temperature alloys and reactive metals. The company was founded in 1934 to produce high-quality, small diameter steel tubing for the aircraft industry.

    Contacts

    CXO Communication for Watermill
    Sandy George, 617-413-6126
    sandy@cxocommunication.com

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    To fund or not to fund, that is the question… http://www.watermill.com/fund-fund-question/ Fri, 25 Jul 2014 21:52:44 +0000 http://www.watermill.com/?p=1531 One of the main conversations happening in the private equity world is how populated the industry has become and its effect on the purchase price of a company. Whereas 5-10 years ago PE firms would pay a 3-5x EBITDA multiple to acquire a company, today that same company could sell for for a 5-7x multiple,...

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    One of the main conversations happening in the private equity world is how populated the industry has become and its effect on the purchase price of a company. Whereas 5-10 years ago PE firms would pay a 3-5x EBITDA multiple to acquire a company, today that same company could sell for for a 5-7x multiple, with some companies in certain high growth markets like technology selling for a whopping 12x EBITDA. In other words, if a company’s EBITDA was 5 million dollars, a few years ago a PE firm would have offered somewhere between 15 and 25 million dollars to acquire the business, but today, that same company might sell for between $25-35M, or possibly higher.

    Why is this? Why have the multiples gone up so much in such a relatively short period of time? To start looking for an answer, I found an article published in The Wall Street Journal on June 15th, titled, “Private Equity Has More Than It Can Spend.” The article speaks mostly about the amount of dry powder, or the amount of un-invested money raised by PE firms, while focusing on the fact that the firms have, as the WSJ points out, “been so successful in raising money from investors recently that it can’t spend it fast enough.” According to the WSJ, there was about $1.073 trillion dollars of “dry powder” for the year ending December 31, 2013, an increase of 130 billion dollars since the end of 2012.

    The question I ask is whether or not there is a correlation between the increased EBITDA multiples and the amount of dry powder sitting in PE funds today.

    To start to answer that question, let’s look at the model most PE firms use. Approximately 9 out of 10 PE firms use what is called a 2 and 20 model. The model assumes a 2% annual management fee on the money in the fund and a 20% fee on the profits of each company it sells. As an example, if a PE firm raises a 1 billion dollar fund, and decides that they don’t see any deals they like, they could choose not to make any deals for that year and still make $20 million (2% of $1 billion) for the year.

    2 and 20 firms have started to become aware of investors’ concerns about this model, and have begun to somewhat force their way into deals. One would argue that those firms are pursuing deals they shouldn’t be making, that are either the wrong industry, or over-priced,  just to satisfy their investors.   As the WSJ article states, “some analysts fear that private-equity firms will struggle to invest such a large amount, resulting either in money remaining un-invested for years or in fund managers overpaying for deals.” This can leave investors in a tough predicament. They are left waiting for the PE firm to give them a capital call, but need to keep their money super liquid in order to invest, because, if while waiting for the PE firm to close a deal, the investor decides to enter a different investment, they may not have the cash to invest and will default on the pledge. Defaulting on a pledge will not only get the investor blacklisted from most PE firms in the future, but may also result in a loss of money. One can make the argument that not only have the investors not made a return from the PE firm, but they also had opportunity costs due to investments they decided to pass up out of fear of defaulting.

    The question that many PE firms are asking themselves is: how can we keep our investors happy, while still being patient and selecting only the most promising deals? The Watermill Group’s answer, which I feel is the best solution, is having no fund at all. Watermill has a group of private investors that have committed to finance deals when they occur. In the meantime, while Watermill is looking for the right deal, investors can invest their money however they want, without a 2% management fee. In addition, if a Watermill investor has his cash tied up in other investments when the capital call arrives, he can just pass on the deal with no repercussions. By using the “fund-less” model, Watermill feels absolutely no pressure to overpay for a deal, and can afford, if need be, to go a year without making a deal with no anxiety on the part of their investors.

    It will be interesting to monitor whether PE firms lean more towards Watermill’s model or whether they stick with a conventional 2 and 20 model. As a partner in Watermill said on the first day of my internship, “PE is a huge and expanding bubble, and it’ll be interesting to see when it bursts.”

    As an aside, this is my 5th week as an intern in the PE world, so take all of the above with a grain of salt.

    -By Intern Akiva

     

     

     

     

     

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    Thoughts on the Future http://www.watermill.com/thoughts-future/ Fri, 25 Jul 2014 21:25:10 +0000 http://www.watermill.com/?p=1528 Being on the verge of graduating college sets you up for a nasty bout of the “shoulds” — a cascade of career advice from everyone you know. This is all good and well, however, the shocking eminence of important career decisions begs the question: how are college grads to evaluate themselves and their career opportunities?...

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    Being on the verge of graduating college sets you up for a nasty bout of the “shoulds” — a cascade of career advice from everyone you know. This is all good and well, however, the shocking eminence of important career decisions begs the question: how are college grads to evaluate themselves and their career opportunities? How do you tailor your own personal competitive strategy to get you to the next level? As college students, we feel intense pressure to live up to the price tag of our undergraduate educations, yet simultaneously need to use this time to figure out who we are. Despite a surplus of advice, sorting your life out is no menial task —we are stuck in the college/professional dichotomy. In such a state of flux, some decisions deserve thinking out of the box.

    Who’s hiring? What is the opportunity cost of my time? With one foot on either side of the college/professional dichotomy, the decisions we make regarding first-time employment seem to lack creative or alternative thought processes. The same metrics are referenced in every job description, every piece of advice, and every interview, leading to a feeling that our choices are limited.

    A recent piece in The New York Times entitled “A Mad Scramble for Young Bankers: Wall Street Banks and Private Equity Firms compete for Young Talent” gave me new insight into my search. The article details how the competitive landscape for top-tier finance graduates is shifting towards private equity, where hours are shorter, pay is comparable, and the grass is greener, and away from investment banking. My peers competitive strategy doesn’t need to be the tried and true iteration of yesteryear — we have more opportunities these days and can take lifestyle considerations into account. To elucidate: the high costs of investment banking are finally being realized (and acted upon), forcing a mismatch between young talent and the traditional banking career path, pushing would-be career bankers into private equity jobs. Too often are arduous work hours, an unfavorable work-life balance, and difficult work environments taken as a necessary evil by green talent in finance. Perhaps tides are turning.

    In suggesting this, I don’t demean the importance of developing and maintaining a personal competitive strategy. One thing I’ve learned at Watermill is that competitive strategy is king. I merely assert that no longer do we need to accept the status quo, giving up so much for so little. By using just as much introspection as external analysis, we allow ourselves greater agency and a solid departure point for career decisions. Therefore, I implore us not just to listen to the “shoulds;” but to develop our own brand of personal strategy, by keeping an open mind and asking the questions people don’t ask. Like my peers, I often feel lost in weighing income and lifestyle. But taking a step back and comparing your personal life against the requirements of industry may prove to be a solid point of departure in post-graduate decision making.

    – By Intern Luke

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    Made in the USA http://www.watermill.com/made-usa/ Fri, 07 Feb 2014 15:50:03 +0000 http://www.watermill.com/?p=1410 Since its founding more than 35 years ago, Boston-based The Watermill Group has kept an eye on manufacturing companies. Of course, given the ebbs and flows of the market, investing in American manufacturing companies hasn’t always been an easy or even a good strategy. In fact, most companies have been outsourcing their manufacturing needs for the last 20 years...

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    Since its founding more than 35 years ago, Boston-based The Watermill
    Group has kept an eye on manufacturing companies. Of course, given the ebbs and flows of the market, investing in American manufacturing companies hasn’t always been an easy or even a good strategy. In fact, most companies have been outsourcing their manufacturing needs for the last 20 years to places where the cost of labor has been cheap, thus making it extremely difficult to own a successful manufacturing company in the United States. However, the development of horizontal fracking technology in the energy sector, coupled with increasingly higher costs of outsourced labor and lower quality production from
    non-North American countries, has caused companies to reassess their manufacturing policies.

    As a result, many companies are now bringing their manufacturing operations back to North America. Sensing this shift, Watermill renewed its commitment to manufacturing by purchasing the Dresser, Wis.-based company Tenere Inc. in December 2012.

    When assessing the value of a manufacturing company, Watermill outlined three main drivers. “There are three inputs that manufacturers have to look at: the cost of raw materials, labor costs and energy costs,” says Steven E. Karol, managing partner and founder of Watermill, noting that the resulting lower cost of natural gas stateside is translating into lower manufacturing costs domestically. “Energy is a major input, and the cost of it is decreasing. Tenere can do great here and so can many other companies with these favorable factors playing a positive role.”

    Founded in 1966, Tenere manufactures advanced, customized components from metal and plastics for blue chip customers such as IBM, Hewlett- Packard, EMC and John Deere. The company manufactures everything from steel metal fabrication to injection-molded products, but most of its customers are technology companies with data centers. For those clients, Tenere helps engineer server racks to maximize computing density while ensuring machines have the spacing and ventilation to function reliably.

    The company had been on Watermill’s radar for a while. Where others may have looked at Tenere and saw a metal and plastics part fabricator, Watermill saw the potential for a cutting-edge design and manufacturing company coming into favor given the shift in manufacturing trends. Previously owned by Stonehenge Partners Inc., Tenere had been on and off the selling block numerous times in the past 12 years. The company was in need of a partner with a longer-term outlook than prior owners.

    “Watermill was attracted to the engineering sophistication at Tenere,” says Watermill Partner Robert Ackerman. “We specialize in optimizing mechanical components in
    highly complex systems,” says Greg Adams, CEO of Tenere. “By fine-tuning the mechanical components, we can help our customers achieve greater operational efficiencies. And considering data centers today can cost billions of dollars,
    making the most of each facility is very important.”

    Tenere’s storage systems are custom-built for each customer and often include more than 10,000 parts that need to be customized, designed and assembled. “Our
    clients count on us to be a reliable extension of their organization. We need to be flexible, good at problem solving and meet the client’s needs, which are continuously
    changing,” Adams says.

    Undoubtedly, the uncertainty surrounding Tenere’s future for so many years took an emotional toll on its employees and changed budget decisions. “I think Watermill’s high-growth approach was liberating to the employees,” Adams says. “It emphasized a long-term strategy to build the company out while serving the customers. Watermill believes that if we build a great company, then everyone’s financial goals will be met.”

    In the short time that Watermill has owned Tenere, the company has been growing rapidly. To date, its gross sales are up to $100 million per year, a 50 percent increase from the prior year. Naturally, Tenere’s growth hasn’t come without a substantial contribution from Watermill. Watermill has spent about $9 million, taking into account the acquisition and equipment Watermill has financed. “We have made a real commitment because we believe in this company,” Ackerman says.

    The first thing Watermill did upon taking ownership was invest in the team. Watermill hired Adams, who had been the chief financial officer at Nypro, a manufacturer
    of products for the healthcare and packaging industries.

    “We wanted someone with the vision to see the growth possibilities and to
    bring leadership, but we also wanted someone who understood where the
    company was and was willing to get hands-on in creating change,” says Julia Karol, a director with Watermill.

    Watermill then took the management team on a retreat and worked to reenergize
    the employees. “We wanted them to know we were there to support their growth because having a motivated team is critical,” Julia Karol says.

    Adams personally met one-on-one with every employee, then met with them again in groups of about 15 to listen to how they felt the company could be improved. “Eighty percent of the employees are working with the product, and they added a valuable perspective. And they were anxious to be engaged,” Adams says. “We laid everything out after we got the employees’ input.”

    What’s more, Watermill wanted to make sure people understood that a manufacturing job at Tenere is a career path and started emphasizing training at the company and at local colleges.

    Additionally, Tenere hired a supply chain director and more employees. The head count at the company has grown from 318 to a whopping 618 employees in less than a year. Part of the employee growth came early on from an add-on acquisition Watermill completed in May 2013. Watermill bought Protogenic, a carve-out that focuses on prototyping, design and casting. “We added 35 people, and it expanded our capabilities by creating prototypes and demonstration drafts before we put products into full-scale production,” Steven Karol says.

    With the acquisition, Tenere also acquired a 22,000-square-foot manufacturing facility in Lakewood, Colo., and has since opened several more manufacturing facilities. Today, the company has four plants located in Dresser,
    Lakewood, St. Croix Falls, Wis., and Somerset, Wis. Watermill also is investing
    in new machinery to accommodate its growth and customer demands.

    “We export from Wisconsin and Colorado to all around the world,” Adams says. “Our plants are filling up. Our parking lot is jam-packed in Wisconsin and the employees are energized by it. This whole business comes down to the people. It’s a critical component. And we’ll continue to grow.” //

    Danielle Fugazy is a freelance writer and contributor to Middle Market Growth

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    Manistique Makeover http://www.watermill.com/manistique-makeover/ Mon, 16 Sep 2013 21:52:53 +0000 http://www.watermill.com/?p=1381 Joining FutureMark Paper Group is helping Manistique create a brand not a commodity Like long lost siblings reunited after many years of separation, the Alsip, IL, and Manistique, MI, paper mills are now back under the same umbrella – this time that of the FutureMark Paper Group. After suffering through numerous ownership changes, including a...

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    Joining FutureMark Paper Group is helping Manistique create a brand not a commodity

    Like long lost siblings reunited after many years of separation, the Alsip, IL, and Manistique, MI, paper mills are now back under the same umbrella – this time that of the FutureMark Paper Group.

    After suffering through numerous ownership changes, including a bankruptcy shut down in August 2011, the Manistique mill re-opened just one month later thanks to the efforts of Jon Johnson, now executive vice president and general manager, as well as the foresight of the local bank, mBank, and the Michigan Economic Development Corporation. Still, this was a short –term solution an a buyer was needed for long term survival.

    The Watermill Group, a Lexington, MA-based private investment firm, which had purchased and reposition the Alsip mill in 2009 as FutureMark Paper (PPI, February 2011, June 2011), first visited the Manistique mill in November 2011 and was intrigued by the possibilities of this northern Michigan mill, finalizing the sale in May 2012. Although the two mills are separate legal entities, they are operated under a marketing alliance called Futuremark Paper Group and share common senior management. There are now 150 employees, up from 120 when the sale was finalized with Watermill. And the mill has been profitable every month since the purchase…

    … What was the attraction this aging and ailing mill had for FutureMark and Watermill?

    Read More

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    Watermill’s Steven Karol on Transforming a Firm http://www.watermill.com/watermills-steven-karol-on-transforming-a-firm/ Wed, 11 Sep 2013 18:16:03 +0000 http://www.watermill.com/?p=1362 September 8, 2013 – Privcap sits down with Watermill’s Steven Karol to discuss transforming industrial processes by setting new goal parameters to increase a company’s profitability. Watermill acquired rubber manufacturing company Preferred Compounding in 2002, when the company was at a challenging crossroads. Steve Karol of Watermill discusses how the transformation of industrial processes can allow a...

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    September 8, 2013 – Privcap sits down with Watermill’s Steven Karol to discuss transforming industrial processes by setting new goal parameters to increase a company’s profitability.

    Watermill acquired rubber manufacturing company Preferred Compounding in 2002, when the company was at a challenging crossroads. Steve Karol of Watermill discusses how the transformation of industrial processes can allow a company to bounce back — twice.

    Watch the video here

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    Total Alignment: The Fundless Approach Advantage http://www.watermill.com/total-alignment-the-fundless-approach-advantage/ Mon, 02 Sep 2013 21:20:30 +0000 http://www.watermill.com/?p=1340 The Watermill Group does not invest in the fund format, and founder Steven E. Karol details why this model has worked for firm for over 30 years. He also discusses Watermill’s emphasis on strategy and operations over financial engineering. Watch the Video

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    The Watermill Group does not invest in the fund format, and founder Steven E. Karol details why this model has worked for firm for over 30 years. He also discusses Watermill’s emphasis on strategy and operations over financial engineering.

    Watch the Video

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