Blackford Capital plans to acquire three more companies for its newly launched outdoor home-focused consolidation fund by June, said Martin Stein, the founder and managing director of Blackford.
The Grand Rapids, Michigan-based private equity firm has already signed a few letters of intent with potential targets, he noted, adding that Blackford eventually wants a dozen businesses under the portfolio’s umbrella. That goal could take another year, he projected.
One of the three targets in question generates between USD 5m and USD 10m in annual revenue; the second's revenue is between USD 20m and USD 40m, while the third's is USD 80m to USD 100m, Stein said.
Once closed, Blackford will have new operations in the East and West Coasts as well as the Southwest, he said, adding that in the future, it will likely target companies in the Midwest and Northwest as it wants a global footprint.
Blackford established the portfolio group in November. That same month, it bought Starfire Direct, a Temecula, California-based seller of outdoor gas fire pits and high-end custom products to consumers, and Artificial Turf Supply, a Carlsbad, California-based supplier of high-quality synthetic and artificial turf products for residential backyards. Stein declined to disclose the terms of either purchase.
New targets could include patio furniture, gazebo, outdoor lighting, and lawn game companies, said Stein. These are all consumer-focused sectors likely to see long-term growth, he noted.
“We have a strong sentiment that more and more people will spend more time outside,” he said, adding that this trend is noticeably prevalent in Southern states. “It was accelerated by Covid but it’s here to stay. Families are going to be investing substantially more in their backyards and outdoor spaces.”
Blackford is also interested in companies that sell their products through distributors or outlets like Home Depot and Lowe's, he added.
The intention is for the portfolio companies to maintain their names but sell each other’s products, said Stein.
“Most people who want to upgrade their backyard and install artificial turf are not going to stop there,” he explained. It would be a natural progression for those consumers to also invest in things like lawn furniture, outdoor lighting, and outdoor fire pits, Stein said, projecting that “it won’t be long before one can buy artificial turf from Starfire Direct and buy fire pits and sun umbrellas from Artificial Turf Supply. We want to be a one-stop shop that’s multi-brand and omni-channel. [New] companies would help us move in that direction.”
Going forward, Blackford as a whole will target groups of varying sizes, said Stein.
“The smallest company that we’ve acquired in the past five years had approximately USD 2.5m of EBITDA and our current largest company is projected to have USD 40m in EBITDA,” he said. “Generally, we are looking to acquire businesses with below USD 10m in EBITDA, grow them acquisitively and organically, deploy at least USD 25m of equity and then sell them with meaningful returns.”
Last year, Blackford sold Quality Aluminum Products, a manufacturer of various aluminum and steel products, to Gibraltar Industries [NASDAQ:ROCK] for USD 54m (around 5x trailing twelve months adjusted EBITDA, according to a press release); heavy construction equipment dealer Grand Equipment to Cognitive Capital Partners; AV systems manufacturer Hall Technologies to Gun Lake Investments; and its Imaging Supplies Consolidation group, which comprises several aftermarket toner and cartridge supply groups, to CWG International. Terms for the latter three deals were not disclosed.
The firm invested in these companies between 2015 and 2018, according to press releases. The sale of the imaging supplies group represented a 5x return for investors, according to a press release. The divestiture came about due to Covid-19's severe impact on the printing industry, according to the release.
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