Standard Precast Inc.

Company Description

Standard Precast is a manufacturer of precast concrete manholes for storm drainage, sanitary sewer, electrical and other utility, and underground applications. Founded in 1965, it has been providing products and services to Site Contractors, Municipalities, Utilities, and Private Developers in North and Central Florida for more than 55 years.

Transaction Background

In December 2016, WoodLake Group received a brief information memorandum on SPI, located in Jacksonville, FL. It was majority-owned by Russell Smith and the widow of his co-founder. We were attracted by the company’s high profitability, a unique market position and a strong management team led by Russell Smith.

360 Degree Diagnostic

Despite a lack of financial and performance data, we went through a deep 360-degree diagnostic and created a comprehensive data base. We examined 8,800 pages of invoices in non-editable PDF format by hand and broke down the historical sales by product type, by customer, by geography, and by salesmen. We also examined all of SPI’s projects over the past 5 years and categorized them by customer type, end-use customer, and county. We reached out to the city of Jacksonville and obtained past and budgeted infrastructure expenditures to determine market share. A Quality of Earnings study was started by Mazars USA and completed in record time.

Next, we prepared a very comprehensive Investment Memorandum, which we shared with prospective senior and junior lenders. In late 2016, lenders had reservations about lending to infrastructure in general and precast concrete companies. Impressed by SPI’s profitability and our detailed Investment Memorandum, we reached favorable terms with a senior and a junior lender. While this was going on, we had to find a sale leaseback company to acquire 56 acres of land and 150,000 sf of buildings and close simultaneously with the purchase of the Company. Generally, sale leasebacks are for distribution centers, not specialized manufacturing facilities. We finally identified the right company, Store Capital, after contacting 30 different parties.

Smooth Transition

The seller was concerned about customers adversely reacting to a change of control, so we conducted an extensive customer satisfaction survey. The result was very favorable. At the closing, three sets of negotiations were taking place - with the seller, with the lenders and with Store Capital, the sale leaseback company.

Accomplishments

Add-on Acquisition: While the SPI acquisition was ongoing, we initiated discussions to acquire Precast Concrete Systems, LLC, a small competitor in Tallahassee, FL. On December 28, 2016 we closed on SPI. Less than 90 days later, we closed on PCS. The add-on opened the Florida panhandle and allowed the company to dominate the Florida market. In June, 2017, we were recognized by ACG New York as Finalist in the Champions Awards.

Strengthened Internal Control: WoodLake identified the lack of internal control and reporting system during due diligence. We created information systems to measure daily and weekly performance, gross margin by product family, perpetual inventory, labor usage, and other critical operating and financial factors.

Addition of Talents: After the seller decided to retire early on short notice, Sam Seraphim, WoodLake’s Managing Partner, stepped in as interim CEO for 6 months until the addition of a new CEO, who turned out to be a great boon to the company. WoodLake also added a highly experienced CFO. The new CFO further strengthened the information system and provided weekly updates to investors.

Outcome

In October 2019, WoodLake Group and its co-investors sold the company to Oldcastle Infrastructure, a wholly owned subsidiary of CRH, one of the largest building material company in the world.

After increasing revenues by 60% and maintaining the same EBITDA margin, SPC was sold at a very high multiple within a 33-month holding period. The original owner, Russel Smith, who rolled-over a portion of his proceeds, was able to receive a “second bite at the apple”.