Blackford Capital spreads its wings

Managing director says firm adds supply chain value for portfolio companies through Asia partnership.
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Martin Stein started Blackford Capital 11 years ago, and in that time, he said a disciplined approach to investing has propelled the company’s growth and credibility.

Martin Stein. Courtesy Blackford Capital

The Grand Rapids-based private equity (PE) firm, based at 190 Monroe Ave. NW in downtown Grand Rapids, acquires, manages and builds founder- and family-owned lower middle market manufacturing, industrial and distribution companies, helping them supercharge performance by improving operations and implementing aggressive growth plans. The firm currently has 11 portfolio companies and has had five exits in its history, with more expected to close this year, according to Stein, founder and managing director.

As the Business Journal reported in a 2011 profile on Stein, he launched Blackford as a solo operator returning to his West Michigan roots after years of mergers and acquisitions (M&A) experience in Los Angeles and time spent living in Chicago; St. Louis, Missouri; Washington, D.C.; Paris; and Boston.

He and his wife wanted to be closer to family as they raised their young children — and they have stayed put ever since.

Stein has been busy growing his firm from zero to approximately 30 employees, as well as six operating partners in Michigan, Maine, Colorado, California and Hong Kong. During its existence, Blackford has hired and mentored 120 junior analysts — mostly from Michigan universities — who have gone on to work for well-known entities such as Goldman Sachs, Mercantile Bank, Van Andel Institute and RDV Corp., taking M&A experience with them.

The firm has averaged about four-and-a-half acquisitions per year since its inception, and by year’s end, Stein estimates Blackford will be managing $700 million in aggregate revenues.

“We’ve got over 300 investors now as a firm, we have deployed just under $200 million in equity capital and done three-quarters of a billion dollars’ worth of transactions,” he said.

Back in 2012, Blackford set up the Michigan Prosperity Fund to invest in Michigan-based companies and recruited former Gov. John Engler as its chair, winding the effort down when Engler left to become president of Michigan State University from 2018-19. In just under six years, Blackford acquired eight Michigan companies, a move Stein said was rare and inspired other PE firms to turn their sights to founder- and family-owned business in Michigan, as well.

“When I relocated back here, I remember going to a Business Leaders for Michigan presentation, and they were talking about exactly that: how little investment there is back in Michigan. And we said, well, we’re going to do the exact opposite. We are going to invest in Michigan. And so we did that in 2012, and it was a highly successful effort.”

Of those eight Michigan companies, Dickinson Press exited Blackford’s portfolio in 2018 and Custom Profile exited in 2019.

Every time the firm has a successful exit, Stein said its credibility and capacity to attract capital grows. During its first four years, Blackford deployed about $20 million of equity, in the past five years, it deployed about $160 million, and this year alone, it’s on track to deploy about $70 million.

Stein made the Business Journal’s and The M&A Advisor’s 40 Under 40 lists in 2012 and won Dealmaker of the Year awards from MiBiz in 2013 and 2017. In 2016, The M&A Advisor named Stein Private Equity Professional of the Year and in 2018 named Blackford Capital the Private Equity Firm of the Year out of all the PE firms across the U.S.

Like companies in every industry, Blackford’s ability to proceed with “business as usual” was impacted by the COVID-19 pandemic. It was a “terrible year” for transactions, Stein said, and other than selling one company (Fort Wayne, Indiana-based Ellison Bakery) the firm spent all of its time making sure its portfolio companies were able to survive COVID-19 by shoring up their operations and realigning their cost structures.

“(But) it ended up being one of our strongest years we’ve ever had,” Stein said. “… We finished the year in very positive territory for our equity value growth for our companies.”

This year, Stein said Blackford expects to close 14 transactions by year-end — far and away its best year ever.

In July, the Business Journal reported Blackford hired Steve Feniger, an over 30-year veteran of international buying and supply chain sourcing, as operating partner for Asia. 

“He has taken a company public on the Chinese stock exchange, he worked with one of China’s largest private equity funds, PAG, in their first fund, and he operates a base of 50 employees out of Hong Kong and Shanghai that we use to support the sourcing activities for Blackford Capital,” Stein said.

What this means, practically speaking, is Blackford can use Feniger’s connections and Asia team to help the firm’s portfolio companies “do better than our competitors on the supply chain” by regular visits to suppliers to ensure timeliness and quality.

“We are actually buying companies now with the basis that we’re going to be able to improve their capabilities in sourcing,” Stein said, “and it’s not just China. … It’s Asia broadly.

“For example, (Avon, Massachusetts-based) Aqua-Leisure is one of our portfolio companies. We are the No. 1 manufacturer and distributor of aquatic recreational products in the United States, and the business sources from 42 factories over in Asia. Because we have 50 employees that are in Asia, we are able to go visit those factories to make sure that we’ve got the quality levels and, more importantly now, the service and delivery levels that our customers are requiring. It has allowed the company to grow enormously over time. When we acquired it, it was about $60 million in (annual) revenue, and we’re on a path at the end of next year to be at an estimated $300 million in revenues.”

Although Blackford started out with a regional focus, with eight of its 16 platform investments in Michigan and 12 of 16 in the Midwest, its most recent transactions were in Nevada, California and Boston, so it’s expanding its reach. Stein said he expects the firm will continue its focus on U.S. investments only, with supply chain sourcing support from Asia.

More information about Blackford Capital is at blackfordcapital.com.

 

Blackford Capital statistics

46 completed transactions

200 acquisition opportunities reviewed

2,000 detailed analyses

35,000 reviewed transactions

11 portfolio companies

5 portfolio exits

$700 million in revenues under management expected by year’s end

2,000 employees across its portfolio

30 Blackford team members

16 states in which its companies operate

Source: Blackford Capital

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