Investment firm L Squared Capital Partners in Newport Beach has taken another step in its consolidation of the cutting tools sector.
The firm said earlier this month its portfolio company GWS Tool Group had acquired Monster Tool Co. in Vista north of San Diego. That marks GWS’s seventh acquisition in less than two years, and the fourth this year alone as part of L Squared’s rollup strategy across various tech industries ripe for consolidation.
GWS is a manufacturer of highly engineered cutting tools, which are used to remove an excess layer of material from precision manufactured items to obtain desired shape, size and accuracy for industries including aerospace and defense.
L Squared invested in GWS in 2019 on the premise “there was a very fragmented universe of small and regional cutting tool manufacturers that had an excellent product in the U.S. but had a limited scale and reach beyond their current capabilities,” L Squared Partner Randall Hunt told the Business Journal on Aug. 17.
Buying Monster Tool “cements GWS’s nationwide reach with 10 high-end facilities and more than 450 employees spanning coast- to-coast,” according to L Squared.
“Our demonstrated commitment to an aggressive M&A; strategy has established GWS as the preferred acquirer for high-performance cutting tool companies in North America, a landscape that remains very fragmented,” said Hunt, who is also a GWS board member.
Automotive, Medical
GWS also serves the power generation, automotive and medical sectors.
Hunt said L Squared looks a various factors when considering investing in a “consolidation platform” such as GWS. That includes the fragmentation of the sector and the “actionability” of acquiring targets, including fundamental revenue quality and organic growth prospects.
Thereafter, the considerations for the add-on acquisitions, such as GWS purchasing Monster Tool, include “product and customer service quality combined with synergistic rationale.”
Raptor Scientific
L Squared has been operating in a similar way as it seeks to consolidate the high-tech testing and measurement production in the aerospace and defense markets with a company it founded in 2019 under umbrella company Raptor Scientific LLC.
Raptor Scientific said April 12 it had acquired TestVonics, a Peterborough, N.H.-based manufacturer of equipment that is used to test, verify and calibrate a range of air data instruments, as well as airspeed monitors used on rotary and fixed wing aircraft.
With Raptor and GWS “we found them to be very actionable,” according to Hunt.
“We’ve also had a lot of success with a business that was formerly known as Oracle Elevator that was recently rebranded to Elevated Facility Services,” Hunt said. “Between those three platforms—Elevated Facility Services, Raptor Scientific and GWS Tool Group—we’ve now done over 25 add-on acquisitions in just the past three years.”
In another development, L Squared on Aug. 16 announced the acquisition of Miamisburg, Ohio based Crane 1, one of the largest providers of overhead Crane MRO (maintenance, repair and operations) services and equipment in the United States, from Pfingsten Partners of Chicago.
Industry Research
L Squared was founded by Chicago Growth Partners alumni Rob Healy and Jeff Farrero.
It makes investments in leading growth companies that operate in targeted sectors: education technology, tech-enabled services & software, and industrial technology & services.
It cites a “unique investor base of family offices.”
L Squared, founded in 2014, also works with various investment bankers pitching ideas.
“We all have sort of a mind toward industry research,” Hunt said.
The company says it doesn’t disclose financial information of its portfolio companies aside from noting it is currently investing funds from its third fund, which closed in September 2020 with $505 million.
More’s on the way. “There are assets that are in the pipeline,” according to Hunt.
