Summary
The exit of Quality Aluminum Products (QAP) represents a great example of Blackford Capital’s value proposition for family-owned businesses, and adds to our successful and consistent track record of investments in the industrials/manufacturing sector. With QAP, Blackford partnered with a third-generation family-owned business and provided a financial mechanism to transition the business to a younger generation.
During its time as a Blackford Capital portfolio company, QAP grew its market position organically through a relentless focus on customer service, strategic customer growth, product quality and supply availability. Additionally, QAP made consistent capital expenditures to stay ahead of advancing technology and develop an expanded aluminum sourcing capability.
QAP experienced consistent, year-over-year revenue growth and enhanced margin performance throughout Blackford’s 6 ½ year ownership period. From 2016 to 2022, QAP earnings grew five-fold and revenue tripled.
As a result, Blackford was able to attract the acquisition interest of Gibraltar, a $1 billion publicly held company. Blackford completed the sale of QAP to Gibraltar in August of 2022 for $54 million, generating a 10x gross return for investors.
Background
QAP was founded in 1990 by brothers George and Robert Clark. Both veterans of the aluminum business, they had previously started (and sold) Clark Brothers Metal.
Based in Hastings, Michigan, QAP is a well-established manufacturer of residential aluminum products for repair, remodel and new construction for the wholesale market. QAP differentiates itself from competitors as an industry-leader in both product quality and product portfolio depth, and by providing outstanding customer service and custom production capabilities for their clients.
In 2015, the Clark family began looking to transition ownership of QAP from one generation to the next. Blackford was selected as the winning bidder for QAP because we provided the support and flexibility the Clark family was looking for.
Under Blackford’s ownership the family stakeholders retained a significant equity position. The family legacy and leadership, including Bob Clark as CEO, remained intact. Blackford identified immediate growth opportunities for QAP both organically (through improvements to operations and sales infrastructure) and strategically (through acquisitions and geographic expansion).
The BFC Difference
Over the course of the ownership period, Blackford ensured that the right talent, infrastructure and governance programs were in place. These strategic investments and improvements demonstrated Blackford’s disciplined approach to driving growth and helped the QAP team out-perform relative to their prior activities.
Operational & Infrastructure Improvements
Once the acquisition process was completed, Blackford augmented QAP’s family leadership with skilled leaders in the finance, sales, operations and human resources functions. Importantly, there was consistency in QAP leadership throughout Blackford’s ownership period, with Bob Clark serving as CEO from start to finish.
To improve QAP’s performance, new financial and operational systems and KPIs were put in place. Blackford also invested in the infrastructure and capabilities of the business, allowing revenue to scale.
The company overhauled its materials sourcing process, restructured its supply chain and improved inventory management and handling capabilities by instituting bar code technology.
It also streamlined pricing strategy, developing a pricing system that positioned QAP as an industry-leader and significantly shortened the time required to pass along price increases from the LME.
Board Involvement
To help QAP navigate its growth trajectory, Blackford recruited a top-tier Board of Directors that included multiple CEOs of billion-dollar businesses, the CEO of a multi-generation family business, a nationally branded architect in the building products space and a member of the Clark family.
The group worked together for 6.5 years, bringing their extensive knowledge and experience together to guide the QAP management team and enable the company to triple its revenues and quintuple its profits.
Determination & Resilience
QAP experienced a series of obstacles during Blackford’s ownership, including:
- COVID-19
- Talent-sourcing challenges during the Great Resignation
- Highly volatile commodity prices and the outright lack of available supply
- Increasing competition from international competitors
Thanks to the determination and resilience of both Blackford and the QAP management team, the organization was able to stay on the path to growth and success.
During COVID-19, QAP led the Blackford stable of portfolio companies in the development of response plans, creating a handbook that was ultimately distributed and deployed across the entire Blackford portfolio.
When QAP was deemed a ‘non-essential’ business by the Governor of Michigan and was shut down for 3+ weeks at the onset of the pandemic, most companies in their industry laid off workers to save costs. Guided by Bob Clark’s leadership and his compassion for his employees, QAP kept everyone on staff and the company absorbed the financial strain.
QAP’s commitment allowed the company to recover much more quickly than our competition and when demand exploded in 2021, QAP was able to steal significant market share from competition ill-equipped to respond to the surge.
Results
During its ownership of QAP, Blackford tripled revenue and grew earnings five-fold, while putting the systems and infrastructure in place to attract the acquisition interest of a $1 billion publicly held company (Gibraltar) (ROCK: Nasdaq). We acquired QAP for $12 million in 2016 and sold it for $54 million in August of 2022. Along the way, we paid down most of the debt and generated a 10x gross return for investors.
QAP, along with our successes with Custom Profile, Staging Concepts, Key Health, Dickinson Press and Ellison Bakery, has helped us create a well-developed ‘playbook’ for investing in high achieving family- and founder-owned companies.
At the time of Blackford’s acquisition, QAP’s owners partnered with Blackford Capital and rolled a large portion of their initial proceeds back into the deal with Blackford. As a result, they owned a meaningful portion of the business, which appreciated dramatically in value, allowing them to get more than 10X what they initially invested back from the second deal.