A White Bear Lake company called Wilson Tool recently launched a $40 million venture capital fund to snap up companies in growth industries as part of a plan to expand into other facets of manufacturing. Of particular interest are metal manufacturers for the medical, oil and gas sectors, but the newly created Wilson Venture Group will consider many kinds of businesses to widen the company’s reach.
“The new strategy is to find a parallel industry that we can grow,” said Brian Robinson, CEO for Wilson Tool, which makes tools and dies for the metal stamping and punch press machines used by Toro, Polaris Industries, Pentair, John Deere and others.
The goal is to have 50 percent of revenue coming from new businesses in 15 years or so. The strategy is quite a change from the Great Recession, which whacked 30 percent of revenue at the 48-year-old, family-owned business. Today, revenue is back. Wilson boasts more than $150 million in annual sales, 10,000 customers and 800 employees around the globe, including 500 in Minnesota. The new goal is to grow to 1,500 employees worldwide.
Wilson hopes to offer cash for companies with an expertise in high-precision manufacturing but also a commitment to the original legacy. Deals may range from $5 million to $40 million each.
The plan was hatched just a year ago, when the 11-member Wilson family tapped Robinson and Paul Johnson, Wilson’s president of new business development, to lead an acquisition search. Internal funds were set aside. Now a team is scouring Minnesota, Wisconsin and the Midwest for entrepreneurs.
“We are ready to move,” Johnson said. “We are looking first in the Minnesota area. If it’s the right company and in Minnesota or Wisconsin, that would be the best of both worlds.”
In its new role, Wilson Venture joins Granite Equity in St. Cloud, Tonka Bay Equity Partners in Minnetonka and a few other private equity firms that specialize in scooping up small but bright gems in the manufacturing world. It also joins such conglomerates as Cargill, 3M, and Medtronic who are also hunting for cutting edge manufacturers that bring new businesses, new technologies or distribution routes into the fold.
Across all sectors, acquisition activity in Minnesota fell in 2013. According to Bloomberg News, only 297 deals worth $13.7 billion were completed last year, including $3.2 billion in machine shop, factory, and farm chemical firm sales. In 2012, there were 341 deals worth $23 billion in Minnesota.
Wilson officials insist they can grow via carefully timed and smart acquisitions now that the economy and manufacturing sector are stronger. Bob Kill, CEO of the manufacturing consulting group Enterprise Minnesota, said Wilson’s strategy makes sense.
Kill, who often introduces potential buyers to sellers, said Wilson Tool is in a semi-mature industry and one of the biggest tool and die shops in the world. “So they have decided that acquiring adjacent machining operations would be in line with their growth targets.”
Vanessa Greer, Wilson marketing specialist and third-generation family member, said: “Knowing that we want to be here well into the future, pass down from generation to generation and maintain as a privately held family business, the more industries we are in the better.”
But Wilson will have company in deal hunting.
‘Money is cheap’
“Private equity firms do have plenty of money right now. Money is cheap,” Kill said. “And these firms have discovered that there is some real opportunity in the value-add manufacturing space.”
Many of the smaller deals never make the news. As a newcomer, Wilson is likely to learn quickly “that there is as big a discrepancy between what they want to pay and what the small [factory] thinks they are worth,” Kill said. “The recession was five or six years ago and these businesses are doing really well compared to that.”
In other words, sellers think they are worth a lot.
To find the right businesses, Wilson Venture has talked with the Minnesota Chamber of Commerce, the Minnesota Precision Manufacturers Association, trade groups and its own well-sourced board of governors. The goal is to find the right partner, do due diligence and close its first nontraditional deal in a year.
“Many of these firms don’t know they want to sell yet,” Robinson said. “There are a lot of original entrepreneurs who are 55-plus years old and they don’t have a contingency plan for moving forward. We think we can take [such a business] to the next level.”
Wilson Tool has some experience doing just that. It purchased four private tool companies in four years: The factories, two in Canada, one in South America and one in Italy, increased revenues by 10 percent.
But for this new effort, “We want to stay close to home,” Johnson said.
Staff writer Patrick Kennedy contributed to this report.