The Anderson Group has acquired Fosbel Inc., a furnace refractory services business headquartered in Cleveland, Ohio.
The purchase price was not disclosed, but Anderson raised nearly $6.8 million from investors that it plans to pump into improvements in the business, said Cory Gaffney, a partner at the private equity firm.
Anderson acquired 100 percent of the assets of Fosbel in a partnership with the company’s management. The company, with annual sales in a range from $50 million to $75 million, is headquartered in Cleveland and has offices in Europe, Japan, Brazil and India.
Fosbel’s customers are steel plants and glass manufacturers, which have ovens that burn at extremely high temperatures. The extreme temperatures cause the ceramic in the ovens to crack.
“Service providers repair these ovens to keep them running, because the cost of having a break is so high — from a couple hundred thousand to over $1 million per day in lost revenue and profit,” Gaffney said. “Companies like Fosbel are experts at going in and repairing and rebuilding these ovens.”
It’s the first deal of 2019 for Anderson, which focuses on old-line industrial businesses.
Anderson was founded in Michigan in 1985 and moved its headquarters to St. Petersburg about five years ago. The firm now has 10 employees in downtown St. Pete.
“We look to acquire companies where we feel we can work with the management teams to add value to operations. We’re generally working in companies that are either turnarounds or corporate carveouts, or they are companies that really need a partner to help take the business to the next level,” Gaffney said.
Unlike private equity firms with institutional investors, Anderson invests its own capital, and it doesn’t need to sell its holdings quickly.
“We can hold on to it and enjoy the long-term equity appreciation and cash flow,” Gaffney said. “We don’t need to cut people and slash costs and sell it in three years. We’ll generally go in as a turnaround or revitalization situation with the companies. We’ll focus on profit improvement for the first year or two and then our preference is to re-invest that profit back into the business to affect a longer-term growth plan. Once we are able to achieve that growth, it’s up to management partners to continue to own it and grow it or sell it and exit and move on to the next thing.”
Anderson has 13 portfolio companies in manufacturing, distribution and services. It prefers its platform companies to be headquartered in the United States, and will do bolt-on acquisitions that can be headquartered anywhere in the world.
The company aims to do three to five transactions each year, with some additional add-on companies. Last year, it acquired Olympic Aviation, which distributes and exports government certified aircraft replacement parts, components and chemicals.
The Anderson Group disclosed the $6.8 million capital raise for FSBL Holdings in a Form D filing with the U.S. Securities and Exchange Commission on March 21. A separate March 21 filing showed Anderson FSBL Investors raised $4.9 million.