International auto industry adviser Capstone Financial Group and its investment banking subsidiary Mobility Securities LLC recently completed a complex transaction in which Adell Group Inc., a Texas-based automotive OEM supplier and portfolio company of Kinderhook Industries, simultaneously acquired three vertically integrated manufacturers and distributors of trim products sold to auto manufacturers through the Original Equipment Service channel. The transaction demonstrates the growing importance of consolidation in the auto supplier sector.
“Vertical integration and auto supplier consolidation is inevitable and growing,” said Dan Smith, Capstone’s CEO. “All companies need scale and negotiating power, and the best path for many is vertical integration. We will see more deals involving multiple parties, particularly now that auto sales have declined. To take on these more difficult deals, investment banks will need specialized skill sets involving intimate knowledge of and deep experience in the automotive industry.”
The deal was exceptionally complex, says Capstone, involving three suppliers in two countries. It included two asset sales, a stock sale, two currencies, financial statements and documents in two languages, two sets of Canadian provincial laws and four taxing jurisdictions. Capstone had five personnel on the deal team, including Carl Norman, the firm’s managing director.
The sellers were three separate entities: Powerflow Inc. of Buffalo, New York; Powerflow Products Ltd. of Toronto; and Solutions Plastik Inc. of Magog, Quebec.
Capstone provided independent financial analysis and accounting functions for the three entities in preparation for the deal.
“Capstone possesses unique skill sets plus the deep industry expertise and relationships necessary to structure a transformative deal like this,” said Doug Ward, Powerflow’s founder. “Deals like this don’t get done often because there are so many moving parts and most investment bankers don’t understand the automotive industry and its distribution,” Smith said.
