Target Overview

Inland Coatings Holdings, LLC, established in 1978 and headquartered in Adel, Iowa, initially operated as a distributor of synthetic coatings aimed at the automotive aftermarket, particularly for rust inhibition. Over the years, the company has evolved and now focuses primarily on manufacturing roof coatings, specializing in various chemistries including SEBS, silicone, acrylic, and polyurethane. Inland maintains manufacturing facilities in both Iowa and North Carolina.

Industry Overview

The coatings industry in the United States is highly diversified, encompassing a range of applications from automotive and industrial to construction and aerospace. The growing demand for sustainability and environmentally friendly products has significantly influenced the sector, prompting manufacturers to develop innovative solutions. In particular, the roof coatings segment is gaining traction due to the increased awareness of energy efficiency and long-lasting protective solutions.

Inland Coatings, as part of the coatings industry, has benefited from this trend. With a growing focus on sustainable building materials, the company's eco-friendly roof coatings align with market demands, positioning Inland as a competitive player. Additionally, states and local governments are increasingly funding initiatives to replace old roofing systems with more energy-efficient alternatives, further augmenting market growth.

In Iowa, the coatings industry is bolstered by a regional emphasis on manufacturing and innovation. The state is home to a range of companies that specialize in various coatings applications, resulting in a collaborative environment. This regional concentration fosters partnerships and synergies, which companies like Inland can leverage to enhance production capabilities and distribution networks.

Furthermore, the rise of advanced technology within manufacturing processes, including automation and digitization, is reshaping the landscape of the coatings industry. Players that adopt these technological advancements are likely to achieve higher efficiency rates and profit margins, making continuous investment in innovation crucial for success in the competitive market.

Rationale Behind the Deal

The sale of Inland Coatings Holdings, LLC was strategically timed to benefit both MGP’s investors and the company's employees. Since MGP’s investment in 2014, significant steps were taken to enhance the company's operational efficiency, including the addition of key management personnel and the implementation of sophisticated systems for financial and inventory management. These improvements greatly increased the company's gross margins and overall market position.

By selling to a strategic buyer, MGP aims to ensure the continued growth and support of Inland's employees while providing an excellent financial return for its investors. The alignment between Inland's products and the strategic vision of the buyer is expected to create new opportunities for both parties.

Investor Information

Midwest Growth Partners (MGP) is a private equity fund based in West Des Moines, Iowa. Founded to support lower-middle market companies, MGP focuses on providing operational expertise and financial guidance to help businesses grow. The firm prides itself on fostering an entrepreneurial spirit while instilling professional management practices in its portfolio companies.

With a strong track record in the coatings industry and a community-focused investment strategy, MGP has successfully partnered with companies like Inland to unlock their growth potential. Their commitment extends beyond profit, aiming to create lasting value in the communities where their portfolio companies operate.

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The exit of Inland Coatings from MGP's portfolio exemplifies a well-planned investment strategy that aligns with both business interests and employee welfare. By strategically positioning the company for acquisition, MGP has enabled a transition that respects Inland's legacy while ensuring its future growth under new ownership. The strong operational enhancements made during MGP's investment period have undoubtedly made Inland an attractive proposition for the new buyer.

This transaction is indicative of the potential for lower-middle market private equity to effect positive change in small businesses. The successful professionalization of Inland Coatings under MGP's guidance underscores the value that experienced investors can bring to burgeoning companies.

Overall, this deal appears to be advantageous not only for MGP’s investors, who will receive favorable returns, but also for Inland’s employees, who will benefit from the strategic buyer's resources and vision. It represents a positive outcome that adheres to the values of mutual growth and sustainable business practices.

Ultimately, while the decision to exit may be bittersweet for MGP, the successful sale of Inland Coatings Holdings, LLC highlights the efficacy of partnerships in the venture capital landscape and their capacity for generating valuable synergies.

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