Target Company Overview

Hohenschild Welders Supply has been a respected independent distributor of packaged gases and welding supplies in the greater Kansas City area since 1922. Initially acquired by Perry Johnson Sr. in 1947, the company has remained family-owned, with his son Perry Johnson Jr. taking over as president in 1985 and later acquiring full ownership in 2005. Known for its dedication to quality and excellent customer service, Hohenschild caters to a diverse range of industries, including construction, automotive, and manufacturing.

As the company did not have a succession plan, Johnson turned to CC Capital Advisors (CCCA) for assistance in finding a suitable buyer. His key priorities were to identify a buyer who would continue the company’s legacy, retain its employees, and maintain the existing management team. CCCA's role was to facilitate the sell-side process and connect Johnson with the right purchaser aligned with his objectives.

Industry Landscape in the United States

The U.S. welding supply industry is integral, supporting various sectors such as construction, automotive, and manufacturing—key drivers of the American economy. With a growth rate projected at 3% annually, the demand for welding supplies and packaged gases continues to rise. This growth is largely attributed to advancements in technology and increased investment in infrastructure projects across the country.

Moreover, the welding industry is highly competitive, characterized by numerous independent distributors and major suppliers. As businesses strive to differentiate themselves, consumer expectations around product quality, service, and price competitiveness are higher than ever. Thus, businesses within this space must innovate and adapt to changing market dynamics.

In the context of Kansas City, the local economy benefits from being a manufacturing hub, which further increases the demand for welding supplies. As industries evolve and modernize, suppliers that can provide high-quality products and robust customer service positions themselves favorably to capture market share.

Overall, the welding supply industry represents a significant opportunity for growth, particularly for established companies like Hohenschild Welders Supply, as they leverage their reputation and relationships in a rapidly evolving marketplace.

Rationale for the Deal

The acquisition of Hohenschild by Meritus Gas Partners was primarily motivated by a strategic desire to expand their portfolio in the packaged gases and welding supplies sector. Meritus, a firm connected to AEA Investors Small Business Private Equity, was particularly aligned with Hohenschild's operational philosophy, emphasizing employee retention and continuity within management. This alignment was crucial for Johnson, who sought to ensure that his team and employees would remain in place to uphold the company's standards.

By engaging with CCCA, Johnson was able to initiate a structured sell-side process which efficiently identified and evaluated potential buyers, ultimately leading to a partnership that respected the operational legacy of Hohenschild.

Investor Information

Meritus Gas Partners is a portfolio company under AEA Investors Small Business Private Equity, located in New York. Renowned for its expertise in the welding and packaged gases sector, Meritus has successfully completed several acquisitions in related fields, emphasizing growth through targeted industry consolidation. The team at Meritus consists of industry veterans who understand the market intricacies and have a proven track record of nurturing acquired businesses.

Through this acquisition, Meritus not only enhances its geographical footprint but also strengthens its operational capabilities, facilitating further expansion in a growing industry. Their commitment to maintaining Hohenschild's workforce is indicative of their long-term investment strategy centered on sustainable growth and employee engagement.

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The acquisition of Hohenschild Welders Supply represents a strategic and positive move for both parties involved, primarily due to the alignment of values and operational philosophies. Meritus’s intent to retain the existing workforce and maintain operational continuity will likely enhance Hohenschild's long-term stability and growth, ensuring that the company continues to thrive in its local market.

From an investment perspective, this deal appears to be prudent. With Meritus’s established reputation and expertise in the sector, combined with Hohenschild's history and solid customer relationships, there is significant potential for advancing market share. The ongoing demand for welding supplies further bolsters this potential, making the acquisition timely.

Additionally, CC Capital Advisors played a crucial role in ensuring that the transaction was smooth and that both parties were equipped for success. Their involvement highlights the importance of having knowledgeable advisors in complex deals to secure favorable terms while facilitating transitions.

In conclusion, the deal aligns with current industry trends, and both Hohenschild and Meritus stand to benefit from this merger. With a proactive succession plan and a focus on operational stability, this acquisition could set a benchmark for future transactions within the welding supply sector.

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