Overview of the Target

Parkway Capital is excited to announce its investment in Precision Piping Products (P3), a notable player in the manufacturing and distribution of flange protectors. Established in 2014 and based in Houston, TX, P3 has carved a niche in the industry by providing innovative solutions designed to protect flanges and pipes from debris and corrosion during transportation and construction. The Company stands out due to its patented adhesive process and proprietary adhesive solution, which differentiates its flange protection systems from competitors.

Industry Overview in the United States

The flange protection industry in the United States has shown robust growth, driven by the increasing demand for industrial piping solutions across various sectors, including oil and gas, construction, and manufacturing. As these industries expand, they have heightened the need for reliable and efficient products to prevent damage during transit and installation.

Moreover, regulatory and safety standards regarding the transportation of hazardous materials have escalated, compelling businesses to ensure that their piping systems remain intact. This has placed additional emphasis on using quality flange protection products, thereby bolstering the market for companies like P3.

Additionally, the growing focus on sustainable practices within these industries has spurred investment in innovative materials and solutions, allowing firms that prioritize research and development to thrive. With P3’s patent-protected products, the Company is poised to capitalize on these industry trends effectively.

Rationale Behind the Deal

This investment is a strategic move led by Tico Capital Partners and 7 Seas Capital, in collaboration with P3's senior management team, to facilitate the Company's recapitalization. By providing both subordinated debt and equity, Parkway and Pine Street Capital Partners are positioning P3 to enhance its operational capabilities and expand its market reach. Investing in P3 not only aligns with Parkway's commitment to supporting innovative companies but also represents a calculated opportunity to strengthen their portfolio with a high-potential player in the flange protection market.

Information About the Investor

Parkway Capital, established in 2000, has developed a strong track record in investing alongside management teams, independent equity sponsors, and family offices, offering flexible junior capital solutions to lower middle-market companies. The firm joined forces with Calvert Street Investment Partners in 2019 and has amassed a wealth of experience in mezzanine-focused investments, having allocated over $535 million across more than 75 portfolio companies.

Calvert Street Investment Partners operates primarily through two key strategies: Crescentia Capital, which focuses on equity buyouts, and Parkway Capital, dedicated to mezzanine investments. As a whole, Calvert Street's professionals have invested over $1.1 billion in more than 150 companies since its inception, underscoring its capability and commitment to the lower middle-market sector.

View of Dealert

Expert analysis suggests that this investment in Precision Piping Products could be a timely and strategic decision by Parkway Capital. The growing demand for effective flange protection solutions aligns well with the ongoing expansion of key industries such as construction and manufacturing in the United States. P3's patented technologies and innovative products create a competitive edge that may lead to significant market share growth.

Additionally, the structuring of the investment as both subordinated debt and equity offers resilience in various economic conditions while also positioning Parkway for potential upside as P3 scales its operations. Given the current market trends and P3's unique value proposition, there is considerable optimism about the Company's ability to succeed and deliver returns in the long term.

Overall, the deal provides Parkway Capital with an advantageous entry into a burgeoning market. If P3 continues to leverage its innovations and expand its customer base effectively, this investment will likely yield substantial benefits, reaffirming Parkway's strategy of partnering with transformative companies within the lower middle-market space.

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