Information on the Target

Founded in 2006, Moldcom Composites, S.L. (commonly known as McBath) has emerged as a leading European manufacturer and distributor of resin shower trays. The company has established a strong foothold in a high-growth niche within the bathroom sector, with approximately 80% of its revenue generated from markets outside of Spain.

Headquartered in Ribarroja, Valencia, McBath achieved significant financial milestones, closing the year 2019 with revenues of €25.5 million and an EBITDA exceeding €5 million. The company has shown resilience, rebounding well from the impacts of COVID-19, and is projected to surpass its previous year's performance in 2020.

Industry Overview in Spain

The bathroom sector in Spain has been experiencing robust growth, particularly in segments focusing on innovative and sustainable solutions. With changing consumer preferences and an increasing emphasis on elevated quality in home fixtures, companies in this market have begun to capture more attention both locally and internationally.

The shift towards more elegant and functional bathroom interiors has driven demand for high-quality products, such as those offered by McBath. Moreover, as European consumers become increasingly environmentally conscious, sustainability stands at the forefront of production processes in this industry.

With significant investments directed towards the development and production of more advanced and durable materials, the market is witnessing an influx of innovative companies that are redefining traditional bathroom spaces. The pandemic has also prompted a surge in home improvement projects, further fueling the demand for premium bathroom fixtures.

This favorable market environment provides substantial opportunities for growth for companies like McBath that are positioned to meet rising consumer expectations and trends.

The Rationale Behind the Deal

The acquisition of McBath by The Engineered Stone Group (ESG) reflects a strategic move aimed at enhancing ESG's portfolio in the growing bathroom fixture market. Following Nazca's hands-on investment since February 2017, which led to a 50% increase in McBath's sales and the creation of 60 new jobs, the timing of this divestment aligns perfectly with both market growth and ESG's long-term goals.

Moreover, with Nazca successfully executing an international expansion strategy for McBath, the company has consolidated its leadership in several key markets, enabling the exit to yield a return of over two times the initial investment in less than four years.

Information about the Investor

Nazca Capital is a private equity firm dedicated to investing in small and medium-sized unlisted Spanish companies. The firm focuses on driving growth through strategic support and operational improvements, with a demonstrated track record of enhancing value within its portfolio companies.

Since its establishment, Nazca has shown a strong commitment to fostering innovation and sustainability in the businesses it invests in, with a keen interest in sectors poised for growth—such as the bathroom fixtures market represented by McBath. By leveraging its resources and expertise, Nazca has successfully implemented international expansion strategies and product innovation, propelling the performance of its holdings.

View of Dealert

From an investment perspective, the acquisition of McBath by ESG stands out as a strategically beneficial move. Given McBath's solid market position and the growing demand within the bathroom fixture sector, this deal could indeed drive substantial returns for ESG, especially as McBath continues to explore new markets and product lines.

The successful transformation and growth exhibited by McBath during Nazca's stewardship bolster the argument for this acquisition. With a proven track record and an experienced leadership team, McBath is well-equipped to capitalize on the expanding opportunities in both existing and emerging markets, such as Italy, Poland, and North America.

Moreover, the transaction provides Nazca with a significant exit, demonstrating a robust cycle of investment and return, highlighting the firm's adeptness at maximizing value at opportune moments. This strategic divestment also reinforces the company’s reputation in the private equity landscape, showcasing its capabilities in enhancing SaaS and niche market firms’ growth.

In conclusion, the acquisition of McBath represents a compelling opportunity for ESG, further solidifying its portfolio while allowing McBath to continue its trajectory of innovation and growth in an increasingly competitive environment.

View Original Article