🔒Private equity deals bring operational, other changes for CT manufacturers

High-profile private equity deals in Connecticut — most notably for Kaman Corp. in April of this year, and Barnes Group just a few weeks ago — have headlined what is becoming a major trend in the state’s manufacturing industry.

And Connecticut is following a global movement. New York-based investment firm Jahani and Associates recently reported that private equity firms put around $262 billion into manufacturing companies between 2020 and 2024.

But while it has become a valuable source of liquidity for high-cost industries, taking on private equity can mean significant change for companies, whether they were previously closely held — often by generations of the same family — or publicly traded.

For instance, in October, Nashville, Tennessee-based Arcline Investment Management quietly installed a new leadership team at Bloomfield aerospace manufacturer Kaman, which it acquired in a $1.8 billion deal just a few months prior.

Kaman now has a new CEO, chief financial officer, and other C-suite executives who previously led another Arcline-owned manufacturer.

Whitcraft, the long-established Eastford-based aerospace components manufacturer, was bought in 2017 by Greenbriar Equity Group. Then in 2022, the company’s owner merged it with another Connecticut supply chain company, Manchester’s Paradigm Precision, which had been owned by Carlyle Group since 2013. The resulting company was renamed Pursuit Aerospace.

Before announcing its pending $3.6 billion acquisition by Apollo Management, Barnes Group had been under pressure from major investor Irenic Capital to explore a strategic review after what Irenic saw as “underwhelming” financial results.

Chris DiPentima, CEO of the Connecticut Business & Industry Association, says operational change is to be expected when private equity steps in.

“When they first acquire a Barnes or Kaman, they use them as a platform for growth, where they acquire other companies that either are vertically integrated or somehow have some synergies that can accelerate that growth,” he said.

He said what he’s monitoring is Apollo’s future plans for Barnes.

“What in Connecticut are they going to invest in? What’s their direction as far as future growth, both organically and through acquisition?” he said.

He believes the implications for the state are largely positive because of the increased investment. But he notes that it’s a significant culture change, particularly around a company like Barnes Group, which, while it had been publicly traded for some 50 years, still had significant involvement from generations of the same family that has shown long-term commitment to the Connecticut manufacturing ecosystem.

Paul Lavoie, the state’s chief manufacturing officer, shares those concerns with the recent change in leadership at Kaman.

“At Kaman, we built a really good relationship with the president and CEO, and then he was replaced. So now we’ve got to figure out who the new person is, and how the state can build a great relationship with the new person,” Lavoie said.

At the same time, he says at the operating level — where the state is working with Kaman on issues such as workforce development and the supply chain — he’s confident of seeing continuity.

Lavoie, too, is a proponent of the additional investment Connecticut companies are seeing from private equity, and the dynamic such deals create, which he says tend to make businesses more “mission-driven.”

Meaningful liquidity

At Carter Morse & Goodrich, a Southport-based boutique mergers and acquisitions advisory firm, Managing Partner Ramsey Goodrich sees the change that these deals bring from the ground floor.

“Private equity funds, despite what most of the press vilifies them for, in our experience in the middle market, really come in to invest more,” he said. “They hire more people, they hire more management, they make the right investments and invest in capex and growth.”

It’s his job to make sure his client companies find the right match in the private equity marketplace. They’re squarely in Connecticut’s old economy sectors of manufacturing, aerospace, distribution and business services, many of them with multigenerational family ties.

“Most of our clients, like most business owners, are really good at making a widget, really good at producing a product or providing a service,” he said. “But almost none of them have ever sold their business before.”

But what’s changed, over his decades in the business, is the number of choices his clients have. Back when he started, there were maybe 100 private equity firms in the marketplace. Now there are in excess of 6,700.

That proliferation of private capital is causing what’s been termed an economic megatrend — the shift away from publicly held stock. In fact, since 2012, the number of private equity-owned companies in the U.S. has exceeded the number of publicly traded ones.

Goodrich isn’t surprised.

“A lot of folks love this private equity option and what it means, because I can have the best of both worlds,” he said. “I can create a meaningful amount of liquidity, but still have an operating role going forward. And, I maybe have an equity stake in the company going forward as well.”

As the sheer number of private equity firms has ballooned, the firms themselves have become more specialized in certain sectors. And so, when Goodrich is looking for a likely match for a client, he says his universe is limited to private equity investors that can bring real expertise to bear in the industry at hand.

“If you find the right partner, a really smart, dedicated partner that brings resources to the company, private equity can be magical,” he said. On the other hand, “if you get in bed with the wrong partner, it’s a disaster. It’s guaranteed to be a disaster.”

Discerning the difference, he says, is about knowing what the company needs, in terms of management skill, sales and marketing, operations and growth.

“Everybody’s money is green. Not the problem,” he said. Instead, the question is, “what does partnership look like to you? What do I need? The investor has to have experience in solving your problem in your industry. Do they share your vision?”