Petrochemical and chemical industry private equity

Why does Capstreet invest in petrochemical and chemical?

Capstreet sees new petrochemical capacity that needs technical maintenance providers. It also sees chemicals as a critical input to hundreds of products, with rising demand for sustainability.

Capstreet states its view this way on its What We Do page:

We believe the U.S. has seen a surge in investment in petrochemical production capacity in the past 5-10 years, creating a need for technical maintenance providers to service these plants. Additionally, the usage of chemicals is ubiquitous in the U.S. economy as it is a critical input to hundreds of critical and regularly used products. Demand is increasing for the industry to become more sustainable. Capstreet has several current investments and active themes in this industry.

The firm states that it has several current investments and active themes here, which signals that it is still looking.

The thesis has two layers. The first is maintenance services for plants. The second is the wider chemical industry and its push to become more sustainable. If your company serves either layer, you are in range.

What kinds of petrochemical and chemical businesses fit Capstreet?

A fit is a technical maintenance provider that services petrochemical plants, or a business serving the wider chemical industry. Capstreet is open to both and has current investments here.

Every row after the first comes from a portfolio company description, not from the thesis paragraph. The firm’s industrial work also includes critical maintenance and value-added distribution. Compare your company with its criteria.

How do Capstreet’s criteria apply to petrochemical and chemical companies?

Capstreet publishes five criteria, and they apply to petrochemical and chemical owners the same way they apply to every other industry. Each one is listed below.

• Entrepreneur-owned businesses services companies
• $3 to $15 million of EBITDA
• Primarily majority investments
• Entrepreneurs reinvest alongside Capstreet
• Ability to apply the Capvalue Framework®

The firm also says it looks for “a tenured team of owners or managers seeking a majority capital partner, with solid financials, a defensive business model, untapped growth potential, and competitive advantages within their market niche.” Plants need maintenance on a schedule, which can make revenue steady, and trained crews and safety records are hard to copy. Those are the kind of defensive and competitive features Capstreet describes. This is our reading, not a Capstreet claim.

Its $3 to $15 million EBITDA range sits in what many call the lower middle market. Capstreet’s approach often uses buy and build: buy a platform, then add companies to it. An add-on acquisition is a smaller company that a platform buys and folds in.

Which petrochemical and chemical companies has Capstreet backed?

Capstreet lists many companies that serve petrochemical, refining and chemical customers. Their published status is shown below. Status is shown as Capstreet publishes it on its portfolio pages.

• Onpoint: Current, Fund IV. A specialized provider of safety, logistics and planning services for complex maintenance activities in the refining and petrochemical industries. Founded in 2005 and headquartered in Deer Park, Texas.
• Analytic Stress: Current. Analytic Stress Relieving provides heat treatment services across the industrial sector, with a particular focus on petrochemical, refining and power markets.
• Thorpe Plant Maintenance & Engineering: Past, Fund III. A North American multi-craft industrial service provider to the petrochemical, refining and industrial markets.
• Eads Distribution: Past, Fund III. A Houston-based industrial distributor of flow control products serving petrochemical, refining and other industrial markets. Acquired by FCX Performance, Inc. in 2017.
• GHX: Past, Fund III. A distributor of industrial gaskets, hoses and related fluid sealing products to refining, chemical and petrochemical customers, among others. Acquired by United Central Supply in 2012.
• Sprint Industrial: Past, Fund II. A provider of industrial equipment rentals for turnaround and maintenance operations in refining, petrochemical and oilfield service. Acquired by First Atlantic Capital in 2007.

Capstreet publishes a case study you can read: Eads. It describes what the company did, not what investors earned.

What does Capstreet do after it invests?

Capstreet applies its Capvalue Framework® in three steps: Research, Build Scalable Platform, and Drive Business Transformation. Across its history, the firm reports 50+ Platform Acquisitions and 200+ Add-on Acquisitions.

1. Research. Perform deep research to identify markets and build relationships with key entrepreneurs.
2. Build Scalable Platform. Invest in top talent and technologies, and provide functional expertise for scale.
3. Drive Business Transformation. Develop a long-term strategic roadmap and execute a buy and build strategy.

A second case study covers GHX, which grew from 7 to 39 branches and completed nine acquisitions. For more on why the firm likes this region, read its insight on industrial investing.

There can be no guarantee that Capstreet will be successful in applying its Capvalue Framework®.

Next step

If your company serves petrochemical and chemical, read the full deal criteria, then start a confidential conversation through the contact page. You can also call 713-332-2700 or email connect@capstreet.com. See all industries Capstreet lists.