Ardian North America Fund
In conversation with Soteria Flexibles
First steps in building a national flexible products group
VINCENT FANDOZZI Head of Ardian North America Fund
BRAD HERBOLSHEIMER CEO of Soteria Flexibles
TODD WELSCH Director at Ardian North America Fund
Soteria Flexibles – Manufacturer of flexible plastic packaging
We’d been developing the base for behind Soteria Flexibles for a couple of years and in September 2019, we put the first major building block in place by making a substantial investment in Colonial Bag, a family-owned company based outside Chicago. Colonial is in the “flexible products” business, manufacturing plastic liners for specialized uses, such as medical waste. These clients want customized products in relatively small volumes and it’s a market that the biggest players in the industry are not set up to address – their business is making standardized products in very large volumes, so it’s just not efficient for them to serve our customers.
Despite the consolidation in the flexibles market – or perhaps because of it – there’s a real need for quality producers in our segment. The big opportunity we see is to bring together a national group of three or four regional suppliers like Colonial Bag covering multiple geographic areas, so that we can serve regional and national customers efficiently while maintaining quality. Soteria Flexibles will be the holding company for that group.
plants spanning over...
Colonial Bag gives us a great start in building Soteria. I came in while the deal was in due diligence and when I looked at the company closely, I found a great combination of high-quality end markets with a strong recurring demand and longstanding, passionate employees who have a customer-first mindset. We want to replicate that across the country. By bringing several independents together under the Soteria umbrella, we can keep that high-touch approach to customers in different regions but really build national scale behind the scenes.
Investing in the right initial asset was key but it took a long time to close this transaction, largely because it was a proprietary deal with no advisers involved. We were introduced to the owner by a mutual contact and he was typical of many small business owners in the US in that he’d started Colonial more than 40 years ago and grown it to a very nice size. He is now in his 80s and didn’t have a clear family succession plan. So part of the opportunity for us was to provide that succession plan and bring in Brad to transition Colonial from a family-owned entity to an institutionally — managed company.
sq ft near Chicago, IL
It took almost a year to get the investment done, mainly because a lot of the information that we needed to do the due diligence just wasn’t available. We had to help assemble it and often explain why we needed it – without intermediaries and advisers pushing the process forward, educating the seller was part of our job as the buyer.
It was definitely a challenging process but now that we’re able to start work on the next phase, the opportunities are huge. One common feature of businesses like Colonial is that they have excellent customer relationships but often haven’t been managed to maximize productivity and profit. We have a very strong demand from existing customers and now that we’re working to increase productivity, we expect earnings to grow rapidly. We’ve already identified ways to increase output from the existing plant very significantly, just by optimizing the way we operate and by making some small additional investments. And then longerterm, once we add further businesses like Colonial Bag to the group, we can sell our existing products to more customers across the country and move into other product areas. With very little modification to what we do, with our same distributor base, our same way of working, we can move to another place on the chessboard.
This is an important investment for us – not just because it is our first step in building a national group that will address a profitable, underserved market, but also because it says a lot about our approach as a fund. Not everyone is willing to roll up their sleeves and take on a more difficult process like this one because it’s an investment of time and money, and our time is a valuable resource. Investing that time is a calculated risk but the outcome is that we’ve ended up with a ton of opportunity to grow the business – and it’s only strengthened the base behind Soteria.
In conversation with SEA Milan Airports
In conversation with SEA Milan Airports
Seeking a “new normal” for our industry through long-term collaboration