Entrepreneur Owner-Manager Background
Chet Dunn founded Dunn Industries over 30 years ago and built a successful plastic extruding business supplying numerous industrial applications. Over the years, the management of Dunn Industries (www.dunnindustries.com) truly became a family affair. Chet's son Duane was President and his two sisters, Durene and Darlene, who were both shareholders, historically held various positions in the company. Their husbands, Ken and Grant headed quality and operations respectively. Lastly, Duane's son was also working in the business as part of the third generation. This family team led the radical transformation of the business where it literally pioneered the extrusion of specialized high precision medical tubing.
Today with over 95% of sales comprised of tubing for medical devices, Dunn is known as a leader in high quality, close tolerance custom plastic tubing with expertise in a range of thermoplastic materials. Dunn’s products include single and multi-lumen, coextruded, striped and braided tubing and applications ranging from simple, single lumen catheters used for drainage, to complex, multi-lumen applications for coronary angioplasty and drug delivery devices.
Like most successful businesses, the Dunn family had been approached by potential acquirers over several years. The industry was consolidating dramatically, and the family decided that a deep-pocketed partner would allow the company to reinvest more aggressively and free up the family’s capital. So, the owners accepted one of the offers from a group that had approached them and executed a letter of intent. The proposed transaction was with a public strategic acquirer that ultimately did not close.
Bigelow Relationship
Bigelow was introduced to the owners as they were in final negotiations of a new letter of intent proposal with a different potential acquirer, this time a private equity platform. Bigelow took a step back and quickly met with the entire family to clarify what their underlying motivations and drivers were and asked, what would the family achieve through finding a new owner? How long would it take to close a transaction? The priorities were clear: find a new partner that would accelerate building a new plant and expand the company’s capabilities. The new partner must be a good cultural fit as the management team planned to continue to work for years to come. Lastly, the valuation and transaction terms and conditions had to be strong. Shareholder, Darlene Dunn commented, “Bigelow was exceptional at getting the whole family on board. While they worked most directly with the management team, the rest of the family had a voice and was involved at every step. We may not be running the company, but our name is still on the sign out front. How and why we picked a new owner was key.”
“It is the desire of all parents to want their children to grow and succeed. We had a unique opportunity to start a business, bring the family into the business, step aside and watch “Team Dunn” and their families focus and grow the business. We harvested the fruits of their labor at the right time in all of our lives!...what a miracle for our families, thank you!” Chet Dunn, Founder Dunn Industries, Inc.
“Having failed at managing a transaction ourselves, we had no idea what an M+A advisor could do. Bigelow kept us in control and got it closed. We got to choose our partner and the valuation was more than 50% higher than our prior deal that didn’t close. In a word…TREMENDOUS.” Duane Dunn, President Dunn Industries, Inc.
Challenges
Bigelow believed that there would be many qualified investors interested in teaming up with Dunn due to its great reputation, marquee customer base, repeat order pattern, and consistent performance. However, Bigelow quickly determined it was necessary to have a quality of earnings report performed by a nationally recognized accounting firm because the company did not have audited GAAP financial statements. Armed with a more solid financial presentation, Bigelow approached numerous potential investors/acquirers and initiated a series of serious conversations under non-disclosure agreements which led to multiple initial offers. The management team and family reviewed the initial offers, and with Bigelow’s guidance, selected several to meet in person. Multiple final offers were negotiated and because the family leadership was continuing, fit was critical. Consequently, Bigelow led the management team to see several of the most serious potential partners “on their turf” in a series of reverse due diligence visits to better assess their capabilities and cultures.
Outcome
The family selected Tekni-Plex to be the new owner. Tekni-Plex is one of the top three medical tubing suppliers in North America. They understood and appreciated Dunn’s unique position and were enthusiastic to support Dunn’s further growth. Tekni-Plex, which is a portfolio company of Genstar Capital, is headquartered in Wayne, Pennsylvania and operates manufacturing sites in eight countries worldwide to meet the needs of its global customer base. The transaction allowed the Dunn family to capture the Enterprise Value it created over the years and importantly, allowed the family to maintain a significant ownership position. Chet and Hope Dunn moved on to their next personal chapters, while the management team was able to continue to operate Dunn Industries with added resources and capabilities.