Driving Value through M&A and One Catalyst Platform Strategy

The Stephens Group (“Stephens Group”) invested in Sound Seal Holdings, Inc. in March of 2019. Later that year, the company completed three acquisitions, Acoustical and Tackable Surfaces, Inc., Lamvin, Inc., and Noise Barriers, LLC. In 2020, the company acquired Kinetics Noise Control, Inc. and Fräsch, LLC and formed Catalyst Acoustics Group (“Catalyst”), as the platform holding company for this elite group of acoustic, seismic, vibration and noise control companies that together offer the broadest portfolio of noise control solutions for industrial, architectural, commercial, construction, healthcare, government and other industries. Below, Joe Lupone, Catalyst CEO, discusses the company’s accomplishments to date as well as plans for the future.

In the first year and a half of the Catalyst and Stephens Group partnership, the team completed 5 acquisitions, rebranded the business to reflect its broad portfolio of noise control solutions, and more than doubled the size of the company. How did you work together to move quickly on these actions after close?

It started with The Stephens Group’s deep understanding of the business and a proactive alignment with the Leadership Team on the investment thesis. A powerful event was an initial session where the Leadership Team and The Stephens Group developed a shared vision for the path forward. From then on, consistent communication in every mode, including email, phone, in-person, in office, out of office, one-on-ones, in groups, tag team customer meetings allowed the business to move at a rapid pace. Integrated teams comprised of The Stephens Group and Catalyst members, skip meetings with middle management, side by side involvement in projects and a “share the workload” mentality, all done with transparency, trust, and accountability shortened the timeframe for decisions. Furthermore, The Stephens Group brought to bear operational and M&A resources to help Catalyst capitalize on its acquisition pipeline. A high level of stamina and mutual respect set the partnership up for success.

In addition to acquisitions, what were the key drivers to your investment thesis and how have those translated into value creation opportunities to date?

First, the Noise Control and Sound Quality market is growing. Noise is becoming a bigger problem and the world benefits from our solutions. We are capitalizing on niche markets. The market is served by many profitable, subscale companies who are looking for a succession plan. Catalyst is a desirable alternative for the current owners of some of the best companies in our space. Importantly, our customers benefit! The influencers in our market (acoustical consultants, architects, engineering firms, etc.) benefit from the concentrated expertise of the Catalyst Acoustic Group Member Companies. Our member companies benefit as well. Each member company goes to market as an independent business and benefits from the scale of Catalyst. To date, the synergies include Marketing, New Product Development, Information Technology & Data Analytics, Continuous Improvement Expertise and HR resources. Finally, we leverage our current channels to market across the entire Catalyst enterprise for the benefit of our member companies. We are focusing on expanding our wallet share by gaining more mind share at our acoustical sales reps and distributors and encouraging them to displace competitors with the products of fellow Member Company alternatives.

Joe, you have worked with a few different private equity firms throughout your career. What attracted you to The Stephens Group’s model of flexible capital?

Well, first of all, The Stephens Group was the leadership team’s first choice. We had a number of suitors during our sale process, but we selected The Stephens Group because of their flexible capital and focus on enduring partnerships. Because The Stephens Group is NOT a Limited Partner backed Private Equity firm with 10-year funds, they are NOT focused solely on PE-type metrics to make their funds look good or make raising capital for the next fund easier. They never find themselves with an obligation to do what’s right for their fund when it may very well be sub-optimal for the company. Without this dilemma, The Stephens Group is able to be patient and focused solely on achieving the best outcome for the company.

Why is this structural difference important?

This structural difference enables our company to fully embrace the partnership with the Stephens Group to reach our potential. Balanced consideration can be given to the short-, mid- and long-term strategies for organic and acquisitive growth. This approach significantly increases the probability of success, and when the time is right, the Leadership Team and The Stephens Group can determine the exit horizon.

While Catalyst and The Stephens Group have already accomplished a lot during their relatively short partnership, what initiatives are top of mind going forward?

Three things are top of mind right now:
      –    Double Digit Organic Growth at each member company
      –    Employee development
      –    Driving the One Catalyst Strategy to deliver the benefits of scale to member companies

One of the tenets of The Stephens Group’s strategy is partnership. How has partnership played into Catalyst’s success to date?

Yes, a partnership mentality has been the cornerstone of the Leadership Team’s relationship with The Stephens Group. Together we generate a lot of good ideas and get creative about how to execute. There is very good alignment between our teams. When we do have bumps in the road, we hold each other accountable, double down on communication and get through the rough patches together.