Following a successful turnaround on its first two businesses in the region, Lancaster-based investment firm PennSpring Capital looks to continue its focus on midstate investments with a new acquisition.
PennSpring announced on Tuesday that it completed the sale of its two Leola-based holdings, Swing Kingdom and Atlas Molding, to New Holland-based Country Lane Gazebos just 19 months after acquiring the pair of businesses.
The firm also closed on a deal to acquire a majority stake in Lancaster-based environmental services company EHC Associates.
Swing Kingdom, a manufacturer of playground equipment, and its sister company, Atlas Molding, which makes plastic components for playground equipment, were the first two local companies purchased by the investment firm, which previously focused on companies outside the state.
During its ownership of both companies, PennSpring helped Spring Kingdom grow its client base beyond its traditional relationship with playground dealers to include municipalities, said Lou Castelli, PennSpring managing partner.
The firm also invested in new equipment for Atlas Molding and added more staff to the warehouse floor, allowing the manufacturer to triple its input. Other changes to the company included professionalizing Atlas’ financial function and modernizing the company’s customer experience, said Castelli.
The changes at both Swing and Atlas tripled EBITDA between the two companies in 19 months, drawing in an interested buyer well before PennSpring had planned to sell.
“(Country Lane Gazebos) came to us, they were a customer of Atlas and they have many shared distributors and they saw our success firsthand,” said Castelli. “Usually, I would hire an investment banker and take it around to other private equity groups but that wasn’t necessary.”
Nate Eisenberg, Swing Kingdom COO, called PennSpring “an incredible steward of our organization,” noting that the firm tripled EBITDA without altering the company’s culture.
“Even at the point of sale they proved adept at uncovering the perfect buyer,” Eisenberg said in a statement. “Not only strategically, but Country Lane Gazebos is also a cultural fit for our Amish/English workforce.”
Similar to how Country Lane Gazebos reached out to PennSpring to purchase Swing Kingdom and Atlas Molding, PennSpring’s newest acquisition, EHC Associates, contacted the firm after seeing how it handled its tenure with Swing and Atlas.
“Everyone knows each other in this area,” said Castelli. “It’s a beautiful thing. This acquisition we just closed on, they came to us. They are a couple miles from Swing Kingdom, they know the people there. People are getting to know us.”
EHC offers environmental services such as demolition, asbestos abatement, air duct cleaning, lead paint abatement and mold removal, primarily to contractors. The firm, which employs 30 people, has a large market share in the region but seeks to expand its outreach to include services for smaller, residential clients.
“It’s the reverse of Swing Kingdom; we are already doing the big jobs but we want the small jobs,” said Castelli. “My role is going to be on the digital marketing and sales side. Sourcing more leads, more revenue, getting more interest from realtors and home owners.”
PennSpring and EHC completed the transaction last week, with PennSpring joining as both controller and owner. John Hartman, former majority owner and current president of EHC, said PennSpring was very thoughtful in its approach to the process.
“Their track record of value creation is unrivaled in our region,” Hartman said in a statement. “With PennSpring at our side, EHC is well-positioned for both immediate and sustained growth.”
Prior to investing in area businesses, PennSpring focused on acquisitions outside of the state. Other than EHC, PennSpring’s controlled investments include Securus Contact Systems in Portland, Oregon; PSST Seamless Data Solutions in Louisville, Kentucky; and Traffic Control Systems in South Hackensack, New Jersey.
Ffollowing his experiences with Swing, Atlas and EHC, Castelli is convinced that PennSpring’s future lies in investing in businesses throughout the midstate, adding that he was naive not to see the potential of businesses in the region sooner.
“I have even more conviction about local businesses than ever before,” he said. “We can do it all here. We are the only investors here. We won’t be the only ones here forever but there is a market here in itself and it’s exciting.”