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By Maureen Flanagan
Qualitor, Inc., based in Southfield, MI, is a leading manufacturer of automotive and truck aftermarket parts. The company was formed in April 1999. Today, Qualitor commands the top market position in aftermarket brake components and engine controls and is among the leading producers of windshield wipers. Operating eight manufacturing, distribution and storage locations, Qualitor is known for its comprehensive SKUs, its engineering capabilities that lead to "first to market" products, and its exceptionally strong order fulfillment and product management.
In a December 2004 transaction, Qualitor was acquired by Thayer Capital Partners, a Washington-based buyout firm, and Baird Capital Partners (BCP), the Chicago-based private equity affiliate of Robert W. Baird & Co.
In support of the buyout, American Capital Strategies, Ltd. (Nasdaq: ACAS) provided $33 million of subordinated debt and equity.
"Under its new ownership, Qualitor will take advantage of the company's engineering and design strengths while utilizing the automotive supplier experience of Thayer Capital and the significant Asian sourcing and manufacturing expertise that BCP brings to the table," said David Ehrenfest Steinglass, American Capital Managing Director.
BCP has an interest in investments that can benefit from Asian-based manufacturing and distribution capabilities. In January 2004, American Capital co-invested with BCP in Hygenic Corporation, a marketer of healthcare and fitness products with manufacturing capabilities in Malaysia.
Qualitor's Hydraulic Brake Group (HBG) manufactures and supplies replacement brake component products such as back plates, shims and caliper hardware for disc and drum brake systems. Customers rely on HBG to quickly develop application-specific parts to replace components for OEM braking systems that wear out over time. HBG develops the required tooling and products to supply aftermarket customers and is often "first to market" with brake parts for new model platforms. HBG's engineers also develop advanced materials and connection devices to reduce the noise, vibration and harshness associated with friction braking systems and differentiates its product offering with added design features.
 Qualitor's Pylon division manufactures and distributes a comprehensive line of windshield wiper blades, inserts and refills, as well as window care accessories. The division serves all price points for automobile and light truck makes and models and uses a branding strategy for product differentiation and market segmentation. Its popular Michelin-branded wiper blades (pictured at right on display) give Qualitor a major competitive advantage and enable the company to compete against the largest industry players.
The company's engine controls and heavy duty aftermarket products are sold through its BLD subsidiary. Qualitor manufactures mechanically and electronically operated sensors, switches, and valves used for engine and transmission control. Its engine controls product line includes components that are integral to emissions systems, electronic fuel injection, and carburetors of automotive engines. Through its Novo Products subsidiary, BLD is the largest North American aftermarket supplier of PCV valves for emissions control.
Also within the BLD subsidiary, Qualitor manufactures and supplies air brake, electrical and fluid delivery components to the medium to heavy duty truck aftermarket under the Sloan brand. Sloan also pursues select original equipment programs under the Hebco brand.
"Qualitor now has the expertise to implement a long-term, multi-phase process to expand its existing market penetration in key product areas by increasing its Asian sourcing and manufacturing capabilities," said Kevin Baird, Qualitor President and CEO. "This should prove to be an excellent complement to the company's current leadership positions in a number of product categories."
In the December 2004 transaction, a syndicate of lenders led by Antares Bank provided a revolving credit facility and senior term loans alongside American Capital's financing package. Thayer Capital was the lead equity sponsor with BCP providing a co-lead role.
Qualitor joins American Capital's portfolio which currently includes more than 100 companies, several of which manufacture products for the automotive aftermarket.
For more information about American Capital's portfolio click here. Since 1997 American Capital has invested more than $3 billion in middle market. Steady growth is forecasted for the $165.4 billion automotive and $62.1 million truck aftermarkets. Qualitor's submarkets are expected to grow even more rapidly. Motorists need to replace brakes at an increasing rate due to the continued penetration of heavier vehicles on the road and changes in friction material. The brakes on heavier vehicles wear out faster than on lighter vehicles such as automobiles. Growth will also be driven by ever increasing vehicle miles driven. In addition, SUVs and sedans are often equipped with rear window wipers, which will add to the need for replacement wipers.
Qualitor is enhancing its relationships with national automotive warehouse distributors and specialty retailers. It now has opportunities to leverage each division's existing channel relationships and "pull through" product offerings from other Qualitor divisions. In addition, the company has developed value added design and branding features that improve product margins and enhance customer relationships. Possible acquisitions will also accelerate growth and further reduce the company's domestic cost structure.
With its leading market positions, strong customer relationships, and new ownership experienced in Asian sourcing, Qualitor is accelerating down the road to a bright future.
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