Jim Umland, owner of CEPS Inc. in West Lebanon, N.H., knew the opportunity to acquire well-known competitor Johnson Precision was golden. Having successfully modernized CEPS, acquiring Johnson Precision would mean a chance to have a similar impact at a larger scale.
His bank financing, though significant, left Umland short of what he needed to acquire Johnson Precision. He was unable to attract equity investors because the proposed transaction was taking place in the depths of the 2009 financial crisis.
Why VFG made this investment
Having a timeline for selling the company isn’t necessary for royalty financing. Seeing experienced management, a strong company, and a growing market, VFG used a royalty (or mezzanine) investment structure to fill the capital gap.
Before long, those same equity investors who originally passed on the opportunity became partners in VFG’s royalty financing deal.
Johnson Precision has grown since VFG’s investment in January 2010, and expanded to a new facility in Hudson, N.H. Having added equipment and more-precise molding technologies, Johnson is a leader in the medical-device-injection-molding market.
Most importantly, the patience offered by royalty financing has enabled the company to continue investing in people and position itself for long-term growth without the restrictions that a traditional mezzanine investment would have placed on the company.
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