GreyLion Capital will announce later this morning that it has invested in two companies: Webconnex LLC, a developer of ticketing and event management software; and Norwood Sawmills, a provider of portable consumer-sized sawmills. While in different sectors, both targets are emblematic of the New York-based PE firm’s strategy. GreyLion, which focuses on the lower mid-market, was spun out from Perella Weinberg Partners back in 2020. PE Hub interviewed the managing partners who worked on the deals.
GreyLion will inject capital into Webconnex and Norwood Sawmills to help them realize the next phases of their growth. The capital will be used to help scale multiple components, such as hiring new personnel, expanding sales and marketing functions, new product development, new technology and creating new value-add services for the end-customers.
The two newest, controlling investments into the GreyLion portfolio are within sectors the PE firm knows well. With the addition of Norwood, GreyLion has six equipment rental and construction-type companies in the industrial sector, and WebConnex marks the fifth company in the firm’s software and services portfolio.
“Our strategy is less focused on trends in each sector and more on identifying strong management teams at good companies that have a reason to win within the sectors we focus,” according to Chip Baird, managing partner at GreyLion. “The lower mid-market, where we seek to invest, is the growth engine of the US economy and we believe this will continue to be the trend going forward.”
Webconnex was founded in 2008 and is a Sacramento-based tech company that makes software for events and fundraising. The Webconnex product suite includes TicketSpice, RegFox, GivingFuel and RedPodium, which collectively are used to process nearly $1 billion in annual payments for event creators and non-profits globally.
Baird walked through what he sees the growth opportunity for Webconnex is.
“As far as products go, the company has a diversified product offering and is well positioned to growth given industry tailwinds and when it comes to end markets, Webconnex serves a wide variety of end markets with fairs, festivals and sports making up the majority of its top customers,” he said.
He also added that there is “significant” opportunity to enter adjacent verticals and introduce new products to Webconnex’s existing customer base.
“When it comes to sales and marketing, the lack of formal strategy today leads GreyLion to believe that with investment, they will be able to take advantage of the attractive unit economics, large TAM and attractive industry tailwinds,” he said, noting that there is also an opportunity to enhance Webconnex’s pricing to be more “in-line with competitors and increase take rate.”
Founded in 1993, Norwood manufactures portable sawmills, which can be customized. The company holds more than 70 patents.
“We plan for continued organic growth in the portable sawmill market, as well as expanding the sales team and having more of a geographic focus,” said David Ferguson, managing partner at GreyLion. “We also want to target consumables which are currently less than 10 percent of sales.”
He added that they plan to leverage M&A to expand into adjacent markets such as splitters, chippers and grinders.
“Strong brand and customer loyalty creates opportunity for complementary products focused on our customer base, which can cross sell other outdoor consumer tools and equipment,” he said.
In June of 2020, GreyLion was spun out from Perella Weinberg Partners Capital Management LP, where GreyLion had been part of Perella Weinberg Partners’ asset management business since 2012. Since then, GreyLion has been an independent, employee-owned investment firm, focusing on investing in a diversified portfolio of high-growth businesses in the mid-market.
As a firm, GreyLion typically sees over 1,000 opportunities that are fairly even split across the firms four target sectors – industrial, software/services, healthcare and consumer. GreyLion acknowledges the current headwinds in the labor markets and supply-chain challenges, but they are “not insurmountable,” Ferguson said.
“The businesses that we invest in face numerous challenges as they execute on an accelerated growth plan, but our work in diligence to identify areas of investment and the application of our LIFT strategy mitigates these specific company challenges,” said Ferguson.
For GreyLion, LIFT stands for leadership, investment, flexibility and technology – the four key areas the firm focuses on.
“Leadership is ensuring that each management team has the proper supporting talent to maximize growth, investment is re-investing significant P&L and balance sheet capital into business and infrastructure to support future growth, flexibility is using debt conservatively to create flexibility; consider minority investment opportunities and technology is ensuring our partners have best-in-class technology, systems and processes,” he said, noting that the growth strategy in each of these companies is consistent with the firms strategy over the past 25 years.
According to GreyLion, each of these investments represented an opportunity to back a founder-run/management-led company where GreyLion was the first institutional capital and the business had reached an inflection point with tremendous opportunity in front of them.
“In each case, the company had demonstrated a competitive advantage relative to its peers and carved out a segment of the market where they have a reason to continue to succeed,” said Ferguson. “Each of the companies also have a distinct culture which made it important for them to identify the right partner to help them achieve their growth potential.”
In addition to industrial and services, the firm also invests in the healthcare and consumer sectors. “We like the ability to pivot from sector to sector, given inflated valuations, potentially increased competition and other circumstances,” said Ferguson.