SFW buys RDI, banking on increased demand for predictive maintenance

SFW Capital Partners will announce later this morning that it has completed a majority recapitalization of RDI Technologies, which makes sensors that use camera technology and video-processing software to monitor a wide range of industrial and engineering equipment. Company founder and CEO Jeff Hay, president Bob Wilson and COO Jenna Johns are reinvesting alongside SFW to retain a significant equity stake in RDI.

PE Hub discussed the deal with SFW partner Ahmad Sheikh, who will serve as the chairman of RDI. In this Q&A, Sheikh spoke about the trends driving demand for predictive maintenance and advances in vision technology, which, he said, facilitate “better communication between technicians and management.”

Please describe some of the ways customers are using RDI’s offerings across different industries.

RDI customers span a variety of industries such as automotive, power generation, oil and gas, technology and packaging to name a few. All of them use RDI solutions for predictive maintenance to identify existing or potential faults in machinery that could lead to catastrophic failure if left undetected. RDI’s proprietary technology uses image-processing algorithms that turn every pixel into a displacement sensor to measure vibration & motion that would not be visible to the human eye.

Examples: In power generation, a company used RDI (with an assist from Boston Dynamics) to check on whether a power turbine was experiencing vibrations that would eventually cause a breakdown and power loss. In aerospace, a manufacturer used RDI technology when designing new engines because any sensors placed on the equipment would overheat and break. In technology, a large data center used RDI’s solutions to understand how shock and vibration affects their cloud technical infrastructure by testing the hardware used at their data centers across the whole design, testing and field deployment cycle.

What’s driving demand for RDI’s offerings?

There are two main drivers. At the macro level, it’s the trend of predictive maintenance. Businesses have learned that it is much more cost effective to search for and find problems early on rather than wait for things to break. The decrease in downtime more than pays for the investment up front. Then there is the advancement in vision technology that enables better communication between technicians and management. In the past, these issues would need graphs that require a trained technician to understand. RDI makes understanding issues with machinery much easier and, if you can show someone the problem, you can get an immediate fix.

What are the add-on opportunities for RDI?

We don’t see this as a roll-up, but we see good opportunities for strategic acquisitions, and have already identified some candidates. There are some interesting opportunities for RDI with other video-based measurement technologies like 3D analysis that can do real-time modeling and provide data on physical properties. We would also be looking at companies working in machine learning and the Internet of Things (IoT).

What is SFW’s long-term exit plan for RDI? 

Right now, we are focusing on the growing opportunity in predictive maintenance, but we believe RDI will be a very attractive target once we build the business by expanding its offerings and growing its global footprint. In addition, RDI is developing a very robust data asset because leveraging real-time data from manufacturing operations has huge value that goes beyond predictive maintenance to business strategy and optimization.

How does RDI fit into SFW’s investment thesis?

SFW focuses on investing in leading founder- and family-owned businesses in the industrial and life sciences technology sector, with deep expertise in measurement and testing. A prior investment in the predictive maintenance sector was Spectro Scientific, which we purchased in 2011 and sold to Ametek (NYSE: AME) in 2018. We grew the business through a substantial increase in new product development and completion of four acquisitions that expanded proprietary data assets and expanded the business into new end markets.