SFW Capital has big ambitions for Caron Products and Services, whose products ensure that vaccines and medications maintain a proper shelf life, as well as optimize the environment for cell and gene therapy development.
The growth-oriented private equity firm has completed a recapitalization of Caron, assuming a controlling stake following proprietary discussions between the two parties, the firm told PE Hub. SFW is partnering with CEO and president Steve Keiser and vice president Dave Figel, who will remain significant shareholders and continue to lead the Marietta, Ohio, business.
Caron, founded in 1985 by the Christy family and management, is a leading provider of laboratory equipment used in small and large molecule drug development and manufacturing, cell and gene therapy, and academic research.
“Whether it’s your Tylenol or cell and gene therapy – each one of those products needs to have a shelf life [so] that they are actually going to be active when they are used. How do you find out? You find out by using one of Caron’s products,” Ahmad Sheikh, partner at Rye, New York’s SFW, told PE Hub in an interview.
Caron’s most significant product line is used in stability testing for everything from complex vaccines (including covid-19 vacinnes) to more commonly used pharmaceutical products. Its proprietary technology and products are applicable at all stages – beginning with drug development all the way through ensuring quality control during the final approval process, the investor said.
Simply put, “you put the drug or vaccine through a series of environments to see what is the most optimal environment for it,” Sheikh explained.
Besides stability testing, Caron’s product line of CO2 incubators are uniquely applicable to cell and gene therapy – serving many of the CDMOs specializing in what is considered to be the fastest growing area of medicine.
“That’s another area where we expect to see a lot of demand because that market’s on fire,” Sheikh said.
Look ahead: M&A, global expansion, product development
For SFW, Caron “plays at the center of the fairway,” Sheikh said. Consistent with its playbook, SFW typically invests in family-owned companies that provide an analytical tool that is used to make better decisions.
Caron is led by a seasoned executive team – Keiser and Figel both came out of Thermo Fisher – and provides proprietary technology with a unique application. But the company has been constrained historically because they didn’t have the capital and resources to supercharge growth, Sheikh told PE Hub.
Structuring the transaction with all equity and no debt, SFW put additional cash on the balance sheet in order to accelerate its growth investments, the investor said.
“We’re focused on the scientists and their workflow – and how we can make their lives easier,” Sheikh said. Growth will come in the form of both strategic M&A and organic efforts. As SFW examines different opportunities, he continued, “We’re thinking, ‘should we be making this ourselves or go out and buy it?’”
For example, from a product development standpoint, SFW is considering adding probes within Caron’s incubators to enable more real-time monitoring, the investor said.
Elsewhere, geographic expansion presents another avenue for growth. With about 85 percent of Caron’s revenue generated in the US today, “there is a significant opportunity outside of the US,” Sheikh said. “We can take this global with our experience and our resources.”
With these efforts and others, SFW will look to accelerate Caron’s historical annual growth rate of about 10 percent, he said.
While the business in 2020 experienced a slowdown when covid caused many labs to shut down, Caron rebounded with record monthly bookings between August and December, according to the investor. 2020’s backlog of business provides great visibility in the near-term, he added, with Caron’s factory fully booked through the end of February.
For SFW, Caron is right in its wheelhouse. The firm has deep experience in supporting the growth and development of leading providers of laboratory instrumentation and equipment, including Essen Bioscience, Micromeritics, Spectro Scientific, Mettler-Toledo, and Waters Corporation
The deal with Caron, for its part, came together particularly quickly.
Months after the parties first engaged in discussions in early 2020, the target’s majority owner decided near the end of the year it was time to exit. A diligence process spanned just 30 to 45 days after SFW signed the letter of intent late last year, Sheikh said.
“We spent some time with them and saw there was so much commonality,” Sheikh said. “We spoke the same language.”
For SFW, Caron marks its seventh Fund II investment, which closed on $345 million in commitments in 2015.
Update: This report is updated with the correct spelling of SFW on certain occasions.