Inside Texas Injection Molding’s rollup strategy: ‘a good time for buyers and sellers’

Jeff Applegate and team have built Houston-based Texas Injection Molding into a regional industrial powerhouse, along the way co-founding the Greater Houston Manufacturers Association in 2013. Recently, Applegate steered TIM into an acquisition by Blackford Capital, where he now leads a rollup strategy to “build a platform of injection molding companies in high-growth regions and high-growth industries.”

There’s good reason for optimism. “June will be our best month ever,” Applegate tells me. 

As with other Houston manufacturers, TIM is tapping into sector diversification in the Gulf. “Oil and gas is about 30% of our revenues, and it’s ‘steady to up’. Medical is pretty steady for us, and we’ve had a little spike in some HVAC work, maybe just an anomaly with a customer. But nonetheless, we’ve seen a nice uptick in some of our HVAC markets,” adding, “the construction market right now is good. So we’re doing a lot for home building, apartment building, a lot of ventilation as I mentioned, and building components. The consumer market is also fairly steady.”

Steady is one word. Opportunistic is another. And the manufacturing consortium that Applegate envisions seems well-positioned to tap growing demand across multiple industries.

“The goal is to build a platform of injection molding companies in high-growth regions and high-growth industries. And so much of that is going to be in the southeast and southwest United States. You see that in energy, in medical, in data centers and even automotive in the southeast,” Applegate says. 

All good, with the obvious qualifiers: how’s the market for injection molders? And are company owners in a mood to sell?

“We’re a buyer in the market now, and I think it’s a pretty good time to be a buyer. That said, I think the sellers also feel good. In some cases they might be willing to take a little bit less – maybe trying to get out while the getting is good, not hold their hands too long and then find out that the economy doesn’t hold together like they hoped or thought it would,” Applegate says. “You don’t want to sell in down year; somebody once told me, ‘nobody wants to catch a falling star.’ But a company’s trailing 12 months is how many of the companies we’re talking to value their business, and most people’s trailing 12 months is pretty solid.”

Yet distractions continue to weigh on the economy, and I ask if uncertainty is working to keep valuations suppressed. “It may be one of those times where it’s both a good time to be a buyer and a good time to be a seller,” he responded.

The same might be said for the universe of available companies: certainly not lacking, but not overly flush. Meaning a lot of money continues to pursue limited opportunities. “I’ve visited lots of companies all over the southeast – and many in the west. We don’t want to be in California, necessarily; we’d prefer the Phoenix area and then sell into the California market. Today, there are a number of opportunities in California, but not in Phoenix. And the businesses may not be able to move,” he says. “Our business is pretty regionally focused — regional proximity to customers is important. Our customer relationships are important.”

I mentioned recent data from the Dallas Federal Reserve Bank (more detail here) that pointed to an uptick in sentiment, a slowdown in industrial output but gains in wages and productivity. Applegate tracks: he’s optimistic, but cautious about what’s ahead. “If there’s anything, I think it’s what you see across the whole economy. The future is so unpredictable. You know, you could have a crisis that nobody can really predict that can affect the whole economy. And we’re seeing that our customers are not willing, in many cases, to make commitments too far out.”

Applegate’s growing customer base should provide insights into how the market evolves. We’ll circle back in later editions.

Bart Taylor is president of the Greater Houston Manufacturers Association. Reach him at [email protected].