Acacia Research announces Strategic Acquisition of Deflecto®
Acacia Research Corporation has taken another significant step in expanding its portfolio with the acquisition of Deflecto, a specialty manufacturer serving essential sectors like commercial transportation, HVAC, and office markets.
The $103.7 million deal promises to bring considerable value to Acacia’s portfolio by delivering immediate benefits in terms of revenue, free cash flow, and earnings per share. Deflecto, with a robust reputation across its product lines, expects to generate between $128-$136 million in revenue in 2024, positioning Acacia for growth in multiple sectors.
Acacia Research and Deflecto
In a move aligned with its strategy to acquire businesses that present long-term value, Acacia’s latest acquisition strengthens its foothold in the industrial and manufacturing sectors. Acacia Research, renowned for its acquisition-focused business model, aims to grow its influence in sectors that promise stable and diversified revenue streams. Deflecto, headquartered in Indianapolis, Indiana, aligns perfectly with Acacia’s growth strategy. The acquisition fits well within Acacia’s vision of expanding into mature sectors that show steady cash flow.
Ross Pliska, CEO of Deflecto, will continue to lead the company, backed by a seasoned management team. Pliska and his team bring years of experience and are well-versed in the operational execution and capital allocation processes that will be vital to achieving further growth under Acacia’s umbrella.
Martin (MJ) D. McNulty, Jr., CEO of Acacia, emphasized the potential for value creation through product and operational optimisation, along with strategic mergers and acquisitions. “We’re thrilled to add Deflecto to Acacia’s growing portfolio. Deflecto fits our model perfectly, offering diversified and essential products to a wide array of customers. Ross and his team have demonstrated remarkable operational execution and capital allocation, making this an excellent fit for both parties,” McNulty said.
A Market Leader Across Multiple Sectors
Deflecto has long been recognised as a leader in its markets, supplying crucial products to a range of industries. From emergency warning triangles and vehicle mudguards for the transportation sector to air ducts and registers for HVAC systems, Deflecto’s product range serves blue-chip customers across the globe. Deflecto’s reach spans over 1,500 retail, wholesale, and OEM customers through long-term relationships that solidify its market presence. With manufacturing facilities across the United States, Canada, the United Kingdom, and China, the company is well-positioned to continue scaling its operations.
As of the twelve-month period ending August 31, 2024, Deflecto reported revenue of approximately $131 million. Looking ahead, the company expects to maintain its growth trajectory, projecting revenue between $128 million and $136 million in 2024, despite fluctuating market conditions. The acquisition is expected to be immediately accretive, benefiting both Acacia’s earnings and cash flow.
A Closer Look at the Financials
Acacia Research is funding the transaction through a combination of cash on hand and borrowings under a newly established senior secured credit facility. JPMorgan Chase, acting as the lead arranger and administrative agent for the facility, has syndicated the loan among other financial institutions. The new facility provides $48 million in borrowings, with Deflecto expected to hold $10 million in cash post-transaction.
This financial structure not only supports the immediate acquisition but also ensures that both companies have enough flexibility for future investments and operational growth. The deal structure highlights Acacia’s strategic approach to maintaining liquidity while capitalising on growth opportunities in the industrial and manufacturing space.
Deflecto’s Path to Success
The acquisition is a testament to the success Deflecto has achieved since 2021 when the company embarked on a mission to improve its financial and operational performance. Pliska noted that the partnership with Acacia opens doors for further investments and value creation. With Acacia’s expertise and additional capital, Deflecto is in a prime position to enhance its product offerings and enter new markets.
“This transaction is the culmination of our efforts to significantly improve Deflecto’s performance. Acacia’s proven track record of successful integrations, combined with their industry expertise, will fuel our continued growth,” said Ross Pliska.
Beyond its robust product line, Deflecto has developed a reputation for innovation. With more than 60 years of experience in developing essential products like floor protection solutions, bicycle reflectors, and air distribution products, the company continues to prioritise operational excellence. These capabilities make Deflecto a valuable asset in Acacia’s portfolio and a key player in its long-term growth strategy.
Acacia’s Broader Vision
Acacia Research operates on a straightforward but effective strategy: acquire businesses with stable cash flows, optimise operations, and generate value through strategic mergers and acquisitions. The company, publicly traded on Nasdaq, is focused on expanding its footprint in the industrial, technology, and energy sectors, seeking out opportunities that offer consistent cash flow and scalability. Acacia’s leadership, experienced in transactions and operations management, applies a disciplined approach to evaluate opportunities based on cash flow potential.
The acquisition of Deflecto is a perfect example of how Acacia aims to create value through people, process, and performance. By combining expertise in operational optimisation with the financial firepower to make strategic investments, Acacia is positioning itself for sustainable growth.
The Road Ahead for Acacia and Deflecto
Looking ahead, the partnership between Acacia and Deflecto signals promising opportunities for both companies. Deflecto’s existing customer relationships, its ability to innovate, and its market-leading position across multiple sectors make it a valuable addition to Acacia’s growing portfolio. With immediate financial benefits expected to boost Acacia’s earnings and cash flow, this acquisition sets the stage for long-term value creation.
Both companies are poised to explore new opportunities in product development, operations, and strategic partnerships. As Acacia continues to expand its reach in the industrial and manufacturing sectors, the acquisition of Deflecto marks an important milestone in its growth journey.
A Future Built on Synergy
The synergy between Acacia and Deflecto is expected to yield immediate results, both financially and operationally. This acquisition not only strengthens Acacia’s portfolio but also brings new opportunities for innovation, market expansion, and strategic investments.
As both companies move forward, the future looks bright, with plenty of room for growth and collaboration.
