Opex Awards 2016: Americas, lower mid-market – Riverside

Eemax, a manufacturer of electric tankless water heaters, was generating an EBITDA of just under $2 million when the Riverside Company acquired it in September 2008. At the time, Eemax was No. 1 in the commercial market for electric tankless heaters, but lagged in the residential and industrial markets.

By the time Riverside exited in December 2015, the Connecticut-based manufacturer was market leader in all three segments, with EBITDA of more than $9 million.

At the time of the acquisition, Riverside saw big growth potential for Eemax’s energy efficient products, but believed it needed operational support for both its infrastructure and team.

“Eemax’s revenue had been growing about 20 percent per year,” said Riverside principal Joe Manning. “It was very clear they were going to outgrow their current facility over the next couple of years, but didn’t have sophisticated manufacturing processes or quality-control processes.”

To increase production capacity, Riverside moved Eemax to a new 45,000 square feet plant, more than double the size of the original. Improving the product range was a key priority. For the industrial market, it began manufacturing water heaters for eye-wash stations and safety showers, following a three-year R&D project.

In the residential market, Eemax secured top spot helped by the add-on acquisition of Miami-based EcoSmart, which produces energy-efficient tankless water heaters for home use. New sales channels via retailers such as Home Depot and Lowe’s boosted revenue. Popular products include a tankless auto-booster that can be retro-fitted to traditional, tank-based water heaters to meet new energy efficiency standards.

Central to the strategy was the expansion of its design team from one engineer to seven. Three-quarters of Eemax’s product range are either redesigns or new products developed by this team.

Senior management was bolstered with the addition of a new chief executive, chief financial officer and vice-presidents in engineering and marketing – all filled within the first 18 months of Riverside’s ownership. Riverside also upgraded three of the four existing senior management positions to build what Manning describes as a “true executive team”.

The sale of Eemax to Rheem Manufacturing in December 2015 was a testament to the success of its strategy, said Riverside operating partner Mike Eblin.

“It validates the teamwork between Riverside (the operating partner, transacting partner, and financial directors) working with the management team. For me, I’m incredibly honoured to receive this award; it’s an acknowledgement of a lot of hard work by everyone involved,” he said.

The returns were especially strong given the investment was made before the financial crisis, said judge Steven Kaplan of University of Chicago Booth.

“Riverside did a great job with Eemax. They helped turn a niche player in one segment into a market leader in three. Riverside upgraded the team, made big investments in R&D and engineering, increased capacity, and improved the sales process. Very impressive,” he said.

“A major investment in R&D (funded by Riverside), an add-on acquisition, and the implementation of a new sales toolkit were key enablers,” said judge EY's Paul Fuhrman.