SunTx Capital in 8x automotive exit

The US mid-market firm has completed the sale of automotive component maker Huron, generating more than a 30% IRR since acquiring the company in 2005.

Dallas based mid-market firm SunTx Capital Partners has sold US automotive product-maker Huron.

Financial terms of the transaction were not disclosed, but a source familiar with the matter said SunTx generated more than an 8x return multiple and more than a 30 percent internal rate of return on its investment. SunTx invested in the company in 2005 using capital from its $230 debut fund that closed in 2004. The firm is currently investing its $256 million Fund II that closed in 2010 and is more than two-thirds invested.

Huron manufactures tubular products such as coolant lines and other automotive components to US customers including Ford and Toyota. During the holding period, SunTx helped grow the business by implementing a number of operational changes, according to SunTx partner Ned Fleming.

“We started with consolidating plants and working with the labour unions to figure out ways to reduce labour costs,” he said. “The biggest thing we did was make sure management and labour were working together to find efficiencies, not just from a private equity perspective, but from an operating perspective, both strategically as well as on the plant floor.”

While SunTx had in-house expertise in the automotive industry in the form of a former consulting executive, the firm also worked with Huron’s employees to create new operational efficiencies.

“The people that work in these plants that have done this for a long time really have some terrific ideas,” Fleming said. “Working with them to get some of those instituted throughout the plant created more plant efficiency.”

SunTx invests in established mid-market companies with enterprise values between $50 million and $150 million, primarily in the southern US. The firm targets businesses in a variety of sectors, such as manufacturing, communications and technology, and food and beverage, and has invested more than $600 million since its founding in 2000.