INVESTMENT FOCUS
| The HammerBlow Corporation Wausau, WI |
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HammerBlow was originally founded in 1919 in Wausau, Wisconsin to manufacture precision auto tools. In 1927, the company invented the drop forged ball and socket trailer hitch (also known as a coupler). In subsequent years, the Company added product lines including jacks, axles, conveyors and more couplers. HammerBlow has evolved into a leading manufacturer of mechanical trailer jacks and couplers. Its products serve manufacturers of horse and livestock trailers, agricultural equipment, construction and industrial equipment, and recreational vehicles. Roughly half of its sales are to OEM’s with the remainder sold in the after-market throughout the United States and Canada.
Merit’s investment in HammerBlow occurred in 1997 when the company’s 100% owner became ill. As a result of his condition and the need to reduce his illiquid assets for estate planning purposes, the owner entered into discussions to sell HammerBlow to a strategic buyer. Following several months of difficult negotiations, it became apparent that a satisfactory sale was not feasible. Recognizing the continued need to sell a major portion of HammerBlow for both liquidity and estate planning purposes, the owner approached Merit Capital to provide financing for a recapitalization. We became comfortable with the business, but the challenge was to structure an investment beneficial to the owner, the existing management and Merit Capital. In the end, we assisted in the change of the legal status of the company from an S-Corp to a C-Corp and invested a portion of the consideration in the form of Preferred Stock. The transaction enabled the owner to receive the liquidity that was desired, while also providing existing management with an ownership position in the business.The investment and the structure were a success. The owner received his liquidity. Management incentives, through a meaningful equity ownership, were aligned with our interests. The company performed well over the ensuing years and Merit Capital and our limited partners received a commensurate return for our investment. |