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Potter prefers organic growth post-KKR acquisition, tuck-ins on agenda

Potter Global Technologies, a manufacturer of fire and emergency communication equipment, is mostly seeking organic growth following its November acquisition by KKR but will look at complementary targets, KKR partner Brandon Brahm and Potter CEO Gerry Connolly said in a joint interview.

In November, the St. Louis-based company, known as Potter Electric Signal until its renaming in 2023—its 125th year of existence—was sold to KKR by Gryphon Investors after a six-year holding period, for undisclosed terms. Connolly said that, as Potter finished up the sale process, it saw a compelling path to accelerate organic growth but also had its eye on some complementary businesses, adding that other potential targets have emerged since.

Brahm and Connolly declined to comment on the revenue size range of potential targets or on Potter’s annual sales. According to KKR’s web site, its middle-market investment strategy deals with companies with enterprise values between USD 200m and USD 1bn.

Potter, which serves the education, multi-family, industrial, healthcare, and other sectors, develops fire alarm systems, sprinklers, voice evacuation systems, and explosion-proof devices, among many other safety and security-related products.

“The criticality of Potter’s products drives consistently growing demand because safety regulations and standards only go up. No one is taking a step back in safety,” said Brahm, who is also co-head of KKR’s Ascendant middle-market investment strategy. One organic growth goal could be finding a partner abroad to help with international expansion, he said, as Potter has a smaller foothold in Europe than in the US.

He added, however, that since safety codes and standards in Europe and Asia can differ from those in the US, an acquisition could expedite Potter’s access to those areas and complement organic efforts. As far as Europe, Connolly said that the UK, France, and Germany are big economies where Potter could potentially pursue M&A.

In the US, Potter wants to bulk up its footprint in larger metropolitan areas now that, as of last year, the company has developed a strong platform through investing in research and development for large infrastructure such as big campuses and high rises, Connolly added. He mentioned New York City, Chicago, San Francisco, Los Angeles, and Miami as examples of attractive areas. It could reach this goal organically as well as inorganically, he said.

Tuck-in acquisitions could also boost Potter’s presence in digital communication products, said Brahm, who added that the company wants to deploy its technology beyond schools into sectors like the defense and industrial facilities. He stressed that this goal could also be reached organically.

Potter has the resources and capability to make a transformative acquisition but does not expect to, given that “what Potter does is so special,” Brahm said. “We would only do so if it aligned well with our strategy.”

While Potter began exploring exit options and testing the market in the summer, KKR had already been introduced to the company a few months earlier, said Connolly. Brahm said KKR was excited by Connolly’s leadership and the products Potter was offering. While a lot of interest came from other private equity firms as well as strategics, Potter had already identified a strong strategic fit with KKR, so the process moved quickly, added Connolly.

Potter is unique for how much it spends on R&D relative to its size — significantly more than traditional industrial peers, said Brahm. That tactic has enabled Potter to consistently deliver new products that help its customers maintain compliance with new codes and regulations, better monitor and respond to their systems, and improve the user experience, he added. The company also stands out for providing a high-touch customer service experience, especially to small- and medium-sized installers, who have been historically underserved, he noted.

Potter most recently acquired Valcom in 2021, expanding its range of emergency communication systems for educational, retail, and government facilities; and TowerIQ , a provider of advanced wireless life safety communication systems for smart buildings, in 2020. Terms were undisclosed for both transactions.

Connolly said those two deals have been “additive to our core strategy around building safety” and he and Brahm said Potter will prioritize organic growth to build out these businesses.

Baird and Baker McKenzie were financial and legal advisors to KKR, respectively, on the transaction, while Gryphon’s financial advisors were Harris Williams and Raymond James and its counsel was Kirkland & Ellis.