Managing Partner Jeff Vogel discusses the firm’s investment in GoEngineer and Court Square’s approach to working with founders and management-owned companies.
By Chris Nolter
February 11, 2022 12:03 PM
Court Square Capital Partners LP is deploying its middle-market playbook in computer-aided design and 3D printing with an investment in GoEngineer Inc.
“GoEngineer was a perfect down-the-middle-of-the-fairway investment for us,” Jeff Vogel, a managing partner at Court Square, told The Deal of the deal announced in January.
The Salt Lake City company sells computer-aided design, or CAD, software and 3D printing hardware and advises large enterprises on how to best use the technology, and it fits a number of Court Square’s criteria, Vogel noted. The firm is keen on profitable, middle-market growth companies in tech, industrials, healthcare and business services that are predominantly owned by founders or management. Relationships with founders and management-owners is a core part of the strategy, and GoEngineer CEO Ken Coburn stayed with the company and remains an investor.
GoEngineer works with large enterprises such as Boeing Co. (BA), Alphabet Inc.’s (GOOGL) Google, Nintendo Co. Ltd. and Chevron Corp.(CVX) that need to design and print airplane parts, video game consoles or other products and components.
“With any of these companies, they need somebody to hold their hand through that process, to help them understand how to use this software or which software to choose and, ultimately, if they need help over time, training them how to use it and help them to be better at their job,” Vogel said.
“It has more than $200 million of revenue, it’s growing double digits, and the majority is recurring revenue,” Vogel said. Court Square’s future plans for GoEngineer includes cross-selling 3D printing to its CAD software customers.
CAD software is a $10 billion market growing at approximately 10%, he said. While 3D printing is a roughly similar-sized market, it is growing at more than 20%, an opportunity that Vogel described in financial markets terms.
“We’ve got a call option on GoEngineer because 85% of the business is CAD software today, but hopefully five years from now a lot of the growth will be driven from just the cross-selling of 3D technology to our 10,000 customers,” Vogel said. The company expects more growth as 3D printing shifts from design and developing prototypes to manufacturing products at scale.
GoEngineer’s profile is reminiscent of former Court Square portfolio company Ahead LLC. Court Square backed the Chicago cloud consulting and services company in November 2015 and sold it in October 2020 to Centerbridge Partners LP and Berkshire Partners LLC for an undisclosed amount.
Ahead helps customers deploy tech and services from companies such as Cisco Systems Inc. (CSCO); Dell Technologies Inc. (DELL) and its EMC Corp. unit; Amazon.com Inc.’s (AMZN) Amazon Web Services; and Microsoft Corp.’s (MSFT) Azure.
“Ahead doesn’t actually make that technology,” Vogel said. “They go to these customers and guide them through their next five-year cloud and data center strategy.”
Ahead was also a founder-based business. “They were doing $20 million and $200 million of Ebitda and revenue, and we increased that eightfold by the time we exited,” Vogel said.
GoEngineer and Ahead are typical of Court Square’s portfolio.
Approximately 70% of Court Square’s investments are with founder-owners and management-owned companies. “They have the power to decide who their partners are. It isn’t just, ‘I’m going to sell my company for the highest amount of money I could possibly get,’” Vogel said. “This is their baby, and they want to stay engaged. They’re looking for the safe pair of hands and the right partner to align with on that next stage of growth.”
Management makes an average six times their investment alongside Court Square’s investment, he added.
The company’s approach to founder- and management-owned companies may provide an advantage when negotiating with potential portfolio companies. “They’re talking to other founders or current managers of our portfolio companies and that sells, because they know we’ve got a demonstrated track record and are going to make them a substantial amount of money,” Vogel said. “It’s just never about the price. It’s actually about that next bite of the apple.”
Source: The Deal