Court Square’s GoEngineer Doubles Size with CATI Purchase

By Chris Nolter
Published: August 25, 2022

With the purchase of 3D design software and printing hardware vendor Computer Aided Technology Inc. announced Thursday, Aug. 25, GoEngineer Inc. is doubling its revenue about nine months after raising capital from Court Square Capital Partners LP.

“It’s atypical for us to double the size of a business within less than a year,” Court Square managing partner Jeff Vogel told The Deal about GoEngineer’s purchase of CIVC Partners LP portfolio company CATI.

The logic behind the deal is partly geographic. GoEngineer of Salt Lake City is the largest computer-aided design, or CAD, software and 3D printing hardware vendor and services provider in North America, largely focused west of the Mississippi. CATI is “sort of the carbon copy of GoEngineer, but in the Eastern North American region.” Vogel said.

The deal was also about scale. GoEngineer founder and CEO Ken Coburn has greater ability to invest in sales and engineering resources to work with clients and important suppliers such as Dassault Systèmes SE and Stratasys Ltd. (SSYS). Meanwhile, the company can continue to make tuck-in acquisitions as 3D printing, also known as additive manufacturing, grows. So far, Vogel said GoEngineer is following the playbook of Court Square’s successful investment in former portfolio company Ahead Inc.

Additive M&A

When Court Square recapitalized GoEngineer in December 2021, the sponsor and portfolio company already had CATI on their radar. “We knew that this was a possibility,” Vogel said. The sponsor did not know the deal would materialize so quickly, however. Vogel said the timing so soon after the recap gives Court Square and GoEngineer several years to digest the acquisition and continue to invest in the business before the private equity firm’s prospective exit.

CATI dates to 1992 and raised capital from CIVC in 2019. The middle-market Chicago sponsor typically makes initial equity investments of $20 million to $100 million in companies with $5 million to $25 million in Ebitda.

The deal resulted from direct talks rather than an auction. “GoEngineer had a relationship with the CATI management team for years,” Vogel said. “Even before we owned GoEngineer, we had a relationship with CIVC.” Lazard Ltd. and Dechert LLP advised GoEngineer, while CATI retained Lincoln International LLC.

Vogel compared GoEngineer with cloud consulting and services company Ahead. Court Square backed the Chicago company in November 2015 and merged the business with fellow portfolio company Data Blue LLC in 2019, before selling it to Centerbridge Partners LP and Berkshire Partners LLC in October 2020.

“The Ahead and Data Blue business model is the exact same model as GoEngineer’s, but instead of being focused on CAD and 3D printing, they’re focused on storage, compute and networking solutions and cloud solutions into the data center for large enterprises,” Vogel said.

In both cases, Court Square combined two large, founder-run companies. “With Ahead, we did that over a five-year period,” he said. “With GoEngineer, it’s been within the first 12 months.”

CAD Consolidation

Acquisitions will still be part of the story, though GoEngineer’s next deals will likely be smaller, tactical tuck-ins. “At this point we’re pretty excited about the organic growth opportunities,” Vogel said.

Targets could include regional operators that have developed relationships with GoEngineer’s team, customers or vendors such as Dassault or Stratasys. GoEngineer also could look to expand into technological specialties such as electrical, mechanical, manufacturing or design-oriented shops. With its scale, GoEngineer could bring on small teams of experts through deals. As GoEngineer expands, it could seek international consolidation opportunities.

The market for CAD software and 3D printing resellers is fragmented, with PE firms and acquisitive private companies. Middle-market sponsor Sentinel Capital Partners LLC purchased a controlling stake in Richmond, Va.-based TriMech Solutions LLC in March. Hawk Ridge Systems LLC of Mountain View, Calif., has raised equity and debt from Main Street Capital Corp. (MAIN) to roll up peers. MLC CAD Systems Inc. of Austin, Texas, is also acquisitive.

“The beauty of the 3D printing market is that, even though it’s been around for quite some time, it still feels so nascent in all the various growth opportunities.” Vogel said.

As 3D printing technology moves from product design to short-run manufacturing and greater-scale manufacturing, Vogel suggested adoption will proliferate across industrial, healthcare and other applications.

“You’re going to start to see different winners emerge,” Vogel said. “Once you have winners at scale, then ultimately they are going to start to be the consolidators.”

Source: The Deal