Woodcraft Industries, Inc.

Woodcraft Industries, Inc. (“Woodcraft”) is the leading manufacturer of hardwood components, fully-assembled solid wood doors, and various laminated and profile wrapped components for the kitchen cabinet, furniture and millwork industries. The company’s core market is domestic, assembly-oriented kitchen and bath cabinet manufacturing companies. Woodcraft is based in St. Cloud, Minnesota, approximately 60 miles northwest of Minneapolis.

Woodcraft was brought to our attention by a Minneapolis-based investment banking firm that had been engaged by the company’s majority owner to find a financial partner for the company. Goldner Hawn quickly determined that Woodcraft was a highly desirable acquisition candidate, based upon the company’s stable and growing end-market, its longstanding relationships with some of the largest and fastest-growing participants in the cabinet assembly industry, and our belief that there were significant acquisition opportunities that could expand the company’s product line, add to its customer base and expand its geographic reach.

While the company was being marketed in a competitive process, Goldner Hawn quickly emerged as the “preferred” buyer for the company based upon a number of factors:

• Goldner Hawn’s geographic proximity and reputation for serving as a value-added strategic and financial partner for incumbent management: these were important considerations for the Woodcraft management team, which was provided with significant input and influence in the buyer selection process.

• Goldner Hawn’s willingness to structure the acquisition to permit the majority owner to “roll over” a portion of his ownership into a minority investment alongside Goldner Hawn: this was attractive to the majority owner and his advisors, as it provided the owner with an opportunity to benefit from the future growth of Woodcraft post-sale.

• Goldner Hawn’s reputation for closing transactions within the agreed-upon timetable and on the agreed-upon terms: this was an important factor for the owner, his financial advisors, and the management team, particularly given the sensitivity of the company’s large customers to a change in ownership and the potential damage to the business from a drawn-out sale process.

The company’s “fit” with Goldner Hawn based on the above factors proved to be decisive: while Goldner Hawn’s proposal did not offer the highest valuation for the company, our proposal was accepted, and we acquired a majority interest in Woodcraft in a transaction that closed in February, 1996. Woodcraft management and the former majority shareholder made minority equity investments.

Woodcraft thrived under Goldner Hawn’s ownership. Over seven years, the company’s revenues grew from approximately $55 million to nearly $150 million, and its cash flow increased by nearly 300% during the same period. Goldner Hawn proved to be a value-added financial partner for the company, providing strategic and financial assistance that permitted the company to generate such rapid growth. Goldner Hawn played a particularly important role in two significant add-on acquisitions that Woodcraft completed under Goldner Hawn’s ownership:

• In 1998, Woodcraft acquired PrimeWood, Inc., the leading U.S. manufacturer of engineered wood components to the U.S. kitchen cabinet industry. This acquisition, which was structured and financed under the direction of Goldner Hawn, permitted Woodcraft to expand its product line to offer engineered wood products and to expand its customer base by offering its hardwood product lines to a number of PrimeWood customers that were sourcing their hardwood components and doors from other suppliers.

• In 2002, Goldner Hawn completed the acquisition by Woodcraft of Brentwood, Inc., a west coast-based manufacturer of custom cabinet doors. This acquisition gave Woodcraft access to the high-margin custom cabinet doors segment. In addition, Brentwood provided Woodcraft with a strategic presence on the West Coast, where a number of the company's volume OEM customers were building assembly capacity.

The company’s financial performance, and the track record of the management team in generating organic growth and integrating acquisitions, made Woodcraft a highly desirable platform acquisition. In early 2003, Woodcraft’s stakeholders were rewarded when it was sold to a large private equity firm in early 2003 generating a 27% IRR and returning 3.7x the original investment.

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