MCM Capital and Management Reap Exceptional Returns on Sale of MicroGroup

MCM Capital Generates Strong Return on Sale of MicroGroup, Incorporated

Significant Capital Investments Boost Company Profits, Yield Strong Investor Returns
August 12, 2005

CLEVELAND, OH – MCM Capital Partners, a Cleveland, Ohio-based private equity firm and a leading investment firm dedicated to investing in smaller middle-market businesses, announced the successful completion of its sale of MicroGroup, Incorporated, a Medway, Mass.-based manufacturer of precision, miniature machined components, fittings, valves, and small diameter stainless steel and alloy tubing.

MCM acquired MicroGroup in May 2002 through a leveraged recapitalization, providing its founder and longtime owner with both personal liquidity and preservation of management responsibilities. Since then, MCM’s Principals worked hand-in-hand with MicroGroup’s management team to achieve profitable growth and shareholder appreciation. MicroGroup achieved nearly 33 percent sales and 54 percent earnings growth during that time period.

The sale of MicroGroup to Kirtland Capital Partners, another private equity firm, generated a 46 percent realized internal rate of return (“IRR”) for MCM and its investors, or approximately 3.5 times the initial investment amount over a 38-month holding period. Financial terms of the sale are not being disclosed.

During its ownership, MCM’s Principals encouraged management to invest significant resources that expanded MicroGroup’s production capabilities, capacity and information systems. “MicroGroup achieved significant growth during our partnership through prudent risk taking and management execution,” said Mark E. Mansour, Managing Director and Principal of MCM Capital Partners. “Having met our investment goals, we felt it an appropriate time to monetize our investment and provide a return to our investors.”

“As with all our portfolio companies, we brought a strong growth commitment to MicroGroup,” added Steven M. Ross, Director and Principal of MCM Capital Partners. “We didn’t go in and demand performance that was unrealistic. We’re patient, and we have the willingness and the ability to provide follow-on capital to support our investments. From the start, we encouraged management to hire additional sales staff and make necessary capital expenditures, which helped the Company overcome unfavorable economic conditions at the outset.”

MicroGroup, founded in 1971 as a micro-welding job shop, steadily grew to become one of North America’s leading providers of precision fabricating services and miniature components that serve the medical device and analytical equipment markets. Despite new ownership, Mansour expects MicroGroup to continue to implement its business plan post-sale under a stable management structure. “The Company is extremely well-positioned to continue to grow by virtue of investments made in expanded production capabilities and development of e-commerce functionalities,” he said.

MicroGroup was among a select group of eight platform companies acquired by MCM Capital Partners, L.P. (“Fund I”), MCM’s first institutional fund and second overall pool of capital, between 1998 and 2002. To date, Fund I has generated a 32 percent gross IRR on its five exited investments, which include MicroGroup, Ohio Moulding Corporation, OneSource, Inc. and StyleCraft Home Collections. MCM’s Principals anticipate that Fund I’s final rate of return will place it well into the upper quartile of vintage 1998 private equity funds.

Last October, MCM announced the initial closing of MCM Capital Partners II, L.P. (“Fund II”), its second institutional fund. Capital committed to Fund II is being used to identify and acquire controlling equity interests in North American smaller middle-market manufacturing, distribution and service businesses with annual sales of $20 million to $100 million. MCM’s Principals anticipate investing Fund II capital in seven to ten companies over a period of three to five years.

“The smaller end of the middle market best suits MCM’s strengths,” said James C. Poffenberger III, Managing Director and Principal of MCM Capital Partners. “Our extensive deal sourcing network provides us with superior access to the 30,000-plus companies that populate this niche. Additionally, transaction inefficiencies within the smaller end of the middle market have enabled MCM to acquire equity interests in companies at lower purchase price multiples than would otherwise be possible within the middle market.”

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