How Carlyle Creates Value Deep industry expertise. Global scale and presence. Extensive network of Operating Executives. And a wealth of investment portfolio data; we call it The Carlyle Edge. These are the four pillars of Carlyle’s value creation model.
Carlyle believes these selected case studies should be considered as a reflection of Carlyle’s investment process, and references to these particular portfolio companies should not be considered a recommendation of any particular security, investment, or portfolio company. The information provided about these portfolio companies is intended to be illustrative, and is not intended to be used as an indication of the current or future performance of Carlyle’s portfolio companies. The investments described in the selected case studies were not made by any single fund or other product and do not represent all of the investments purchased or sold by any fund or other product. The information provided in these case studies is for informational purposes only and may not be relied on in any manner as advice or as an offer to sell or a solicitation of an offer to buy interests in any fund or other product sponsored or managed by Carlyle or its affiliates. Any such offer or solicitation shall only be made pursuant to a final confidential private placement memorandum, which will be furnished to qualified investors on a confidential basis at their request.
Diversified Machine, Inc. (DMI)
Diversified Machine, Inc. (DMI)
Over a six-year period, Carlyle partnered with management in taking a domestically focused machine shop with three factories and transforming it into a global supplier of steering components with 10 locations, increasing employment fourfold to more than 2,300
About DMI and the Transaction
Carlyle acquired Diversified Machine Inc. (DMI) in November 2005 and exited the investment through a sale to Platinum Equity in December 2011. DMI is a global sole-source supplier of powertrain components and safety-critical autoframes to major automotive companies and large suppliers. DMI is also the largest global supplier of steering knuckles— a highly engineered component that, together with the steering arm, allows a wheel to pivot.
In partnership with DMI’s management team, Carlyle acquired the company out of bankruptcy and focused the next six years on re-building its operations. Despite a challenging economic climate for the automotive industry, DMI enhanced its product offerings, expanded its global footprint and increased employment. DMI is headquartered in Wixom, MI, and it operates 10 global manufacturing facilities, including plants in: Columbus, GA; Bristol, IN; Howell, MI; Montague, MI; Edon, OH; and Milwaukee, WI. During Carlyle’s ownership, DMI expanded employment from 425 to approximately 2,350, including unionized employees affiliated with the United Steelworkers and United Electrical Workers Union.
Key Value Creation Metrics
Repositioned DMI as a global supplier, expanding from three factories, largely in the Detroit, MI area, to ten, including three outside of North America;
Supported employment growth from about 425 employees to more than 2,350—more than 500% increase;
Acquired the business out of bankruptcy and, during the global recession, increased revenues by 4.5x;
Focused on developing lighter-weight components with aluminum content that would improve fuel efficiency; and
Expanded the Company’s product portfolio and enhanced its engineering and technical capabilities.
Expanding Global Operations and Integrating New Businesses
Supported by Carlyle, DMI expanded its global manufacturing presence. Using existing customer relationships, DMI targeted opportunities where it could supply the same components in multiple geographic markets. DMI made several acquisitions to give it a foothold in key countries. The company established a presence in Europe by acquiring a machining plant in Barcelona, Spain and an aluminum foundry and casting operation in Vaux, France. Additionally, after winning several key contracts, DMI established a Chinese manufacturing presence to supply Chinese domestic and other Asian markets.
While expanding operations, DMI’s management team focused on integrating the new businesses and maintaining the company’s process-driven culture. DMI developed systems to track key performance metrics on a daily basis and implemented new protocols to manage the diverse and expanding employee base. With these systems in place, DMI has achieved significant operating improvements, including higher productivity, enhanced customer quality and better safety performance. The systems and processes that management has deployed throughout the company have created a platform for future growth.
Focusing on New Products and Materials
During Carlyle’s ownership, DMI enhanced its product offerings to meet growing customer demands for lighter and more efficient components. To address stricter emissions regulations and fuel-efficient requirements, automobile manufacturers are increasingly seeking to substitute lighter materials in parts that are currently constructed predominantly from iron or steel. DMI identified this shift towards more fuel-efficient vehicles and began to develop aluminum-based products. In 2007, DMI began casting and engineering aluminum knuckles for many customers, including BMW, Ford and Nissan among others. DMI’s proficiency in manufacturing highly engineered, safety-critical aluminum components gives the Company a distinct advantage when competing for new business.
Diversifying into a Vertically-Integrated Company
During Carlyle’s ownership, DMI expanded its manufacturing capabilities to offer customers a full range of services. At the time of Carlyle’s investment, DMI was a local operation focused on machining finished products. Over time, Carlyle supported the company’s strategy to add new business lines such as engineering and casting. Today, DMI has the distinct advantage of being one of the few companies offering fully-integrated design, development, testing, casting, machining and assembly capabilities, of both aluminum and ductile iron components.