Managing a nearly half-billion-dollar acquisition without the backing of a large law firm or investment banker may seem highly unusual, but N2 Advantage Law, Ltd.
proved it was possible after Silgan Containers
acquired Gateway Plastics Inc.
in a $485 million deal
Brookfield-based N2 Advantage Law is led by brothers Tim and Joel Nettesheim and was created during the COVID-19 pandemic by a small team of attorneys, accountants and entrepreneurs, some of whom have roots at von Briesen & Roper, s.c.
The boutique law firm served as the sole legal and financial advisor for Mequon-based injection molding manufacturer Gateway Plastics. The firm also operates alongside its sister company, N2 Advantage, Ltd., which focuses on financial advising and investments.
The Gateway deal was of unusual size for N2, which typically focuses on clients with lower to middle-market deals in the $5 million to $50 million range. However, N2 established a relationship with Gateway’s CEO Bill Vogel years before the transaction, making the firm an attractive manager for the sale, said Tim Nettesheim, N2 Advantage Law, Ltd. CEO.
N2 had been approached by multiple buyers over the years but turned away offers because Gateway was still positioning itself to be sold. Meanwhile, N2 was keeping tabs on Gateway’s operations in the years leading up to the deal, aggregating data and being party to contracts the manufacturer established with its customers, Nettesheim said.
Having greater insight into Gateway’s relationships proved critical during the due diligence process, added Jim Pellegrini, managing shareholder, N2 Advantage Law. With an understanding of customer agreements, N2 could establish an ideal time to sell because it knew these contracts would remain in place two or three years after the sale, which is attractive for the buyer.
“That was key here…so when they’re entering contracts, we were negotiating those agreements,” said Pellegrini managing director, N2 Advantage. “We knew what they were, how strong they were, and we (added) provisions thinking about the future.”
Finding a buyer and establishing the right time to sell was also made easier by Nettesheim’s unique familiarity with Gateway’s investment cycles and how Vogel operates as CEO.
Gateway manufactures and sells dispensing closures and integrated dispensing packaging products to consumer goods companies operating in the food and beverage markets. The injection molder’s products also serve additional markets including pet care, chemical and nutraceutical.
However, Gateway invested in technology and equipment capable of manufacturing coffee pods (think Keurig cups) through a novel process. Even though N2 and Gateway understood the market opportunity that its coffee pods could capture, buyers that approached the firm over the last three years didn’t buy into the technology, Nettesheim said.
In the meantime, Gateway invested in 12 new machines that now manufacture up to 5 billion coffee pods annually. The manufacturer then established several customers, strengthening its cash flow and subsequently making Gateway a more attractive acquisition, Nettesheim said.
In addition to the coffee pods, Gateway had two other innovation programs that were coming together in 2021. At the same time, COVID-19 threw Gateway a curveball because it made its traditional business boom, creating a “perfect storm” for the sale, Nettesheim added.
“What we’ve learned over the last five years is that it’s hard to time that cycle,” Nettesheim said. “Very rarely does everything come together at once where you have everything under contract, your legacy business is doing good, and your innovation business is doing good.”