Starrett announced this week that the company has entered into an agreement to be sold to “an affiliate of MiddleGround Capital,” a private equity firm.
This means that Starrett, which specializes in precision layout tools and select saw blade products, will be transitioning from a publicly-traded to a privately-owned company.
Starrett’s stock price jumped up by around 60% at the news, landing close to the purchase price of $16.19 per share.
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The move is described by Starrett as a “merger agreement” and “go-private transaction,” but seems more like an acquisition by the private equity and investment firm.
Basically, it seems to me that Starrett was essentially purchased by the private equity company. I don’t see how this is a “merger,”
Starrett says that the transaction is expected to close in mid-2024, subject to shareholder approval and other conditions.
I’m not familiar with MiddleGround Capital, and there’s not much history to dig up, other than an apparent inclination towards acquiring B2B engineering and specialty companies.
In their announcement, Starrett added:
As a private company, the Company will have additional financial and operational flexibility to continue providing industry-leading service and products to our customers across our markets and maintaining Starrett’s proud tradition among its employees, communities and other stakeholders.
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How vague.
The question to ask is whether this will be good for tool users.
Will MiddleGround Capital invest in the Starrett brand, or did they essentially acquire the brand for the name?
I purchased several Starrett products in recent years, and returned some of them due to poor quality and cut corners. Not to mince words, I’m not optimistic about this news.
On the other hand, we don’t know a lot about the particular private equity firm that is acquiring Starrett. It’s possible that, with fresh cash investment, Starrett can enter a new and even better chapter.
Or, the investment company might seek to boost the brand’s value in any way possible, to position Starrett for a profitable future sale to another company.
Thanks to ITCD for the heads-up!
KMR
When MiddleGround bought Race Winning Brands (RWB) in late 2021, RWB just became even more of a mess than it had been under Kinderhook.
1) Immediate and substantial price increases, coupled with cost cutting (staff reductions)
2) Quality control has been problematic
3) Production lead times have become longer and also unreliable
Drew M
https://www.racewinningbrands.com/our-brands/
I didn’t know all those brands were “one company”.
Jamanjeval
Maybe it would have been better if harbor freight bought the name(?)
Jared
I’m suspicious too. The tried and tested money-maker seems to be to leverage the brand name to sell lower quality or imported products in new retail channels. If that’s the case the best we can hope for is a setup like GreatStar/SK where at least some of the “premium” production remains.
Stuart
GreatStar has a tendency to rescue bankrupt brands, and seems focused on building them back up. Their goal seems to be to sell more tools, rather than to boost value in order to flip the brands for profit.
Jared
Fair point. That is a much more charitable explanation than what I was implying, but probably more accurate.
As tool “enthusiasts”, we probably want more GOOD quality tools, not just cheap ones. It doesn’t feel like a good thing to find a legacy brand applied to import goods of a lower tier.
However, if that legacy brand was just going to die out without outside investment and a strategy change… it probably isn’t fair to lay all the blame on the new investor.
JMJR
John Saunders of NYC CNC on YouTube did a factory tour of Starrett ~6 years ago and they had some incredible old machines and skilled machinists.
Those machines will probably be scrapped and the work off-shored in the pursuit of efficiency and profit margins.
https://youtu.be/T7JqXbm-Nwo?si=rplqNTcBTZ_eOmah
Ken Fallon
I went on a tour last fall (2023). The plant seemed too large for the production taking place. There seemed to be minimal production taking place and the shelves were chock full of unsold product.
Not a real healthy production environment.
I left feeling a bit of sadness. This was an old warhorse that was amazing in its prime, but no more. They gave me a Starrett hat.
Regrettably I think the purpose of the buy out is reconfiguration, layoffs, resale of the downsized company and another empty factory.
BUT, BACK IN THE DAY .. oh my! What a beautiful profitable company you operated Mr Starrett, Thank you!
Bob
My initial reaction when I read the headline, that’s bad news for Starrett. While private equity firms do “have additional financial and operational flexibility”, what they usually do is to take money out, add debt, and reduce costs.
From your article, it sounds like Starrett was going down hill. Probably hard to sell enough high quality products in today’s world.
Aram
I’m thinking maybe it’s time for me to stock up on old Starrett gear while it’s still possible. Odds are, the old decent stuff will start ramping up in price substantially once the new crappy stuff really hits the market.
Jeremiah D
I had similar thoughts. Havent read Stuarts entire take yet but my initial response is to get anything i need now before the quality drops off. Ive got some precision tools on my list and starrett was likely going to be my goto.
eddie sky
I watch MrPete222 on Youtube and he was depressed but angry at this news. Yes, the value of USA made Starrett tooling will appreciate. No, the quality from now on will not be good. People will lose jobs, perfectly good machinery will either be auctioned off or scrapped.
Starrett failed to adapt to CNC/Robotic machining and automation. Their tooling was for traditional machining and that is, while rejuvenated thanks to Youtube, is scaled significantly down or work is done overseas.
Not everyone needs a micrometer, straight-edge, etc. But when you saw the name Starrett, you knew precision. Now, guess I’ll just buy Mitutoyo.
Philip Proctor
I predict Starrett branded every damn thing.
Doug
This is what I think. All kinds of Starrett Branded junk like Snap-on does.
Jarad O
I can’t recall a single instance where PE buys a company and things get better. So long, Starrett, I never knew ye.
Ben
Agreed.
TomD
Iirc Dell going private is the only real example that I can think of, and I’m not terribly familiar with it.
You could argue everything acquired by Berkshire was going private, perhaps.
RD
I’d say this is not great news. Like you Stuart, I’ve purchased & returned a few Starrett products in the last year that weren’t even the same quality as things made a few years ago. Finding it incredibly hard to believe private equity is going to make this better.
fred
I have over 150 Starett items – some WWII vintage items were inherited, and others I bought starting in the 1950’s. None bought recently – but I trust Stuart’s appraisal that quality may well have fallen off from their halcyon days. I don’t have great expectations that a PE buyout will return them to their glory days. If I were in the market going forward – other brands like Mitutoyo might get my attention.
Ted
fred!
Always good info. Thanks!!!
Robert
I used to find plausible that mergers gave additional financial resources to build up the purchased company. But the track record I’ve seen it’s usually a way to take profit out of someone’s hide, workers and/or consumers. We’ve seem to have drifted far from Teddy Roosevelt’s intent for anti-trust.
Mark M.
Agree with everyone above. Hate to be a pessimist but any PE sale/purchase, however flowery the press release, means that someone is looking for a return on their investment, and that isn’t typically done by investing in staff, QC, and accepting slim margins for the sake of high quality. This will likely result in brand expansion and pushing high-volume/lower price point sales…none of which seems like a good thing for those of us who value craftsmanship and precision. I’m grateful to have half a dozen or so 1950’s-era Starrett tools that serve me well and are nice enough to pass down to my kids. Sounds like another brand is about to bite the dust. (with a big caveat that I’d be happy to be wrong)
Josh R
I’ve heard a few different quality/QC concerns on new Starrett tools in the last few years. Things like bad finishes on square rules, grit and swarf left in the threads on tap handles, etc.
I’ll hope for good things, but my expectations are low from this sale.
OldDominionDIYer
Starrett used to be the gold standard. I wonder where things went wrong? It’s a shame but I don’t have much faith that a PEF is going to improve the products. They’re in it for the fast money usually.
Zack
I think the big picture story is that there’s been a ton of innovation in the machining industry and although Starrett has a long history and lots of prestige, they haven’t been the innovators, so they’re gradually edged out by up-and-comers. They’ve already been engaging in the kind of brand-compromising behavior that we don’t like to see, licensing their name or outsourcing production of things like tape measures.
Monkey
1. It’s never a merger. They just say that. It’s an acquisition/sale.
2. It’s never an investment or partnership. They just say that. It’s an acquisition/sale.
3. It’s never good for tool users, short-term nor long-term.
4. It’s rarely good for the employees, but we will not know for some time.
5. It’s fantastic for the sellers.
6. It might be good for the acquirors, but they will not know for quite some time.
IronWood
Hello, Mitutoyo, my new/old friend.
Stuart
I went with Mitutoyo nearly 20 years ago, and never looked back. I bought a new set of gauges and a couple of digital products last year, and each tool was perfect, the same as with every Mitutoyo purchase I made before them.
JR Ramos
I’d never ever looked at Starrett’s stock…just browsed some history and stats. It’s been quite some time since they were doing what you’d call well, and that jives with what I’ve seen from them and general observation of modern machining. They’ve had a really hard time keeping affordable pricing and competing with the import versions (or copies) of various hand and shop tools, and their foray into offshore models didn’t really take off (speculation there).
I was genuinely surprised to see how low their numbers are…would have guess them to be much much higher. Interesting note that they have apparently been having great difficulty just staffing their manufacturing plant in MA, operating well under capacity for a few years now. Also how they were affected by the automotive strike recently.
I don’t know if Mitutoyo is doing a lot better in that area but they have a bigger global footprint and they were aggressive with pricing and the pursuit of laser and electronic metrology early on. Tesa may still have the biggest chunk…? As manual machining started to die out, Starrett just seemed to linger in the past for awhile.
I don’t think the QC problems are anything new. I have a pair of 120 calipers that I got around 1998 or a touch later and the inside jaws weren’t ground correctly, such that I have to add 20 thou when using them. I don’t use those for inside that often so I didn’t even notice it for many years (but that does explain a couple of instances where I thought I did my own whoopsie…ha). The good thing is that – while it’s somewhat of a hassle – they will always take care of the customer, big or small, with exemplary service and replacement or parts for self repair. Dealing with them directly is always a professional and friendly experience and you just don’t get that with most companies.
I hope they can continue their forward looking ventures and return to better profitability. It’s been a long time that I’ve quietly wondered whether or not they would last, as a reflection of machining and industry in our country now. They’ve brought an awful lot of great products to market – might be nice to see them revive some that disappeared or changed (and if they continue with small offshoots like tapes and tool bags, maybe they could make those a lot better and successful than they are).
Everywhere – like literally everywhere – I hear older and/or retiring tradesmen and industrial workers lamenting that they just do not have the young people to mentor and bring up in skills. Hands-on but even including niche positions like various inspectors and such. Looks like this greatly affected Starrett even after they introduced robotics and CNC in certain areas. Some of their products really do depend on manuals and hand work and there’s just not a good substitute for it, and that means human beings willing to work harder less glamorous jobs.
BigTimeTommy
Private equity firms ruin everything they touch. Starret was already going downhill, now it’s going to be an overpriced zombie brand.
ITCD
One of their statements also hinted at reshoring. But until it’s actually seen, it may as well be a Facebook comment saying “thoughts and prayers.”
Ned
NOOOOOOOOOO! I can’t think of a single time when this was good for the company or the customer. RIP Starrett 1880-2024
MT
“The question to ask is whether this will be good for tool users.”
No. PEFs ruin everything they touch.
Though in this instance, if things were getting bad already,,, Still probably no.
ishan
Awesome. Can’t wait for Starrett to be hollowed out. (sarcasm).
Eric
As a career Millwright I’ve made my living with Starrett tools. This is very bad news. Another great American company swirling the drain. Too bad no one actually cares.
Crow
Private equity companies exist to drive good companies into the ground so that shareholders can raid the company coffers. Starret will be a shell of its former self within the next couple years.
kent_skinner
I’m happy with my vintage Starrett tools. I’ve heard and seen too many problems with new Starrett equipment.
Sad day, but I think they went downhill a while back.
MM
That’s been my opinion. I’ve been hanging around machine shops ever since I was a teen and I always remember the iconic red Starrett paperboard boxes full of precision standards in the “tool room”. My college machine shop had a whole wall of red–most of it either bought cheap secondhand or donated by retirees or when shops closed down. But I was never really impressed with the quality of any of it. Other brands, mainly Mitutoyo, had better feel in the hand, better precision, and better value for money. In my opinion Starrett is a lot like Stanley or Disston–at one time the name stood for state-of-the-art, high-quality tools which American industry depended on. But they didn’t innovate and now the name is largely a shadow of what it once was. When I had my machining business we had exactly one Starrett reference tool: a precision level. Nearly everything else was Mitutoyo.
They do make decent saw blades, but I think they are even losing that battle. I have a large set of their hole saws I bought about 15 years ago. As they’ve been wearing out, parts going missing, etc, I purchased a Milwaukee Hole Dozer set a couple years ago. They are better in every way: cut faster, stay sharp longer, easier to extract the slug when you’re done. I used to use some of their bandsaw blades but switched over to Lenox. They make great jigsaw blades but the problem is they are difficult to find and shipping costs can easily undo any value benefit they might have over other brands you can find locally or have shipped for free.
SlowEng
Having worked at a few companies that make stuff, mostly aerospace, it appears that most US companies glory days have long faded. What ever ones still exist are on life support with most people just trying to get by till they retire. The vendor base is also old and creaky with no desire to innovate. Everyone is happy to grind along less profitable and worse off than before.
The only “real innovations” are those that allow one to make the books look good even if it is idiocy and adds costing the long term. Over paid business graduates charging through the door with their latest ecxel sheet macro and PowerPoint ready to tell us how the latest business school jargon will save us.
The sale of starrett to a PE firm is just the last few steps on its journey to being a zombie brand with no real production but a nam slapped across goods of any origin to gain brand recognition.
SamR
A quick search found that this PE seems packed up with European money.
Most of their team members are located in the Netherlands.
https://middleground.com/news/middleground-capital-closes-fund-i-above-hard-cap-at-459-5-million/
Jason White
Startett’s quality has definitely fallen off. My 12” combination square purchased 20 years ago is still dead nuts accurate. But l recently had to return a couple of brand new Starrett 4” and 6” double-bevel squares because they were NOT square. Such a shame.
Chris
Hey Stuart, you made it to mrpete222’s YouTube channel. He shows this article.
Charlie
Just had starrett repair a. Vernier bevel protractor,broken gear inside it.A new one costs over $800.00. The repair cost with tax & shipping cost over $400. Cheaper than a new one. I hope the company can survive and still make good quality product.
MFC
The C359? Was it the 7″ or larger? I see several of them for sale from $150-$250 online. Used, but tools like that can still be in pristine condition. $400+ for a repair just seems crazy for a tool like that.
Amatt
Last company to offer free literature in the US and the world.A lot of mine I bought used and had repaired by Starrett….which when these things go that will be the end Bankers just keep ruining everything as well as lawyers because they do not produce anything😢
Amatts
As a retired mfg GM starting out as an apprentice toolmaker to clarify when the PE sucks the life out of Starrett well the real estate value is moot.blasting the brand name all over won’t help most do not know it.also the shitbirds selling free stuff on flea bay will kill that as well.repairs?well good luck with that ……fact is no one out or in of manufacturing et al is clueless sad
Stain
Up to now, no big changes at all, even in board / management or product line… same quality, but no idea on investing for the future. Anybody else has some info for US or abroad sites?