Private equity firm buys majority stake in Westone Laboratories

December 15, 2011

An Indianapolis private equity firm has bought a controlling interest in Westone Laboratories Inc., a Colorado Springs-based manufacturer of ear molds for hearing aids and earphones used by professional musicians and consumers that employs 225 locally.

CID Capital bought out the four surviving sons of Westone founders Ronald and Mickey Morgan on Dec. 1 for an undisclosed amount, but will leave existing management in place and plans no major changes in the 52-year-old business, Westone CEO Lynn Kehler said Thursday. The brothers are nearing retirement age and had hired Green Manning & Bunch Ltd., a Denver-based investment banking firm, early this year to find a buyer for their stake in the company, which resulted in the transaction with CID, he said.

“Our alliance with CID will bring the strategic guidance and resources we need to rapidly accelerate new product development, aggressively expand distribution and pursue acquisition opportunities,” Kehler said in a press release about the transaction issued Wednesday. “We also have a unique opportunity to leverage our extensive hearing health care and professional audio music background to offer the same premium quality products and listening experience to the broader consumer earphone market.”

Westone was started by Ronald and Mickey Morgan in 1959 in their Divide log cabin to make supplies for hearing aids. They eventually turned over the business to son Randy Morgan, who died of brain cancer in 2006. The company later diversified into making custom-fitted ear plugs for workers in the construction, law enforcement and aviation industries as well as custom-fitted earphones used by professional musicians. It also has a facility in Kalamazoo, Mich., where it employs about two-dozen.

Although Westone doesn’t disclose financial information, Kehler said sales and employment have doubled since 2006.

“Westone has a strong management team and we hope to continue their excellent performance,” said John Alpin, CID’s managing director. “We have traditionally been long-term holders of our investments. We are pleased to add this excellent company to our portfolio.”

CID specializes in making majority investments in lower-middle-market companies with a history of consistent performance that have the potential to grow significantly. The company targets U.S. businesses in the manufacturing, consumer products, medical devices, private education, security or distribution industries with annual revenue between $10 million and $75 million that generate annual cash flow of at least $2 million, according to CID’s website. CID typically spends between $10 million and $70 million for its stake.

CID has raised more than $500 million in the past 30 years and has invested in more than 110 companies, including GT Exhaust, a Nebraska-based manufacturer of stationary diesel engine silencers, and Salon Grafix, a Michigan-based maker of hair care products.

Contact Wayne Heilman: 636-0234 Twitter @wayneheilman

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