June 30, 2011
Milwaukee Journal Sentinel

Investors see growth in company that repairs and resells pallets
By Kathleen Gallagher

Some see heaps of pallets stacked behind grocery stores, strewn around manufacturing floors and stuffed into Dumpsters, a few at a time so they'll be taken away.

Blackthorne Partners LLC sees an opportunity.

The Milwaukee private equity firm acquired the assets of JPRS New Way, a Lannon company that repairs and resells old pallets, for an undisclosed price.
With the assets, Blackthorne formed Pallet USA. The new company expects to increase sales and profits through internal growth and an acquisition strategy that will have it buying some of what it estimates are about 120 pallet companies in Wisconsin, with an eye toward companies in northern Illinois as well.

"What we see is that this is a highly fragmented industry where we can bring some sound business practices to the company in terms of systems and processes and sales and marketing, and elevate it to a point where it stands out," said John Syburg, Blackthorne's founder and president.

Since closing the deal in May, Blackthorne has created a website that attracted five new accounts in its first month, Syburg said. There's also a new logo, professional business cards, cups and other marketing materials, and a tagline: "Because a lot rides on us."
Blackthorne is planning to improve the facility and work flow in the shop, and add new financial and operating systems and controls to improve profitability as volume increases, Syburg said.

Steve Balistreri, a Blackthorne partner, is the company's interim president, and JPRS New Way founder Julio Alvarez is general manager.

While pallets might seem low-tech, they're an important and expansive domestic industry.

"It's that often-overlooked heart of the supply chain. Our true economic structure really couldn't function without the pallet," said Ralph Rupert, director of the Center for Unit Load Design at Virginia Polytechnic Institute and State University.

Goods from China tend to be "floor loaded," Rupert said. But once they arrive in the U.S. - whether it's food, clothes, printers or anything else - they ride on any of about 2 billion pallets in circulation here.

"In my experience visiting manufacturing companies, everybody's got pallets, and a lot of people have trouble getting rid of them," said Greg Bultman, a Milwaukee investor who participated in the Blackthorne deal.
Pallet USA will be a platform for more pallet company acquisitions, Bultman said.
There are about 3,000 pallet manufacturers in this regional industry, where shipping costs begin to cut into profit margins when pallets are sent more than about 150 miles, Rupert said. But he's starting to see more consolidation.
The deal for JPRS New Way was the second for Blackthorne, which was founded in 2007 by Syburg and Mark R. Zellmer, who is also president of Northern Oak Asset Management Inc., a Milwaukee money-management firm.
On May 11, the day before the deal closed, the Northeastern Lumber Manufacturers Association won a temporary restraining order against JPRS New Way from a federal judge in the Eastern District of Wisconsin that prohibits JPRS from stamping the association's trademark on its wood. The trademark is used to signify the wood has been treated to prevent the spread of pests.

Blackthorne bought the assets but not the company, so it is not involved in the lawsuit, Syburg said.

Blackthorne made its first investment in September 2010, putting $2 million into Integrated Medical Partners LLC, a Milwaukee company that runs several health care information technology businesses.
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