MiddleGround leverages F1’s growing fandom and ‘increasingly complex’ cars

Motorsport’s ever-growing fanbase is driving commercial opportunities for Xtrac, a manufacturer and supplier of transmissions for professional motorsport and automotive applications, Alex van der Have, managing director and head of the EU Transaction Team at MiddleGround told PE Hub Europe.

Lexington, Kentucky-based MiddleGround’s European office completed its first platform acquisition with Xtrac. The seller in the deal was Inflexion, a London-headquartered mid-market private equity firm that invested in Xtrac in 2017.

Headquartered in Thatcham in the UK, Xtrac is a supplier of transmissions to professional race teams, including teams in Formula One, Formula E, Sportscar, world rallying and off-road racing, IndyCar and NASCAR.

“Increasing consumer interest in motorsport and the continued innovation of the mobility space are driving growth in both markets and creating compelling investment opportunities, particularly in businesses with a culture of innovation that can develop products for increasingly complex vehicles,” said van der Have.

Xtrac has several “compelling commercial opportunities” within its core segments of motorsport and high-performance automotive, according to van der Have. These opportunities include continued penetration of the hypercar and supercar market and development of new product lines, such as a high-performance mechatronics offering, recently launched by Xtrac. The “ultimate goal” of the investment is to take Xtrac to “the next level” as a fully integrated powertrain and drivetrain systems provider across a number of industries, van der Have added.

While M&A is not an explicit part of the underwriting, van der Have said MiddleGround will opportunistically explore acquisitions during the ownership period if they strategically enhance Xtrac’s technology offering and market exposure.

MiddleGround has no immediate plans to expand further internationally, and the firm will focus on investing in the people and physical facilities located at Xtrac’s HQ in Thatcham, van der Have explained. “We also plan to opportunistically evaluate expansion of the Xtrac’s current US facilities in Indianapolis and Mooresville, including potential extension of the company’s manufacturing and assembly capabilities in these locations,” he added.

Motorsport and automotive are by no means a leap into the unknown for MiddleGround. In 2021, the firm invested in Mentor, Ohio-based Race Winning Brands, a manufacturer and marketer of racing and high-performance engine components. Van der Have described Xtrac as a continuation of the firm’s strategy of investing in manufacturing businesses in the motorsport segment. “Further, their history of developing products for hybrid and electric vehicles aligns perfectly with our mobility investment thesis and partnering with businesses poised to benefit from the transition to semi- and fully electrified drivetrains,” he added.

In January, MiddleGround launched its European office in Amsterdam. Having made its first platform investment from the new location, the firm will continue its core strategy of investing in B2B industrial manufacturing and specialty distribution, according to van der Have. “We will also continue to have a particular interest in investments in businesses exposed to our key investment theses of mobility, infrastructure, and Industry 4.0,” he added.