The Fitzpatrick Company started as a family run business in Elmhurst, IL, a suburb of Chicago, making hammer mills for the food industry during the boom of the 1920's. By 2001 the business had lapsed into a poorly functioning ESOP, so much so, that when employees requested to purchase and install a flag pole (entirely at their expense), it was denied by the President. In 2005 Hamilton Robinson acquired the company and transformed a crumbling ESOP into a global leader in powder process technologies utilizing cutting edge stainless steel processing serving the food, pharma and chemical industries.
We believe at its core, private equity is not about leverage, layoffs or outsourcing. It's a business tool... and business is about people. As the new owners, our first capital expenditure was a brand new flag and flag pole. During the HRCP ownership period 2005-2010 average revenue increased 40%, adjusted EBITDA margins increased from 6.4% to 12.9%. The IRR at exit was 26% with full management participation in the value creation. A key to this success was establishing management equity participation in the deal. This allowed us to align our interests with both management and the unionized employees, changing the culture from a manufacturing company to a "solutions" company.
The company had no formal reporting structures in place. Many of the records were still kept in handwritten ledgers and it was common place that 15% of machines failed their final inspection. We institutionalized a LEAN process throughout the organization. Work processes were modernized and streamlined, and a pay for performance program was instituted. This enabled us to assess job efficiency and project profitability, which drove production and new product development into higher quality and earnings. The company's on-time delivery improved 100% within three years. We invested $3.5mm in a new lab facility to test and monitor each stage of production to ensure the end product exceeded our customers' performance and quality expectations.
We also knew we had to capitalize on the established Fitz brand identity and revitalize neglected strategic partnerships to drive organic growth. Again, we put our people focus into motion and forged deep relationships with our customers and strategic partners. Our affiliations with Perdue and Rutgers Universities gave us access and the ability to collaborate in the pharma R&D pipeline coming out of these entities. Fonterra, the world's leading dairy exporter, was struggling with rising transportation costs and we partnered with them to develop a roll compactor that reduced the volume of their standard 50lb bag of powdered milk by 300% significantly reducing their cost of shipping.
IDEX had approached us in 2009 as a strategic buyer for The Fitzpatrick Company, but the recession played its hand and negotiations were halted. Capital equipment companies were hit hard by this downturn, Fitz earnings dropped 50%. We worked closely with the union to retain our highly technical employee base, enacting furloughs, pay reductions and cutting all discretionary spending. Our alignment of interests with management and conservative capital structure allowed the business to maintain its core competencies, preserve jobs and position itself for growth coming out of this economic downturn. With earnings recovering in November 2010, The Fitzpatrick Company was sold to IDEX Corporation. We are confident that the strong management team and industry leading products will allow IDEX to expand the company to the next level. We are very proud to have helped build a company with a history of over 28,000 installations spanning 75 years of business.