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How Private Equity-Owned Bauer Pivoted From Hockey Gear to Medical Masks

Sagard — the alternative investment manager owned by Power Corporation of Canada — is pivoting to help tame a global pandemic.

Bauer has been producing athletic equipment for hockey since 1927.

But last week, Bauer — one of the portfolio companies held by alternatives firm Sagard Holdings — used that expertise to produce its first protective masks for medical workers out of its Liverpool, New York and Blainville, Quebec factories. 

Ed Kinnaly, CEO of Bauer, said two employees came to him two weeks ago with the idea of switching the factories to produce medical masks. The need is real: Amid the global spread of Covid-19, there’s been a dangerous shortage of medical equipment, including ventilators and protective gear for doctors, nurses, and emergency first responders. 

“Thirty-six hours later they had a prototype that they built in a sample room in upstate New York,” said Kinnaly. Although N95 surgical masks provide the highest level of protection, it’s also the most complicated to produce. Bauer is instead creating a mask that uses a clear mylar shield. “For us, that was the path of least resistance and where we thought we could have the biggest impact. Demand has been off the charts,” said Kinnaly. 

Concerned about its ability to meet this demand, Bauer has posted the manufacturing instructions on its website so other corporations can also build the gear.

By the end of the week, Bauer — which is selling the masks at cost — expects both of its factories to produce 20,000 masks. By the end of April, it is targeting the production of up to 70,000 masks.

Paul Desmarais III, chairman and CEO of Sagard Holdings and the executive chairman and co-founder of Portag3 Ventures, its venture capital arm, said the firm wanted to be helpful in the current crisis — but it first needed to ensure its portfolio companies were in a solid financial situation and that its employees had what they needed. 

“We worked with portfolio companies, redid budgets, made sure they had the capital available to survive. Otherwise, they couldn’t have any impact whatsoever. You also have to re-pivot your people; they are now doing things like homeschooling their kids. So the ways you work now have totally changed. We have to be conscious of that,” he said.

“Then we could say, 'What services do we already provide today that can be helpful?'” said Desmarais. 

The firm's efforts didn't end with Bauer.

Dialogue, a telemedicine company that Sagard built from scratch out of its incubator, was an obvious fit. (Sagard also has a 20 percent stake in publicly traded GP Strategies Corp., which among other things does project management, including planning, training, and operational support for emergencies like pandemics.)

“With Dialogue you start thinking, 'How can I use this asset?' In Canada, you call an emergency number if you’re sick. Those numbers are overwhelmed,” said Desmarais. “We launched an AI tool to relieve stress [on that system] and help expand the capacity of the entire [healthcare] system. With telemedicine, you can keep doctors and nurses working. We’re very focused to see how many hands we can get this into,” he said. 

So far, Dialogue has offered Caisse de dépôt et placement du Québec — which is also an investor in the telemedicine company — free access to the service for the pension's largest portfolio companies. The arrangement is an incentive to get people to use telemedicine and relieve pressure on providers in the field. “We wanted to reduce, as much as possible, the friction of onboarding,” said Desmarais.

Desmarais said he’s also trying to fuel ideas in the current environment.

“World connectivity is impaired. Serendipitous encounters aren’t happening. So how do you, as a person with a lot of contacts, help disseminate ideas that may help someone?” He said he recently posted on LinkedIn about a Montreal hospital’s contest for a new ventilator design. “I got 50,000 people viewing the post. I have no idea if this has led to anything, but it’s exciting. Many investors have vast network and we need to help people get their ideas into the hands of smart people,” he said. 

Shifting companies like Bauer to start manufacturing scarce equipment is needed — but complicated.

“How can we pivot companies in our portfolio to get them to do something else to serve the country? We can’t make a ventilator, but we do have the raw materials and a supply chain to make these medical masks,” said Desmarais. 

“It’s not to make money. At Bauer, we’re doing this at cost. But this is so traumatic. If capitalism doesn’t adjust its approach, then we have bigger issues. Now is the time to be compassionate. People will lose family members. This will get very personal. If we can’t look ourselves in the eye, and say, 'We did everything we could do', we’ll regret it.” 

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