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THE HARDING GROUP purchased the Industrial Fasteners Division of TRW and renamed it American Engineered Components (AEC). The business was non-core for TRW, and as a result, was undermanaged but profitable. The trailing twelve months financial performance before acquisition was $16 million in revenues producing $1 million in operating profit. AEC was a leading designer and manufacturer of complex, custom designed stamped metal components, disc springs and engineered industrial fasteners, including sealer plugs, Carr Plug Buttons and Teenuts, serving primarily the automotive, truck, electronics and industrial products markets. The products and components manufactured have long life cycles. Manufacturing processes included progressive die, transfer press, and multislide operations. Customers included General Motors Truck and Bus, Ford, Chrysler Corporation, TRW, Autoliv, and Schlumberger. Stage 1: With management, we set out to improve internal operations and staffing. Since the sales and marketing organization was previously shared within TRW, it remained behind with them. AEC had only customer service personnel and needed to create its own internal sales and marketing team. We balanced the need for internal sales and marketing staff with high quality representative organizations and distributors. We opened a new office with our own sales personnel in Detroit to better serve the automotive and truck customers. Previously, a representative organization worked for us in Detroit, but we needed to have dedicated and focused individuals to better serve AEC’s important customers in Detroit. Since much of the selling and product development was technical, we used team selling nationally with our in-house engineers to solve problems for our customers. This strategy proved to be highly effective and allowed us to significantly grow the business organically and add new customers. Concurrent with the sales and marketing initiatives, we streamlined production and improved operating flexibility, introducing operating cells, Kanban and other best practices initiatives. We found that teamwork and morale soared as clarity of strategy and execution allowed people to see the journey ahead. As a result, improvement ideas came from all walks of employees including machine operators, foremen, engineers, sales, finance and human resources. Also important was the relocation of the main factory in Cambridge, Massachusetts. The original factory was a 100,000 square foot three story brick building from the 1920’s. Operations were spread over the three floors, and we wanted to move to a single story factory nearby to keep all employees and improve efficiency. We found a 108,000 square foot factory nearby in Brighton, Massachusetts, and moved the company to this new facility. Prior to moving, the new building fit-out was optimized for efficiency and production flow. The results were outstanding, and we completed the move during Christmas shutdown in a snowstorm with no loss of production. The employees were amazing to pull off this move. Teamwork was alive and thriving at AEC. Stage 2: Now that our internal house was in order, we began an acquisition program based on our strategy of finding niche add-on companies that would complement our product lines and fit with our company culture. Included in this acquisition strategy, we wanted to be able to cross-sell across all related product lines to gain further depth and breadth with our customers. We were ahead of the curve of the trend of companies partnering with fewer suppliers. Over a four year period, we made six acquisitions that proved to be highly effective and complimentary with our internal improvements. Our sales had grown from $16 million to $50 million while our operating profit grew from $1 million to $9 million. We had owned the business for six years and felt that to take it to the next significant level such as $100 to $150 million in revenue, our ownership position would be severely diluted below majority ownership. We believed that a larger firm or corporation would better be able to continue the growth trajectory, provided that we could ensure that management remained in place and would continue to have an equity stake in the company. After talking with several possible buyers, we decided to sell to Goldner, Hawn & Morrison, a large, well-capitalized private equity firm that would continue AEC’s goals and objectives with the existing management in place and providing continuing equity stakes in the company. Importantly, AEC management was also able to realize a significant capital gain on their equity from our sale of AEC. |
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