Punching Out! Mid-2019 M&A Round-up

There have been quite a few deals in North America in the PCB and EMS spaces over the past 12 months. I have attempted to track down a fair number of these deals and list them, but many are not publicized. For example, our firm has completed five deals in 15 months in these sectors, but only a few of these have been publicly announced for competitive or strategic reasons.

Here are some of the notable PCB deals since December 2018:

  • Summit (HCI) acquired Streamline (December 2018)
  • TTM sells ViaSource to Linkage (PCB distribution sector, March 2019)
  • TTM acquired certain PCB assets of i3 Electronics (June 2019)
  • Angeles Equity Partners acquired APCT from Saugatuck Capital (June 2019)
  • FTG acquired Colonial Circuits (July 2019)

Here are some notable PCBA/EMS deals since early this year:

  • Compass Electronics (Compass Equity) acquired Pro-Tech Global (January 2019)
  • Kitron acquired API’s Defense EMS Group (February 2019)
  • Cerberus Capital took Sparton Corporation private (March 2019)
  • Virtex (Insight Equity) acquired Circuit Technology (March 2019)
  • Gowanda acquired Rem-tronics (April 2019)
  • Monomoy Capital (PE) acquired Kauffman Engineering (cables with some EMS, May 2019)
  • CSI Electronics acquired by an undisclosed executive (May 2019)
  • CapitalWorks (PE) acquired Libra Industries (May 2019)
  • Zentech acquired by PE firm Blackbern from New Spring Capital (May 2019)
  • SlingShot Assembly acquired Jade Electronics (June 2019)
  • Lyndsey Goldberg (PE Firm) announced agreement to acquire Creative Electronics (July 2019)
  • Volex (UK) acquired Servatron (July 2019)

What’s remarkable is that so many of these deals (nine) involve private equity. PE firms are certainly a great source of liquidity for owners in these sectors. PE-owned firms tend to make a lot of add-on acquisitions, so we’ll look at these companies to acquire many smaller shops in the coming years. A couple of the above deals (APCT and Zentech) involved the sale from one PE firm to another. Many of the other deals were completed as part of a growth strategy and/or to enable the owner’s retirement.

One of the reasons why acquisitions will continue in these sectors is consolidation. According to our records, there are 201 PCB companies and 676 EMS/PCBA companies in the U.S. and Canada. Of the 201 PCB shops, about 130 have $5 million in revenue or less. About 30 shops have more than $20 million in revenue. Many of the smaller shops are true survivors, but they will continue to be swallowed up by the larger shops as time goes on. By the way, we count something like 30 PCB distributors in North America, many of which used to produce bare boards. There are also at least 1,000 cable assembly/wire harness companies.

Another major reason why acquisitions will continue in these sectors is the age of the owners, a lot of whom are near retirement. Many owners are handing over the steering wheel to family members or younger managers, but most will look to exit via a sale.

We have talked with a wide range of buyers in these industries who continue to be attracted due to the relatively strong U.S. economy, favorable military budgets and the recent lack of sequestration, the fragmented market and number of acquisition targets, and the strength of other market sectors, such as medical, prototypes, high-end industrial, etc. Many buyers see an opportunity in helping shops bulk up, invest more in technology, and become more efficient through professional business practices.

Some of the major headwinds that buyers face are the lack of long-range visibility into the economy and the trade conflict with China. Normally, we would probably see more foreign buyers, but many buyers are concerned about tariffs as well as potential U.S. government blockage of any deals. Mainland Chinese companies, in particular, are wary about making acquisitions in the U.S., especially if the seller has any military business.

I'll be at PCB West in September and will probably hear about more completed and pending deals; hopefully, our firm will be closing a few more by the end of the year. As always, if you are considering a sale, try to be prepared in case a great buyer comes in the door with a suitcase full of cash (or even if they just give you a call). Once you have a good deal on the hook, you don’t want to keep them waiting or shock them with any surprises.

Tom Kastner is the president of GP Ventures, an M&A advisory services firm focused on the tech and electronics industries. He is a registered representative of StillPoint Capital, LLC—a Tampa, Florida member of FINRA and SIPC—and securities transactions are conducted through it. StillPoint Capital is not affiliated with GP Ventures.

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2019

Punching Out! Mid-2019 M&A Round-up

08-22-2019

There have been quite a few deals in North America in the PCB and EMS spaces over the past 12 months. I have attempted to track down a fair number of these deals and list them, but many are not publicized. What’s remarkable is that so many of these deals involve private equity. PE firms are certainly a great source of liquidity for owners in these sectors. PE-owned firms tend to make a lot of add-on acquisitions, so we’ll look at these companies to acquire many smaller shops in the coming years. Here are some of the most notable PCB, PCBA, and EMS deals since December 2018.

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Punching Out! Why Can’t You Sell Your Business on eBay?

07-25-2019

Wouldn’t it be a lot easier if we could buy and sell companies online? Owners could avoid a lot of trouble and fees as well as get deals done quicker. Unfortunately, it’s not that easy. Here are seven reasons why a business cannot be sold online and how owners can make the sale process go more smoothly.

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Punching Out! Exit Planning 101

06-26-2019

Proper planning can take away many headaches for the seller and buyer as well as increase the value of the company, help obtain better terms, and overall, make it easier to complete a transaction.

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Punching Out! Delegate and You Shall Be Set Free

05-29-2019

It is good for owners/CEOs to step back a few times a year and think about what they do well, what they like to do, and what others can do better. Delegating simple tasks, like sweeping floors, is easy, but delegating sales management or quality control might be tougher. Although delegating is difficult, almost no business can grow solely on the efforts of the owner.

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Punching Out! What’s Special About Your Business?

04-29-2019

To help sell your business to buyers, or to sell your products and services to customers, it is a good idea to find out what is special about your business. It is also important to know how to communicate what's special. Read on to find out how you really compare to the competition, and what concrete metrics and KPIs you can use to judge your own performance.

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Punching Out! Getting to a Signed Letter of Intent

03-28-2019

The letter of intent (LOI) serves as a roadmap for the buyer’s attorney to begin drafting the purchase agreement, so it is important that there are enough details in the agreement. Any major terms that are important to the parties should be included. Here's a list of the very important items in the LOI.

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Punching Out! Why Sell to a Private Equity Group?

02-27-2019

One category of buyers that is often overlooked is private equity groups. PCB/PCBA owners either think that their company would not be of interest to a non-strategic buyer, or they have a negative impression of financial buyers. Here are six reasons why companies should consider selling to a private equity group.

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Punching Out! Beware of Cultural Issues in M&A Deals

01-28-2019

Company culture is hard to define and manage, but it is a critical factor in making an M&A deal successful. It is also often ignored or misunderstood during and after due diligence because culture is a "soft" science instead of a "hard" subject like finances, legal contracts, IP, or accounts receivable, among other things, which makes culture a difficult factor to deal with.

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Punching Out! Creating PCB Industry Giants and Mid-majors Through Acquisitions

01-03-2019

Summit Interconnect announced the acquisition of Streamline Circuits. Summit itself was created in 2016 through the merger of KCA and Marcel, and is backed by a private equity firm. In the PCB and PCBA industry, TTM Technologies is the giant King Kong of acquisitions, growing from just $80 million in revenues 20 years ago to over $3 billion today.

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2018

Punching Out! Avoid Surprises During the M&A Process

11-27-2018

No one likes surprises, especially in merger and acquisitions (M&A) deals; there are enough unknown variables to start with. As the deal progresses, tensions start to rise, so any additional variables can cause a disproportionate response. Below are some ways to avoid surprises, and how to deal with them when they come up.

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Punching Out! How to Avoid Key-Person Risk

09-06-2018

PCB West 2018 is next week in Santa Clara, California (September 11–13). Can you go to the show and visit a winery or two without your shop falling apart? Have you taken a vacation in the past few years? Can you afford to not do board rework on a holiday weekend, like this past Labor Day? If you answered “no” to any of these questions, you may have key-person risk.

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Punching Out! Beware of Customer Concentration Risk

08-08-2018

One of the biggest risks in M&A is customer concentration risk. It is hard to avoid as a business owner; if a customer is giving you orders, you generally take them! The next thing you know, your customer has 90% of your sales and they own you. We see this a lot in both the PCB and contract manufacturing industries.

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Punching Out! Dealing with Family Businesses

06-28-2018

Some families may have spent this past Father’s Day discussing family business issues, including when, how or whether to pass the baton. There are several issues to consider when dealing with a family business.

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Fact or Myth: Do 80% of M&A Deals Fail?

05-09-2018

We are often asked by business owners if the commonly quoted figure is true that 80% of mergers fail to meet expectations after closing. There is a fair amount of research on large ($1 billion+), public deals that suggests that the 80% post-closing failure rate may be true.

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How to Prepare for a Smooth Post-M&A Deal Transition

04-05-2018

Selling a company is an exciting process, as well as time-consuming, stressful, and complex. Both sellers and buyers are sometimes so caught up in the deal that they forget to properly plan the post-deal integration.

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Cross Border Deals: What to Look for and How to Manage

02-22-2018

My firm has been approached by foreign firms several times this year and in 2017 who want to acquire PCB, PCBA, or other electronics companies in North America.

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Punching Out! Top 10 M&A Deal Killers

01-25-2018

I am often asked about some of the reasons why M&A deals die. Although this is a very painful subject, hopefully through sharing these reasons we can help some deals survive the M&A process. Here are my top 10 M&A deal killers (and some of the solutions).

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2017

Punching Out! Survey on State of the North American PCB M&A Market

12-29-2017

Recently, my firm surveyed about 20 PCB manufacturers in North America with an estimated greater than $10 million in revenue. Quite a few replied, and we have spoken with many others throughout the year, which gives us a good view on the state of the PCB market. If I did not contact your shop recently, it is because we already talked within the last 12 months.

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Punching Out!: PCB/PCBA M&A Top 10 FAQs

11-13-2017

We talk with owners a lot about the possible sale of their businesses. Here are the top 10 questions asked by PCB/PCBA shop owners about the process.

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Punching Out! Case Study—Lessons on a Deal

10-19-2017

This is a story of one of our clients, a U.S. contract manufacturer that sold a few years ago. To maintain confidentiality, the names have been changed and the details slightly modified.

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Punching Out! Making the Process Easy (M&A Process Engineering)

09-06-2017

In the M&A world, there are companies that make it easy (or at least easier) and those that make it difficult. By making the process easier, sellers should see better valuations and terms, and have a smoother deal process.

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Punching Out! Bridging the Valuation Gap Between Buyer and Seller

06-13-2017

PCB acquisitions in the U.S. are down so far in the first five months of 2017, with only two announced deals (HT Global Circuits’ acquisition of Pho-Tronics in April; American Standard Circuits’ acquisition of Camtech in May); and one anonymous deal that I am aware of that has not been announced. This compares with 11 announced deals in 2016. There are a variety of reasons for the decline, but one reason could certainly be the valuation gap between buyer and seller.

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Punching Out! How to Put a Wrench in the Rumor Mill During the Sale of a Company

05-23-2017

When selling a house, the owner’s agent puts a sign in the front yard, posts info on the Web, and invites buyers over for an open house. When selling a car, we put a sign on the windshield and take out an ad with our phone number on it. However, when selling a business, some owners do not even tell their spouses.

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Punching Out! Selling a Company—Seeing it as a Triumph, Not a Defeat

04-25-2017

Somehow, there is a still a stigma that selling a company is a negative for the owner. Many people think that there must be something wrong, otherwise, they would not be selling. In reality, exiting a business should be looked at as a triumph for the owner, not a defeat.

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Punching Out! 10 Ways to Increase the Value of Your PCB/PCBA Shop

03-22-2017

I have worked with a wide range of companies in the PCB, PCBA, and other tech and electronics sectors. Through the years, I have developed some ideas on how companies can improve their valuation. Some of these ideas are simple and involve little cost, other ideas are more long-term and involve more effort or investment.

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Punching Out! When Should I Call an Investment Banker?

02-20-2017

The quick answer is ASAP. Even if you are not considering the sale of the company for 5−10 years, it is best to be educated and prepared. Give your advisor (or a few advisors) a call to discuss what can be done to get the company ready for a future sale. The worst time to call an i-banker or business broker is when you are forced to sell due to poor performance, health issues, pending bankruptcy, or dispute with a partner or manager.

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Punching Out! Types of Company Buyers in the PCB and EMS Sectors

01-09-2017

Mergers and acquisitions in the U.S. PCB sector have been in the news recently, with at least 12 deals completed over the past year, and several more in the works. In contrast, the EMS sector has been relatively quiet, but that may change now that the presidential election is over.

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2016

War Stories from the Front Lines of Deal-Making

09-16-2016

Here are some war stories from my experience in working on M&A deals in the PCB, EMS, and electronics fields. The names and details have been changed to protect the innocent.

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Timing: When is the Best Time to Sell?

08-18-2016

A few of the top questions we receive relate to the timing of the sale of a business. The first is, "Is now a good time?" The second one is, "How are market conditions?" These are the top FAQs.

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The PCB Sector—What Buyers Look for and Recent Deals

07-14-2016

The past few months have seen a rash of PCB deals in North America, for a variety of reasons.

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What the Heck is Adjusted EBITDA?

06-07-2016

If you are looking to sell or buy a business, you will most likely come across the term ‘adjusted EBITDA.’ Other common terms are adjusted cash flow, owner’s discretionary earnings, earnings after add-backs, etc. What do these terms mean, and why are they important?

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The Additive Process: Tips on How to Buy a Board Shop or Assembly House

05-14-2016

One of the quickest ways to grow a business is to acquire another business. At the same time, acquiring a business can be risky, and a really bad deal may put your original business in jeopardy. Here are some tips on how to make acquisitions.

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Your Baby’s Ugly, Now Get Over it (How to Work with Buyers)

04-14-2016

Here’s a scenario: An owner has gone to market and is starting to get feedback from buyers, and shockingly, not everyone appreciates the hard work and achievements that went into the business. Buyers may not understand the business, or they may be trying to position things for a low offer. In any case, it is important to know how to work with buyers.

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Putting Together the Deal Team

03-21-2016

When preparing to sell, remember the old saying, “He who represents himself has a fool for a client.” While many owners might be tempted to go it alone, in my experience it pays to have a deal team to help prepare a company (and the owner) for a sale

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Punching Out: How to Sell Your PCB/Assembly Shop

02-04-2016

You are thinking of selling your PCB or assembly shop. Perhaps you are contemplating retirement, you have no successors, and the thought of going to the office on Monday is driving you crazy. This column is designed to help your planning efforts. Future columns will go deeper into each subject

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