Is anybody in the document imaging industry surprised by an acquisition announcement anymore?
Earlier this year, I wrote an article on trends and predictions for 2016 in another publication, noting that one of the leading supplies and services vendors with an aggressive acquisition strategy will continue with that strategy in 2016. I even offhandedly predicted that a potential future target might be a power protection company.
That may still happen, but the power protection company certainly won’t be ESP/SurgeX. That’s because on February 5, the news broke that ESP/SurgeX was one of two companies acquired by AMETEK, Inc., a publicly traded global manufacturer of electronic instruments and electro-mechanical devices with annual sales of $4 billion and a history of growing through acquisitions. The other acquisition was Brookfield Engineering, a manufacturer of viscometers and rheometers.
In the press release announcing the acquisitions, AMETEK Chairman and CEO Frank S. Hermance said, "Brookfield Engineering and ESP/SurgeX are excellent acquisitions and strong additions to our Electronic Instruments Group. These businesses will allow us to expand our presence in laboratory instrumentation and power protection, two attractive growth platforms."
ESP/SurgeX, which has annual sales of approximately $40 million, was acquired for approximately $130 million. With manufacturing operations in Knightdale, North Carolina, ESP/SurgeX joins AMETEK as part of the Power Systems and Instruments Division of its Electronic Instruments Group (EIG).
Brookfield Engineering Laboratories, with annual sales of approximately $55 million, was acquired for approximately $167 million. Headquartered in Middleboro, Massachusetts, with additional operations in Germany, the United Kingdom, China and India, Brookfield joins AMETEK as a unit of its Instrumentation and Specialty Controls division within AMETEK’s EIG.
The general feeling within ESP/SurgeX seems to be positive.
“We were excited when we found out it was AMETEK,” revealed Tanya Flores, Director of Marketing for ESP/SurgeX. “This is a big deal for us because it [AMETEK] is a $4 billion company, which is going to bring a variety of resources and tools to us as a company.”
These acquisitions are right in line with AMETEK's corporate growth plan, a plan based on four key strategies: operational excellence, strategic acquisitions, global and market expansion, and new products. The press release distributed on February 5 reports that AMETEK's objective is double-digit percentage growth in earnings per share over the business cycle and a superior return on total capital.
AMETEK has a history of acquiring power-related companies, enabling it to invest in niche markets it considers important for expanding its global reach.
“One of the spaces they were not in was the office equipment industry,” said Flores. “When you talk about power instruments, ESP is the premier brand in the office-equipment industry. They saw us as a phenomenal investment because the imaging industry is vitally important to business as a whole.”
Also advantageous to AMETEK are the relationships that ESP/SurgeX has forged across the imaging industry.
“They saw us as a great company to invest in,” said Flores. “Because of all we’ve done within this industry, they think this is a great fit.”
ESP/SurgeX will continue to sell both the ESP and SurgeX brands through the same channels it has been selling through all along, albeit with the AMETEK name tagged onto those products. The major difference, however, is ESP/SurgeX is now owned by a much larger entity with strong R&D capabilities.
“AMETEK is focused on making sure our business stays the way that it is because there’s a reason we’ve been so successful,” stated Flores. “They’re not going to do a major overall. They’re just going to make us more efficient on the operations side. Their expertise will help us greatly in managing global sales and distribution.”
She also expects the relationship to enhance ESP/SurgeX’s relationships with its existing customers and help them gain traction with dealers the company doesn’t work with currently. Because AMETEK owns a variety of companies and markets a wide range of products, Flores is optimistic that those resources will be available to ESP/SurgeX, and by extension, its customers in the imaging industry. An obvious example is products for print-production devices since AMETEK specializes in protection devices for large equipment.
AMETEK’s PR Manager Jim McKinley underscored Flores’ comments and further emphasized there will be no impact on the customer, explaining that when AMETEK makes an acquisition it pretty much allows the acquired company to operate the way it has been operating all along.
“We see great opportunities with ESP/SurgeX,” McKinley said. “It’s a great fit with some of our other businesses. We acquired a similar type of business last year with Powervar.”
According to McKinley, AMETEK’s approach to acquisitions is targeted and “kind of bolted on.”
“We try to build out from the edges, acquiring businesses that are complementary and essentially operate them as individual business components within this larger structure,” explained McKinley. “What we’ll do is attempt to achieve improvements in the ESP/SurgeX business by taking advantage of synergies with our other businesses and their capabilities. In this case, ESP/SurgeX will benefit from AMETEK’s broader international reach and the advantages of being part of this larger global organization.”