Deep down, F-15 flight systems rely on AbelConn backplanes
Two US speciality component manufacturers are to merge in a further example of the gradual consolidation of the aerospace supply chain.
Photo Etch, which specialises in lighted displays and control panels used in military and civil aircraft as well as simulators, is being acquired by AbelConn, a provider of interconnectors, wiring harnesses and custom-engineered parts.
Essentially, Photo Etch makes the front of control panels and displays, while AbelConn handles the back and internals, creating a complementary "fit".
Both companies will retain their own identities, premises and management teams.
PRIVATE EQUITY STAKE
Behind the scenes is New Canaan, Connecticut-based private equity fund RFE Investment Partners, which acquired a majority stake in AbelConn in May 2009.
"In aerospace, we're seeing large customers requiring an increasing level of on-time delivery, quality and constant cost improvements," says RFE managing director Ned Truslow. Those demands "require additional capital equipment, upgrading of management techniques and lean manufacturing processes and smaller entrepreneurial businesses reach a point where they no longer want to reinvest that much money into the business".
At this juncture companies such as RFE step in with an infusion of capital, allowing the management team and product portfolio to be built up, says Truslow. Although RFE personnel are active board members, they do not get involved in detailed management of the companies in which they invest.
Typically RFE will be involved over a five- to 10-year period as it attempts to grow the business.
Having acquired New Hope, Minnesota-based AbelConn, RFE had been seeking to combine it with another company to produce beneficial synergies, says Randy Fry of Photo Etch, who will become that company's president as the merger takes effect. Wally Olson of AbelConn will serve as chief executive of both companies.
Both AbelConn and Fort Worth, Texas-based Photo Etch are venerable members of the aerospace community, having been founded in 1959 and 1968 respectively. Their merger will result in an organisation with some 220-plus staff, including 29 engineers, with combined revenues in excess of $40 million.
Both parties hope that their consolidation will take them to the industry-leader slot in their particular areas of expertise. Their experience is another example of small and medium-size enterprises facing a dilemma: do they "get bigger, or get out" of an industry that increasingly looks for efficiencies of scale?
"For decades, these two companies have served many of the same clients with specialised, high-quality components," says Olson, who says they also had similar operating philosophies. "We took similar approaches to high-quality, on-time performance and complementary engineering services," he says.
DESIGNED SOLUTIONS
Both companies design solutions to clients' requirements, rather than simply producing "build-to-print" components.
Fry says that getting together with AbelConn was partly triggered by his business partner deciding to take his career in a different direction. At around the same time, RFE "came around, looking at different companies that might have synergies with AbelConn", he explains. The timing was right.
"This is a rare case where a merger is designed to benefit the customer," comments Fry. "Clients can still deal with the same team they know and rely upon, whether in Texas or Minnesota. However, we will provide them with more expertise and better service than ever before."
There is another facet encouraging the two companies towards pooling their resources, he adds. Aerospace industry majors - the two companies' client list includes Boeing, Lockheed Martin, Rockwell Collins and Honeywell - are increasingly seeking to trim the numbers of companies in their supply chain.
"We'll be able to give a greater depth and breadth of offerings to our customers and that's what they've been asking for over the years," Fry says.
Source: Flight International
