June 11, 2014
After a major acquisition, Mayville Engineering Co.—No. 1 again on the FAB 40—is poised for serious growth in the years to come.
Bob Kamphuis talked with employees before the big acquisition. The chairman, CEO, and president of Mayville, Wis.-based Mayville Engineering Co. (MEC) had led the company through a major turnaround. In 2005 the place wasn’t too far away from bankruptcy, and in 2014 the fabricator again takes the top spot on the FAB 40.
At the end of 2012 the company was carrying relatively little debt for an organization that spent $20 million on capital equipment and technology. At that point Kamphuis talked to employees about acquiring another fabricator—Byron Center, Mich.-based Center Manufacturing—that was about 80 percent of MEC’s size. In the custom fabrication arena, a big fish was about to acquire another big fish.
Employees have a big stake in MEC’s finances, and not just because it’s their livelihood. It’s also because they all own a piece of the company. The fabricator has one of the largest employee stock ownership programs (ESOPs) in the country.
In the 1990s the company expanded rapidly to accommodate one of its major scissor lift product lines, opening a new facility in nearby Beaver Dam to meet the seemingly insatiable demand for MEC’s high-end product. Within just a few years, though, the product line was bleeding cash, essentially because the competition had come out with newer technology.
The Center Manufacturing deal, though, was utterly different. Times at MEC had changed dramatically. The company actually grew during the downturn, as customers consolidated their supplier lists and gave MEC more business. Moreover, Center Manufacturing didn’t depend on just one big product line but instead had a large and diverse customer base that was largely complementary to MEC’s.
“I’ve been involved with a lot of acquisitions over my career,” Kamphuis said, adding that if you acquire an unhealthy company, you go in with the intent to improve the organization. “In this case, we had a solid company already.”
The deal helped MEC gain more market presence in the commercial vehicle sector. It expanded the organization’s tube forming and fabrication capability and catapulted MEC to become a major regional supplier of fabricated assemblies. According to Kamphuis, the acquisition has gone extremely smoothly; company brands merged in August of last year, and the fabricator’s value has continued growing.
“It’s been great for geographic diversification. It’s been great for product diversification, and it’s been great for market diversification,” Kamphuis said.
This year MEC has experienced booming business in the outdoor recreational products sector. Commercial vehicle markets were a little soft in 2013 but grew moderately in the fourth quarter. Agricultural equipment continued strong. Small construction equipment experienced an uptick, mainly thanks to the housing rebound, but heavier construction activity was a little lighter.
The company did see a slight rise in spending by municipalities, which had been very low for several years. Medical devices were fairly strong. And two markets have had significant (and not altogether surprising) declines: defense and mining equipment.
MEC now is centralizing its business systems for all of its units, as well as streamlining production and capacity planning. The goal: Even with a business as large as MEC, the customer should be able to have one point of contact.
“You want all of your quotations to look the same, and a good quotation process should be a very insightful production planning process. If you can create a quotation in a detailed enough manner, that quote can be the blueprint for the launch of a new project,” Kamphuis said. Tracking all this in turn creates a large job database that MEC can draw from to continually effect the quote, which provides a map for everything that occurs thereafter.
Such data, housed in powerful analytics software, is what makes the contract fabrication business truly scalable while remaining diverse, not overly dependent on one customer or sector. “To me, the broader and wider your customer mix and markets that you’re serving, you create much more consistency in your business model,” Kamphuis said. “If you play in enough markets, you can have consistent work loads for employees.”
Diversification becomes easier with more fabrication capabilities and more plants to expand geographic reach. Even with drops in mining and defense, its revenue increased slightly from last year. All in all, MEC didn’t have a bad year.
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