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How an acquisition in metal fabrication saved jobs

Two complementary manufacturing operations are poised to grow together

Laser cutting

An operator sets up a laser program. WESCOBHT has two CO2 lasers, one with a rotary fixture for cutting tube and pipe.

2020 was a year full of staggering challenges and personal tragedies: lost lives, jobs, careers. But not everyone has a tragic story to tell. Tumultuous times force people to adapt, and change, however unplanned or rapid, can sometimes lead to better things.

That was Mark Welle Jr.’s 2020. As the president of WESCO Laser Machining, a laser cutting-only job shop in Littleton, Colo., Welle recalled 2020 starting strong. Then, of course, came COVID-19. When the lockdown ensued during the second quarter, WESCO adapted. Welle and his salesperson, Bill Fowler, began working from home while his operations manager and operator held down the fort, remained socially distant, and kept the company’s two lasers running. Of course, being only a five-person operation, making the transition wasn’t too arduous. And work remained steady thanks to new opportunities brought about by the pandemic, one of them being laser cutting plastic parts for face shields.

Then in summer 2020 came an unexpected opportunity. WESCO had the chance to step beyond laser cutting, acquire a nearby customer, BHT Precision Manufacturing, and in doing so become a full-service custom fabricator. In late 2020 Welle and his team made the leap.

M&A can be tricky. Two businesses can be like two puzzle pieces that don’t quite go together, sliding into place only after adding a little here, shaving a little there. Conversely, WESCO and BHT were like two puzzle pieces that fit into place perfectly on the first try, no significant shaving or adjusting required. Both WESCO and BHT had grown about as much as they could separately. Now it was time to grow together.

The Laser Cutting-only Business Model

With a router and a few other basic machines, WESCO launched in the late 1980s as a plastics fabrication job shop. As the company grew, it purchased one of the first industrial lasers in Colorado and began offering nonmetal laser cutting to companies that didn’t have a laser—and back then, that was nearly every manufacturer in the region.

“We still have some of those clients,” Welle said, “whether it’s a small plastic component for a point-of-purchase display, gaskets, large industrial acrylic panels, or anything else.”

WESCO gradually took on more sheet metal cutting work and upgraded its capacity to include both flat sheet and (thanks to a laser with a rotary chuck) pipe and tube.

For years WESCO filled a niche within the Denver plastic and sheet metal fabrication market. The company served numerous small fab shops that either didn’t have a laser or needed a source for overflow work. “Over the years we’ve built up a reputation as the go-to laser shop for the area,” Welle said.

As laser cutting spread in the 1980s, 1990s, and 2000s, the competitive landscape changed. Just having a laser didn’t bring customers anymore; fabricators had to find more ways to add value. Shops with bending and welding brought laser cutting in-house, while laser cutting-only shops added bending, welding, and other services.

Thing is, not every fabrication shop with a brake and a welder had enough volume to warrant buying a laser. Or, even if they did have enough volume to buy a laser machine, demand might have been too unpredictable to make the investment—especially if the shop had a reliable local source for laser cutting.

Mark Welle Jr

Mark Welle Jr., president of WESCOBHT Manufacturing, called BHT’s previous owner about acquiring some equipment. He ended up with an entire company.

Moreover, those operations that do buy a laser still need a reliable subcontractor to handle the overflow work. Even during slower times, a fabricator might still outsource some laser cutting work to maintain the relationship, almost as a form of insurance. So, when times are busy or a machine goes down, a fabricator has that go-to outside source for laser cutting capacity.

WESCO’s laser cutting niche meant that it could grow a highly diversified customer base. The company could serve as small OEMs and custom fab shops without lasers. It could serve the laser cutting needs for specialty operations, like race car fabricators that need small batches of highly customized blanks cut out of exotic material like titanium. And it could serve larger custom fabricators and OEMs that need a reliable subcontractor to handle overflow work.

This made WESCO’s operation extremely versatile. One day it could cut a dynamic nest full of one-off parts; the next day it could cut a job involving thousands of identical pieces. Welle described one OEM that needed thousands of a certain part cut, just to ease some in-house constraints.

The company remained small, the routing for each job simple. And with relatively low labor inputs, its profits stayed quite healthy, so much so that in 2020 WESCO had enough cash to acquire a company more than twice its size.

Thing is, why buy BHT—a fabricator that offers punching, bending, welding, hardware insertion, and assembly—and complicate what seemed to be a healthy laser cutting-only business? As Welle explained, yes, WESCO had carved a healthy niche for itself, but how sustainable was it? “Over the past few years, we saw the writing on the wall,” he said. “It’s no longer, ‘Oh, you have a laser!’ Now, everyone has one.”

Of course, buying a company comes with risks, and buying the wrong company can be a money-losing, even company-losing, affair. Not all company marriages work out. But according to Welle, the BHT acquisition has been remarkably uneventful, a smooth integration amid tumultuous times. Why? Each small company had something the other needed.

As Welle put it, “It was just a strange set of circumstances during a strange year, and it all worked out in the end.”

Considering Liquidation

“Those new to job shops tend to equate ‘small’ with ‘easy to manage.’” So wrote Vincent Bozzone of Delta Dynamics, a frequent The FABRICATOR contributor and job shop consultant. That comment rings true in BHT’s story. Twice WESCO’s size, BHT still had only 12 employees. Even the smallest of job shops can be complicated businesses to run in the best of times. Add a pandemic-induced economic fallout, and business can fall apart in a hurry.

The company launched as Baron High-Tech before eventually changing its name to BHT Precision Manufacturing. It was founded decades ago by Bernie Baron, who worked to build up a customer base that focused largely on the medical arena. One if its primary customers made (and still makes) hospital carts with integrated computer terminals and medical instruments. In early 2019 Baron, looking to retire, sold BHT to an individual who also ran a used machinery dealership.

“He saw an opportunity with BHT and might have thought he could buy this operation and run it with only limited input, relying on its history to continue moving forward,” Welle said. “As he was trying to run both businesses [BHT and the machinery dealership], work at BHT started to trail off, and it got to the point where he had to start laying off people. He was beginning to consider liquidation.”

medical cart fabrication

Some medical cart assemblies at WESCOBHT have more than 80 components. Before the acquisition, medical carts were the lion’s share of BHT’s revenue. Today the organization’s sales are much more diverse.

The people at WESCO had worked with BHT for years. “We sent work to each other frequently,” Welle recalled. “BHT would send us their laser work, and in turn we’d send them work for forming, welding, and other processes we didn’t have in-house.

“We drifted apart over the years,” Welle continued. “We didn’t send them much work, and they didn’t send us much work. And then, in the summer of 2020, we heard through the grapevine that they might be shutting their doors, or at least be making some changes. So I contacted the owner and said, ‘Hey, I heard you might be moving in a different direction, and you might be looking to sell your equipment.’ Again, we were already thinking we needed to move toward becoming a full-service shop.

“The owner said yes, that was the case. We started talking, one thing led to another, and the owner finally said, ‘Well, why don’t you buy the whole thing?’

“We were in a position to be able to acquire the company, so we did the deal and closed in October of 2020. We merged our operations, and now we’re a full-service shop.” Welle added that “we’ve known [BHT’s previous owner] for years. He was just looking to get out. He’s still a consultant for us, so we’re on great terms.”

What’s the new company name? “We got really creative,” Welle chuckled. “We’re now WESCOBHT Manufacturing ... Each company had a nearly 40-year history, and incorporating them into one name made perfect sense.”

A Good Fit

When you read about the efficiencies and synergies M&A achieves, you’re likely reading corporate-speak for “layoffs.” After all, even starkly different companies of a certain size have duplicate back-office functions. But two small operations merging, at least in this case, is a different story.

“We didn’t have to lay off anyone,” Welle explained. “We inherited all of BHT’s customers and employees, and we were able to keep all those skilled people employed.”

He added that the two companies’ structures didn’t even change much. WESCO was top-heavy, with an owner, a president, a salesperson, a production manager, and just one full-time laser operator. On the other hand, BHT was light on management and heavy on front-line workers. Several key long-term contracts, including a few large ones for medical carts, represented 80% of BHT’s revenue.

Making these carts requires complicated job routings and careful coordination using management tools like enterprise resource planning (ProfitFab, in BHT’s case). “[Without it], coordinating finished parts with dozens of different components that needed to be produced before final assembly would have been nearly impossible,” Welle said. Still, because the shop had fabricated some of the same jobs for years, its experienced talent knew what to do when they saw a job arrive at their workstation.

Documenting Skill

Having such experienced, skilled people is an incredible asset—but it can also be dangerous if all that knowledge remains trapped in employees’ heads, neither documented nor communicated. When WESCO closed on its acquisition, most of BHT’s 12 employees were in their late 50s or early 60s, and some had been with the company since the early 1980s. They won’t be working forever.

Tim Singer Production Manager

Tim Singer, production manager, has worked with BHT’s longtime employees to develop workstation “playbooks” that detail work instructions and procedures.

So, for the past several months, Production Manager Tim Singer has been interviewing punch press operators, press brake technicians, welders, hardware insertion specialists, and assemblers, picking their brains and documenting how they do their jobs.

“Some of these carts have more than 80 components that go into them,” Welle said, “and the entire assembly process has been in the head of someone who’s been here forever. That’s why Tim is developing a playbook for each workstation. When someone goes on vacation or someone else is hired, they’ll now have a reference to see exactly what needs to be done.”

Since the acquisition, WESCO moved from its 5,000-sq.-ft. shop into BHT’s 30,000-sq.-ft. building, adding its Amada and Mazak CO2 lasers to BHT’s 30 or so pieces of fabrication equipment. Baron, BHT’s original owner, owns the building and still keeps an office in the facility. BHT came with some longtime customers, some of whom have been ordering the same part from BHT for 30 years. “Bernie was instrumental in getting that business 30 years ago,” Welle said, “and he’s very available for us when we want to know about the history of a certain job.”

What’s next for WESCOBHT? “Upgrading to a fiber laser will be our next big thing,” Welle said.

In fact, the fabricator might find itself in an enviable position. When shops invest in high-powered fiber lasers, they often find they have so much cutting capacity that they strive for more laser-only work. Otherwise, a fabricator that upgrades its cutting capacity and nothing else simply pushes the constraint down to forming, welding, or other downstream processes.

Thankfully, the combined company still services its network of laser cutting-only customers, and its 15 employees can now offer those same customers additional services. In doing so, they’ll increase revenue diversity and put the entire operation in a much more stable and sustainable position. After a year like 2020, that’s a very good place to be.

About the Author
The Fabricator

Tim Heston

Senior Editor

2135 Point Blvd

Elgin, IL 60123

815-381-1314

Tim Heston, The Fabricator's senior editor, has covered the metal fabrication industry since 1998, starting his career at the American Welding Society's Welding Journal. Since then he has covered the full range of metal fabrication processes, from stamping, bending, and cutting to grinding and polishing. He joined The Fabricator's staff in October 2007.