Acquiring Precision Engineering
Setting
Since its rebirth in 2001, Atlas had been growing rapidly and had continually innovated, leaving established competitors well behind us. To remain at the top and extend our lead, we felt our future to be more in magnetic assemblies than just mere magnets: placing large magnets spaced millimetre perfect is quite an art, an art we were specialising in. By 2006-2007 we were however more and more impeded by capacity constraints at our mechanical parts suppliers, we needed our own proto-typing manufacturing facilities.
Challenge
In and around Brainport Region Eindhoven there are very many small and medium-sized Mechanical Component Manufacturers, however given the boom years from before 2008, hardly any with a zest of being acquired, or if, than only at a great premium, something we couldn’t afford.
Solution
Having good contacts with a large number of local manufacturers, I was in a position to survey the market in order to find that rare company in distress that was in addition of the proper size. Actually, as luck had it, the most likely contenders to be in distress were companies that simply had too few machines to pay for even the simplest of overheads. Since we were in it for proto-typing only – production runs would be transferred to China – we needed few, but capable, machines. After some three months several candidates were identified and I started exploratory discussions.
As you would expect in these cases, the due-diligence revealed a minimal administration and therefore risks that could not really be quantified. Obviously I did not expect the risk to be very large, but unquantifiable is just that. I thus negotiated the purchase of the machinery only and, due to our eagerness to acquire, accepted that we would pay their price based on a ‘going-concern-valuation’, even though we would obviously save a bundle simply waiting for the other shoe to drop.
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