Dr Driving ving ow owner nership ship and nd gr growth owth in n a com ompe petiti titive e en environment ironment August 15 th , 2014 Bob Swelgin President Smart Electronics & Lark Engineering
Changing hanging Ti Times.. es.. Or Not ot Person onal al Histor ory • Started acquisition of small companies in 1988 as part of Texas Instruments • As VP and Country President of Tyco, responsibility for numerous acquisitions and integration on global level. a. Ex: Patriot in Asia, built business from scratch • As COO of Panasonic, opened facilities in China and Texas. Had to integrate quickly, as well as cut costs. • As CEO of American Racing, led two bolt-on transactions. • Failed in founding of Avrio Technology. a. Too slow to change culture to drive “ownership.” b. Allowed too much to remain as is while all expedited change
What’s Next for Me? • Kids through gh schoo ool and finally off my payroll oll a. Time to use personal lessons learned and restructure my go-forward career • No big compa pany bureaucracy cy • Invest st my own money and time • Built relation ionsh ship ip with founde der of Smart Electron onic ics s & Lark Enginee eerin ing
Our Parent Company
Secure Technology Team total Value Sensor Wire bonding/Chip-on- products Board Class 10k clean room Full RF and Digital box build Inc. Cables and Harnesses Your Cost and Technology Value Leader Secure Proprietary/Competition 5 Sensitive
Cho hosen sen Pa Path th Target • A & D- Small business consolidation ( <$5M EBITDA) • RF- Subsystem engineering and manufacturing • Low cost manufacturing in North America Why? • It is a fun industry technically. Best part of my career. • Plenty of small companies consolidation. • A & D industry needs cost reductions and creativity/affordability. • Asia is getting expensive for manufacturing. Mexico will be affordable solution.
Ap Appr proach/Plan oach/Plan • Develop loped ed model el- Built t team to execu cute a. Researched technologies and markets b. Ensured strategy supported customer level objectives and filling the gaps • Recruit uited equity y and debt to make acquisi uisitions ions • Keep on top of market- EW, ISR a. Follow customer strategies to differentiate the new company • Found companies to acquire… Built relationships with founders of Smart Electronics & Lark Engineerin eering a. Bought in non-competitive arrangement -No investment bankers involved
Execution ecution • Hit the groun und d runnin ing a. Integrate quickly b. Acquire quickly c. Engage the workforce d. Create confidence and ownership in full team • Execu cutio ion- 100 day plan with focus us on cust stomer mers s and employee yees a . All hands meeting to explain “go forward” plan b . Restructure compensation to focus on “pay for performance” to create ownership c. Create more entrepreneurs within the company d. Common marketing approach
Execution (Cont’d) • Engage e custome tomers s into o workforce force- Create te custome tomer ownership ership • Explain n custome tomer value ue to all employee oyees- They are not “bad guys” • Show w continu inual l improv ovem emen ent t in all areas • Develop lop and sell l value ue contrib tribut ution ion differen erent t than peer group up a. Internal and External
Ma Marketing rketing Str trategy ategy • “Stick to the Knitting”! a. Focus on aerospace and defense- small high end specialty industry b. A & D area = EW & ISR • Exploit oit the custom omer ers s we know a. Sell top to bottom (Me to President & V.P) b. Sell bottom to top (Program manager & reps to buyer & engineer) c. Get foot in door at one division and expand presence • Make it difficu cult lt for custome omers s to say no a. Build team to show well b. Invest a little in visual aids and cosmetics c. Show “organization” and follow through
Marketing Strategy (Cont’d) • Starts s at Home a. Professional in all we do b. Dress in office- No t-shirts or dirty jeans c. Care for customer during visits. Let them know we love them -Visitor parking clearly marked -Upscale the lobby d. High quality proposals supporting competitive pricing - ”Borrow” shamelessly from customer best practices • Increase ased d value propo position sition a. Never a “one trick pony” b. High Value solution provider
Energizing nergizing th the e Pe Peop ople le • Involv lvem ement ent and personal al impro rovem ement ent a. Education - State offers free basic classes (ie: English, math, Spanish, Vietnamese) • Comm mmission on pool ol organ ganized zed a. Percent of each dollar billed goes to pool. Distribution based on >92% revenue attainment (to budget) b. Anyone with customer contact partakes quarterly c. Salaries adjusted -Sales team = 50% of commission pool -Program managers = 20% of commission pool -Management share goes to group contributing most to prior successful quarter (ie: mfg, QA, purchasing)
Energizing the People (Cont’d) • Monthly “rewards” luncheons a. Every month the team hits target- Free lunch for entire company b. Quarterly awards to “Recognized contributors” c. “Suggestions” implemented are rewarded d. Every employee gets 90 day review to be sure objective is clear and what is rewarded -Not length of service
Educ ducation ation and nd Ta Tactics ctics • Explan anat ation ion to all of their contrib ibution ion to success ess • Openness ess is expected cted- opin inion ion sought ht a. All executives expected to MBWA • Change e is encourag aged ed a. Physical plant adjustments (Paint, walls, chairs, tables, carpet)- Something visible every 4-6 weeks b. New logos, websites, signage
Education and Tactics (Cont’d) • Simple le Things ngs; ; Added as rewar ard for r succe cess of busines iness a. New refrigerator b. More microwaves c. Better coffee d. Personalized shirts and smocks (Craigslist and Ebay are great sources) • Explain ain requirements uirements to employe loyees. es. Off ff to pay for r work rker ers personal nal improv rovem ement ent sessions: a. Program management b. Microsoft office c. English d. Public speaking (Employee needs to invest their personal time for this to work)
Education and Tactics (Cont’d) • Openness ess with customer omer a. Knowledge in what we build b. Accept customers suggestions and offerings (Seek opinions) c. Customers may not be right but they are never wrong • Video o screens s mounted ed throughou out factor ory for improv oved commu munica ication ion a. Quality summary b. Production requirements c. Progress to target d. Newsletter e. Customer product news f. Customer visits g. WIP status- updating every 5 minutes
Res esults ults • Compa pany ny grew >25% in y year one a. Expect 20% growth in year two b. Primarily expanding same customers • Turnover er almost ost non- existent. nt. Happy and contribu butin ing g workfor orce ce • Absentee eeism ism rare • Workforce and customers see benefit of “Team” approach • Employ loyees ees engage e with custom omer er and feel part of success ess (and failure) e) • Customers respond very positively and “perceive” a stronger organization
Results (Cont’d) • We get unsolicite licited d calls s from employ loyees ees at competi petitor ors s looking g for jobs • Costs s stay low a. We are a low cost producer in California! • Margin ins s = 2x 2x o of industry peer group- Stron ong g focus s on cost drivers • Select ctive ve techn hnology ology advan ance ces s continu nue e to differen entiate ate a. Develop roadmap- execute- tell customers
Results (Cont’d) • We listen n to custom omers- Tell them where we are going a. Tell them when we achieve our commitments! • Backlog og is now greater r than revenue at close se of acquisition sition a. EBITDA is >2x pre close • We are now conside idere red d for long term contrac acts s equal to the size of the compa pany
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