Q&A With … Mark Dohnalek

 

 

A: A lot of people think our growth has been largely acquisition-oriented. But that just complemented the growth; most of our growth has been organic. But certainly the acquisitions have added to it—the growth isn’t the result of rolling a bunch of companies into it.

 

A: What was planned right from the start was, I needed to grow this company organically and with targeted acquisitions. We’re a contract services company, a design-services company and a manufacturing-services company. Often, companies like that are relatively concentrated with their customers. So in looking to broaden our customer base, I needed to look for targeted ones to speed that up. The targets were twofold initially: targeted tech that could expand our capability, though we weren’t weak in that area, but knew it could be augmented. And a particular emphasis was to find good companies with good manufacturing and engineering capabilities. 


 

A: We did talk to some investment bankers, but also some of it was networking, working in this industry and just talking to people. And the more I talked with them, the more they realized we were one of those kinds of companies that might be looking. As time went on, the word got out, so working with investment bankers and brokers didn’t seem to be needed.


 

A: You have to read the ownership group, too. After assessing the company, in any acquisition strategy, you buy organizations, not people. It has to have organization, even the small ones. Yes, an organization is the people, but if it’s a one-man band, those are not of interest—he might retire, and then where are you? I wanted senior management to stay on and run the business. 

 

A: I’ll tell you how I think this virus thing is going to shake out. I think it’s going to accelerate the sales process in that demographic. If you think about it, if you’re 69 or 70 years old, you’ve lived though some tough times in your mid-50s, your late 50s and now you have another life-changing event with this pandemic. This will probably shake a lot of people out. I think a lot of M&A people will be pretty busy post-COVID.

 

A: Yes. No one saw this coming, all the sudden it was forced on you. No business, it doesn’t matter what kind, no business can survive with a a 50-percent revenue loss. You can’t survive long-term, anyway. I told my folks in early February, “I know it’s going to be bad. You watch, it’s coming.” But we never laid anybody off through this, you just have to persevere. We’re making money, not as much as last year, but better than some people. We’ve been able to keep our plants open.”

 

A: Right. We were able to space people out, stagger some shifts. Some of this is done with individual work stations anyway, and already have that separation. But we had to do some things to augment that.

 

A: From the engineering-development side of the acquisition, we’re looking for technical expertise that we might not have. When we find that, then we ask, does that culture fit with what we have? We spend a great deal of time trying to find out if that culture does match. At some places doing acquisitions, they will consolidate the new addition into their operation and move on. But then there’s a bolt-on strategy, and I’m a big believer in that. You use your corporate channel for financing and treasury functions, but keep those businesses co-existing in their entrepreneurial culture. The people that made those companies successful, made them interesting enough to be acquired, why wreck that? I’ve seen so many acquisitions in the corporate world, and a lot of mistakes made like that. They lose the people, they lose that identity, then wonder two or three years later, where did all the sales go? They lost contact with their customers. We help with expertise we can offer, but we have them drive that business rather than consolidate management and try to drive things from corporate.






 

A: We have contacts with all of them regularly, and we look at best practices in what we bring to the table. We have more than 100 design engineers now, so we have scale with engineering development, scale with our global supply chain. Those are two factors that none of these companies would have had on their own because of their small scale. Most of these don’t have global supply chain. We have offices in Taiwan, in China, and in America. That helps us buy better and larger quantities. By engaging the business on that front, you try to match the culture. If you don’t see that when reviewing them, you don’t move forward, you probably just move on.

 

A: With benefits, within one-year time period, we try to roll all of them into our benefits. But we don’t force international acquisitions into the 

U.S. model, and we try to make everything pretty close to equal. What we used to do in the early days was, if their health care was serving 

their needs, leave them on that for a period. Now we don’t; in a very short period, we roll them into ours. Usually they get an expanded benefit package and there’s a cost savings at that point. Employees have lower cost and broader benefits. Most acquisitions are not large scale companies; maybe some day we’ll buy a big one, but for now, these are usually win-win situations for smaller companies.





 

A: We’re in the Philippines, China, Taiwan, the U.K. and the U.S. And we have a sales person in Hong Kong, so 12 locations worldwide.

 

A: No doubt about that! There are lot of challenges, trade and the dustup with the U.S. and China among them. That’s been going on for a year and a half. And if we didn’t have a strong global supply chain in place, we would have been in trouble. Some companies had no options. We were like big corporation in a way, because we had a China and Taiwan presence, but our manufacturing was in the Philippines, so we avoided all that dust-up. But I’ll tell you: Everybody in the electronics world, one way or the other, they are sourcing their components from China. Even if they buy them over here, it’s just U.S. distribution and they are coming from over there. 

 

A: The consumer ultimately drives things, so you have to look at the entire picture. That’s an issue that is never going to go away. But there’s no question this has altered the concept of a totality of off-shore sourcing. That genie is not going back in the bottle. Critical supply chain, medical supply chain—it doesn’t mean that’s coming back to America; some will go to Mexico, some will go to Europe, some will go to Malaysia, the Philippines and Vietnam. But for certain, it’s going to be out of China. Health care, the costs are going to go up because goods are going to be made in Joplin, Mo., vs. Shanghai, and as a society, for a while we’re going to have to tolerate that.