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Business Observer Friday, Oct. 12, 2018 8 months ago

Public companies pounce on acquisitions, chase $1B in revenues

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PGT Innovations and Helios Technologies are both in growth mode.
by: Mark Gordon Managing Editor

The two largest publicly traded companies in the Sarasota-Bradenton region have laid out big plans to get even bigger — with each chasing $1 billion in annual sales. An inside look at each company’s strategy reveals some interesting insights.  

PGT Innovations

The beginning of what’s now the most lucrative phase in impact-resistant window and door maker PGT Innovations’ nearly 40-year history started in 2014 with one meeting.

‘Success is never final. You always have to keep going.’ Jeff Jackson, PGT Innovations

It was there, in the company’s Venice headquarters, where Jeff Jackson, recently promoted from head of operations and CFO to president and COO, laid out the company’s future — on a colorful map. One part of the map was Florida, another part had the rest of the contiguous United States.

The map was for acquisition targets. But metaphorically, the map also represented Jackson’s desire to turn PGT, founded in 1980, into a family of posh home brands, not merely a window and door manufacturer. “We want to have a good plethora of high-end brands with equity,” says Jackson, pointing to other home brands like Sub-Zero and Wolf, which leverage brand equity to charge more for products.

Building that family of brands is the primary target at PGT, the largest private employer in Sarasota County, with some 2,000 employees in its north Venice facility and another 1,000 or so nationwide. The company, with $511 million in revenue last year, changed its name to PGT Innovations in late 2016 to reflect the shift. And in going after a high-end brand strategy, the company, and its executives, learned a lot about how to build employee brand equity and stick to ambitious goals.

“First we came up with a strategy to hammer down Florida,” Jackson says. “For one, it’s a very profitable state because it’s code driven. We knew we had to dominate Florida.”

The Sunshine State chase, for PGT, was also a bit defensive. Adds Jackson: “We didn’t want any other competitors with bigger brands to come in and take our market share.”

PGT succeeded on the Florida front with a pair of acquisitions over 18 months in 2014 and 2015 that led to more than $200 million in additional revenue. The first deal, in September 2014, was to buy Miami-based CGI Windows & Doors Holdings, for $111 million. Then, in December 2015, PGT bought Orlando-based WinDoor for $102 million.

Those moves have paid significant dividends, considering PGT now has about a 65% market share of the impact-resistant window and door market in Florida. Hurricane Irma, at least in customer awareness, provided another boost: PGT sales rose nearly 25% in the first half of 2018. Margins set a new all-time hit and earnings doubled.  

Jackson’s next move was an unyielding pursuit of the second part of the strategy — a quest he now projects will transform the company.

That move was to acquire a company outside of Florida, in Phoenix-based Western Window Systems. That $355 million, all-cash acquisition, was announced in July.

Western Window Systems CEO Scott Gates had told Jackson the private equity firm that owned Western, PWP Growth Equity, had no plans to sell the high-margin business — at least not until 2019. But Jackson continuously followed up, with phone calls and emails. “I didn’t let it go,” says Jackson. “I decided to use no as a starting point. I sent them a letter and I kept pursuing it. I told him I needed to buy that company in 2018.

With Western Window Systems, which has customers throughout the western U.S., including California, Texas, Arizona, Nevada and Colorado, and the other acquisitions, PGT is about 70% covered on an unnamed, but auspicious milestone: hitting $1 billion in annual sales.  

The Western Window Systems deal — PGT’s largest-ever acquisition — didn’t come cheaply. The company paid about $315 million worth of the deal through debt notes, and, in mid-September, it held a stock offering where it hoped to raise at least $165 million, public filings show.

Jackson says more PGT acquisitions are on in the offing. Those will be based on the brand, not geography. He’s also focused internally on integration with Western Windows Systems and other challenges. “My biggest worry is complacency,” Jackson says. “Success is never final. You always have to keep going.”

Helios Technologies

Former Helios Technologies CEO Al Carlson, back when the company was Sun Hydraulics, didn’t do his successor in the corner office any favors.

Carlson ran Sun, now an operating subsidiary under the Sarasota-based Helios umbrella, from 2000 to 2016. Shares of the company, known in multiple global markets for its high-end, screw-in hydraulic valves, rose 1,315% under Carlson’s leadership, from $2.41 a share to $34.11 when he retired in March 2016. Annual revenue increased 150%, from $80 million to $200 million.   

That performance left the next CEO, German-born precision manufacturing executive Wolfgang Dangel, with the proverbial big shoes to fill. Yet Dangel, who recently surpassed 30 months as CEO and a Helios board member since 2009, has filled those shoes nicely. So nice the company is poised to match — and surpass — some of its financial milestones set under Carlson.

The crux of Dangel’s efforts centers on Vision 2025, a strategy and vision statement the company created in 2016. A key goal? Reaching $1 billion in sales by 2025. The company had $342.8 million in 2017 revenue, up 74% from $196.9 million in 2016. “We believe we can maintain superior profitability and financial strength,” company officials state, in part, in the firm’s 2017 year-end report filed with the Securities and Exchange Commission.

‘We feel pretty strongly that we have a winning formula in place with the way we go after business.’ Wolfgang Dangel, Helios Technologies

Part of the plan involves consolidating and streamlining manufacturing. That includes, for example, going from three campuses to two adjacent ones in the Sarasota-Manatee region, Dangel says in response to an analyst question on an Aug. 7 earnings conference call. “By doing so, we are freeing up the third facility pretty much for the engineering and R&D center we want to invest in over the next couple of years,” Dangel says on the call. (Dangel, through Helios spokesman Steve Berlin, declined multiple interview requests dating back to January.)

The company, with about 1,600 employees worldwide and 700 in Sarasota and Manatee counties, also intends to build on its strength: making reliable and durable products for customers, which include the mining, energy and oil and gas sectors.

Courtesy. Wolfgang Dangel was named CEO of Helios Technologies in 2016. He had been on the Sarasota-based company’s board since 2009.

Dangel, in the August conference call, says the firm launches about 10 new products a year. “We feel pretty strongly that we have a winning formula in place with the way we go after business,” Dangel says.

The company is also growing through acquisitions.

Earlier this year, for instance, Helios bought Australian fluid power distributor Custom Fluidpower and Faster Group, an Italian manufacturer that specializes in quick-release hydraulics. It paid $26 million for Custom Fluidpower, with $9.2 million in cash and the rest stock, in what Dangel, in a statement, called a “a bolt-on acquisition” that’s “strategically significant.” It paid $523 million for Faster, which has primary markets in agriculture, construction equipment and general industrial.

With Faster, Sun Hydraulics and others in the fold, and new markets and targets, the company in early August renamed the business Helios Technologies. "(We) recognize that the parent company is evolving and needs to remain independent from its operating brands,” Dangel says in a release. “The new name reflects a progression of the company’s corporate strategy.”

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