Actuant Corp

Source: Manufacturing Digital

Date :29/06/2007 15:21:46

Actuant Corporation is using acquisitions to grow into an amalgamation of niche consumer and industrial manufacturing and distribution businesses.

Written and produced by James Buchanan & Patrick Harlow

If Actuant Corporation were a single retail outlet it would look something like a mall with two wings.

One wing would be dedicated to engineered solutions, such as how to raise and lower a convertible hardtop roof on a car, while the other would focus on tools and supplies. And within each of these wings would be a number of specialty, niche stores selling a variety of wares.

But they aren’t.

Instead, Actuant Corporation is a diverse amalgamation of niche consumer and industrial manufacturing and distribution systems that has grown to encompass its current size through a rather aggressive acquisitions program.

“We are a very broad and diverse company that can weather the storm in any particular market,” says Jeff Baldwin, global operations leader for the Tools & Supplies side of the business. “This is derived from our business strategy and how we are going to grow, which is core growth and acquisitions.”

Actuant, was spun off from Applied Power Company in 2000, and initially had sales of less than $500 million. Since that time, the company has grown in leaps and bounds through a series of acquisitions.

The pace of acquisitions has not slowed, and in the past seven years, Actuant has acquired approximately 15 other companies, and has grown to include approximately 6,000 employees, with revenues of approximately $1.4 billion expected in 2007.

While acquisitions have come fast and furious for this company, they have been pursued with an underlying strategy, as the company takes two points of view as to how a business could fit within its corporate architecture, says Baldwin.

The first could be considered to represent the corporate perspective. The question asked is, does the acquisition appropriately broaden and add to the company’s diverse portfolio of businesses?

The second could be considered to be from the local level perspective, where presidents of Actuant’s individual businesses seek companies to grow their capabilities and market share. Simply put, the question would be; will a particular acquisition grow that individual business?

This dual nature of how acquisitions are viewed strikes at the heart of the company’s structure.

“We are a very diverse group of niche businesses focused with a highly decentralized management structure,” says Dave Buck, continuous improvement leader for the Engineered Solutions side of the business. “The corporate level handles areas such as treasury, insurance, and because we are a publicly traded company, Wall Street reporting. There is a lot of matrix management that goes with that.”

Baldwin adds, “Overall, Actuant has been organized into four reporting segments, even though there are two sides of the business. All of which are made up of multiple brand names or business units that have come primarily through acquisition.

“In each of the business segments, and under the brands, there is a president and various managers. These people manage their business almost as entrepreneurs. Sales, marketing, and type-functional areas of a business report on a direct line basis to a president,” Baldwin says.

According to the company’s website, approximately 80 percent of sales are derived from products holding number one market positions as measured by net sales. Strength in each product category is based on brand recognition, proprietary engineering and design competencies, dedicated service philosophy, and global manufacturing and distribution capabilities.

Within this particular architecture, strategy and tactics are handled at the local level, while the corporate umbrella uses the size of the company to find efficiencies and economies of scale to manage the overlapping needs of the individual businesses.

Baldwin and Buck are in the interior of the architecture, in that each is at the leadership level for their respective business group, but also must report to a president and leadership team. Their responsibilities, says Baldwin, include driving adoption and integration of lean manufacturing processes, strategic sourcing, best practices, and procurement improvement.

Within the Engineered Solutions group are the Atuation Systems and Engineered Products segments. Within Actuation Systems are the brands Power-Packer, Kwikee, YVEL, Power Gear, and others. Within the Engineered Products are the brands Nielsen Sessions, Maxima, Turner Electric, Acme Electric Corporation, and others.

Within the Tools & Supplies group are the Industrial and Electrical segments. Within Industrial are the brands Enerpac, Hydratight, Inject-A-Seal, and others. Within Electrical are the brands Sperry, Marinco, Guest, Kopp, Gardner Bender and others.

It would be easy to imagine that much of the manufacturing for all of these businesses and associated products would be contracted out, but according to Buck that isn’t so.

“We do much of the manufacturing work ourselves, but that very much depends upon the market,” he says.

Baldwin adds, “The engineering side is more likely to do the majority of the work in-house as it is more of a vertically integrated produced product.”

Sourcing materials then becomes a major activity for all of the manufacturing work that takes place.

“We are also very strong when you look at how we are able to leverage our sourcing in China,” says Buck. “We are large enough to have our own sourcing staff there to find and attract the best suppliers in China. We also have the infrastructure to smoothly bring products and handle all of the sourcing issues related to bringing these products in from China. Out of our total of 500 employees there, we have around 100 that are focused on sourcing. This is driven by our CEO — he is a big proponent of China, and really drives that.”

Once in the house, these products must be put to good use, which includes strong adherence to lean manufacturing principles.

“Anyone who is manufacturing and isn’t on a lean journey won’t be in manufacturing for long,” says Buck.

“The challenge is on standardizing on the processes and driving it across all of our businesses,” adds Baldwin. “In that journey, each business is at its own place on its lean process and reaching lean goals. This is a biproduct, generally, of when the company was acquired by us, and where each company was on adopting lean processes. Some have been at it for many years, while others were not so far along when they were acquired.”

To work across the organization on achieving lean goals, the company has its own Lean Corporate Group that provides training, Kaizen event facilitation, assessment, strategy, and development support to a business.

One example of how effective the lean group can be, says Buck, is with Monterey, a business the company inherited with one of its acquisitions located in Monterey, Cal.

With any acquisition, the company engages in what it terms the Acquisition Integration Model (AIM), which is a process designed to smooth the integration of a new business into the company fold.

“The AIM is composed of teams that include an HR strategy team, finance strategy team, IT team, sales and marketing, and an operations team,” says Buck. “These are composed of members of our corporate group, people from the acquired business, and the business the acquisition will role into.”

The AIM process is a highly structured and focused method of integrating a company as quickly as possible, through the setting of goals for the first 100 days after acquisition.

“In the case of Monterey, the business had not applied any process toward integration of lean and it is very hard to drive a lean process and expect a turnaround in less than year,” says Buck. “In this case, we went from what had been something of a disaster to something that is now a shining star in our company.

“The AIM process is very intense, it’s a lot of work, but it is very valuable, very focused and a very Lean process itself,” Buck says.

The company also takes the needs of its employees very seriously.

“Because we are so diversified, we provide value by providing our people with access to employee development and training,” says Buck. “There is a real drive to use our employees to their best strengths.”

With diversity also comes a broad range of training needs.

“If we don’t do the training ourselves, we will utilize many different resources that we have access to in order to provide our employees with the best training opportunities available,” says Buck.

As the company looks to grow it will continue to place a high value on acquisition.

“We spend a lot of time on due diligence by looking at how a possible acquisition would strengthen either an existing or help us grow into niche markets,” says Buck.

Baldwin adds, “Right now our focus really is on China. We are looking at some in Eastern Europe and Russia, but where the real growth will be overall for Actuant is in China.”