Columbus McKinnon has been one of the most acquisitive companies in the crane business in the past five years, culminating in the purchase of privately owned Texan overhead bridge and jib crane builder GL International at the beginning of March. Just two weeks earlier, it bought Camlok Lifting Clamps of the UK and the Tigrip product line from Germany’s Schmidt-Krantz & Co.
Columbus McKinnon (CM) describes itself as a broad-line designer, manufacturer and supplier of sophisticated material handling products and integrated material handling solutions, adding that the bulk of sales come from hoists, steel welded chain and attachments, and industrial components. President and chief executive officer Timothy Tevens says that its strategy is based on three main elements: enhancing existing business by expanding the product range, increasing penetration of international markets and making “strategic, synergistic acquisitions”.
CM sales grew at an average rate of around 32% during the period from 1993 to 1998, increasing from less than $130m, to $511m for the year to 31 March 1998. That growth has continued during the current year, with sales for the nine months to 31 December reaching the same $511m that was achieved for the whole of the previous year. CM has come a long way from the hoist and manipulator specialist that started on the acquisition trail in the early 1990s with purchases in the $1m to $2.4m price range.
Major growth started with the acquisition of hoist and crane components manufacturer Lift-Tech for $63m in 1996. This was followed by the $260m cash purchase of Yale International, the manufacturer of chain and wire rope hoists, actuators, scissor-lifts and rotating unions, in October of the same year. Yale’s brand names include Duff-Norton, Coffing, Little Mule and American Lifts. The Yale deal, which remains CM’s largest so far, was followed by the $7m purchase of Lister, a manufacturer of chains and bolts in December 1996.
Just over a year later, in January 1998, CM bought Univeyor, a Danish integrated material handling systems supplier, for $16.5m. This gave it a foothold in the integrated material handling systems market and strengthened its European position. It also offered new markets for existing CM products with blue-chip clients such as Volvo, Saab-Scania, United Biscuits, Mars, Sony and British Telecom.
Two months later, CM paid $155m for LICO, a specialist in custom conveyors and automated material handling systems, mainly for the automotive industry. Its customers include General Motors, Ford, Harley-Davidson and John Deere. This was said to strengthen its position in the automotive industry as well as giving it, along with Univeyor, an established position in the integrated material handling systems market.
To fund the LICO deal and to repay existing bank debt, CM issued $200m-worth of 8.5% loan notes and put in place a $300m bank revolving credit facility. Executive vice president and chief financial officer Robert Montgomery commented: “We have restructured our debt financing to provide CM with greater flexibility and more favourable terms. In doing so, we have reduced our existing borrowing costs and gained the ability to respond swiftly to other business opportunities that may arise in the future”.
Through its main subsidiary Automatic Systems Inc (ASI), LICO is a leading supplier of overhead and floor mounted conveyors, monorails, robotic indexing systems and automatic body transfer systems. One of its main customers is General Motors, and it received a GM Supplier of the Year award in 1998.
Speaking at the company’s 1998 annual meeting on 12 August, Montgomery said: “In the last five years, we have made nine acquisitions, which collectively have secured market leadership in key product segments and a significant global presence. They also produced operational synergies and broadened our focus as a provider of both material handling products and solutions. That meeting saw Timothy Tevens address shareholders for the first time as president and CEO, following the retirement of Herbert Ladds in July 1998. Tevens commented: “CM is now structured as two major segments: our traditional product-focused business and the newly expanded solutions segment, which produces custom material handling systems for entire facilities. Our solutions business now makes up about one third of our total sales and offers attractive growth potential based on industry trends favouring increased outsourcing and engineered-to-order material handling systems”.
He added: “We will continue our three-pronged growth strategy to seek strategic and synergistic acquisitions, increase international sales, and support and expand our core business through new product development and cost management”.
On 25 August, the purchase of Illinois based jib crane manufacturer Abell-Howe was announced, in a deal worth $7m. “This acquisition marks our entry into another complementary product line, further enhancing CM’s capabilities as a provider of material handling products and solutions,” Tevens said at the time. “As a nationally recognized designer and builder of jib cranes, Abell-Howe creates significant cross-selling opportunities with all hoist products, as well as our solutions segment.” In December, CM bought Societe D’Exploitation des Accords Gautier (SERG), a French manufacturer of industrial components, for $2.9m. Its range of rotary unions and swivel joints complements the products already offered by Duff-Norton. There is said to be very little overlap between the two ranges and Tevens comments that CM now offers one of the world’s most complete lines of rotary unions.
On 18 February this year, the company announced the purchase of Chester, UK, based Camlok Lifting Clamps and the Tigrip product line from German industrial product manufacturer Schmidt-Krantz & Co. for a total of $10.6m in cash. Camlok manufactures plate clamps, crane weighers and related products, while the Tigrip range of standard and tailor-made plate clamps is produced in Germany. Camlok and Tigrip will be combined with and managed by Yale Industrial Products GmbH, a subsidiary of Yale Industrial Products Inc. of the USA. Commenting on the transaction, Tevens said: “This is a natural extension of our products segment. Plate clamps are complementary products to hoists, our largest selling product, and are sold through existing market channels. Camlok and Tigrip are both well known brand names, and with this acquisition Columbus McKinnon becomes the market leader for lifting clamps in Europe. This addition to our line of lifting products also creates cross-selling opportunities with hoist products in other markets, particularly North America, where Columbus McKinnon has a dominant market share”.
The most recent acquisition, GL International of Bedford, Texas, is one of the largest full service crane builders in North America, generating sales of $52.7m in the nine months to 31 December 1998. It was formed in 1997 from the merger of southern US industrial crane and hoist company Gaffey with Larco, a Canadian specialist in large, engineered cranes operating throughout North America. Gaffey has manufacturing facilities in Tulsa and Houston, plus nine sales and service locations, while Larco is based near Hamilton, Ontario. A third operation, Handling Systems and Conveyors, of Little Rock, Arkansas, designs and builds overhead monorail conveyor systems, primarily for industrial customers. It is regarded as a natural fit with LICO.
The GL deal was described variously as a “merger” and a “pooling of interests”, and was achieved by exchanging newly issued CM stock and stock options for the whole of GL’s issued and outstanding stock and options. Based on CM’s closing price on 26 February, the value of the CM shares and options was $20.6m, so in effect that is what it paid for GL. It also assumed GL’s outstanding debts of around $10.9m. GL has become a wholly owned subsidiary of CM, although it will continue to operate independently and the existing management team has been retained.
Tevens says that the merger was the first major step in the implementation of CM’s so-called CraneMart strategy, which is to build an integrated North American Network of full-service crane builders. That process started last year with the acquisition of Abell-Howe Crane and is expected to continue via a series of strategic alliances. These alliances are expected to range from supporting independent participants at one end of the scale, right through to full equity ownership. He comments: “CraneMart makes Columbus McKinnon a full service supplier of hoists, cranes and components, and enables us to expand our parts and service offering consistent with the increasing demands of our end-user customers”.
He adds: “GL brings us a well-managed, full service crane builder that is geographically dispersed over a substantial portion of North America; it brings an extensive, successful parts and service business; it solidifies an already strong business relationship; and it provides the basis for significant cost and revenue synergies”. Prior to the deal, CM was already selling hoists and crane components to GL worth around £7m/year, an amount that is now expected to grow sharply.
Tevens continues: “Our combination with a crane builder of GL’s diversity, stature in the marketplace and strategic fit with Columbus McKinnon offers a unique opportunity to launch and establish our CraneMart strategy”.
In an interview with hoist Robert Montgomery was asked where Columbus McKinnon will look for future growth. His response was that the CraneMart strategy is only just getting under way, so there is more work to do in that area He said that he feels further companies could be added to CM’s product segment, adding that he would be looking for more opportunities like the Camlok/Tigrip deal. He sees potential to expand the material handling solutions business, which as mentioned earlier accounts for around a third of total sales. One of its attractions is that it offers higher profit margins than the products segment.
Asked about how customers will benefit from the combination of products and services now offered by CM, and from the CraneMart concept, he said that it will offer them a single source of supply for all their needs. This is regarded as the best approach to today’s market, where many customers, particularly the larger ones such as General Motors, used to have their own design and engineering departments but now outsource these activities.
The discussion then turned to CM’s strategy of enhancing existing business by expanding the product range, increasing penetration of international markets and making “strategic, synergistic acquisitions”. Asked to explain the final element, he said that CM’s overall philosophy is “to take two and two, and make six”, by bringing together companies that offer strategic advantages such as complementary skills and products, shared routes to market and expanded coverage.
