Early February 2023, a private equity-owned Chicago-based EMS contract manufacturer was faced with a dilemma to stay with their decades-old industrial box assembly and PCB manufacturing business with 3 Juki SMT lines. The management had to decide if pivoting into medical device manufacturing was feasible for their ongoing strategy.
The PE executives asked management to submit a detailed report with a clear business model including a proforma and forecasts for growth in the medical device sector. Moreover, the Company had to decide what impact pivoting to a more medically focused business would have to the labor force, equipment, facility and processes under ISO13485.
Planning for change under new ownership.
Marabek spent over 6 weeks carefully studying the historical business and operations as well as management decisions undertaken by previous CEOs and owners. A full gap analysis was completed to understand where resources would be deficient. Surprisingly, the company had grown from a small electronics repair company under a special contract from GE and RCA in the 1980s to a much larger operation supporting a broader list of Fortune 500 companies including telecom/communications, industrial and automotive.
By mid-2023, with the support of Marabek, the Company submitted a very detailed report with financial models, capex, and opex forecasts. The report also included target customers in the medical device contract manufacturing sector. The PE fund was able to discern several takeaways from the report that showed accretive value creation with significant IRR and ROI using levered capital.
Growing new business with long-term strategic alignment.
The Company’s new report forecasted approx. $14m in additional capital would be needed to retrofit the existing facility with a non-unidirectional airflow-certified Class 10,000 (ISO6) cleanroom for a medical board and box assembly. The plan included hiring new key team members to support a GMP facility to ensure quality. The investment would also include the purchase of a new ESI SMT machine that enables flex PCB manufacturing to leverage the advantages of laser-based SMT production better.
The Company used Marabek’s research to show a scalable production line and capacity plan to support 2x to 3x revenue growth in medical EMS over 5 years. Improved facility investment would also upgrade the existing Juki SMT machines with automated AOI equipment. This would significantly reduce scrap and improve quality impacting the bottom line.
Marabek was able to show the PE fund that management had the requisite leadership to execute the business development and strategic go-to-market plan. Using levered capital with existing cash flow and secured assets, the Company was able to get favorable rates and terms. The sales team successfully presented its long-term strategy to grow with fresh capital and value, resulting in 4 new contracts from regional medical device and contract manufacturers. Aligning to the existing core PCBA business brought a new strategy to life.
