Issue link: https://iconnect007.uberflip.com/i/1172746
OCTOBER 2019 I SMT007 MAGAZINE 45 do? Is it the right thing for you to do and for your management team, employees, and leg- acy? All of those things come into play. Johnson: You mentioned that there might be some new sources of money coming into the market. O'Neil: It feels like there are a number of new private equity players to the EMS industry that are coming in and looking to get involved and do some roll-ups and different things. There's a little more financial market attention since the original companies went public and assem- bly shops turned into electronic manufacturing services providers. Johnson: Are investor groups rolling compa- nies up and consolidating a bunch of smaller players? O'Neil: Yes, and they may try to roll out some dif- ferent models. There seems to be some demand aggregation for models out there and people who are simply performing intermediary-type plays, and that's gone a long way in the plastics injection molding type of market; some new models have come out of that. The PCB fabrica - tion industry is becoming dangerously concen- trated. The top four or five companies control around 90% domestically. Typically, that vac- uum can create some opportunities. On the assembly side, there's still a lot of fragmentation, and OEMs are still looking for their optimal solution. They don't all want the same thing, but most of them want at least in- region capability, and then they're just look- ing for the right match in terms of service and technology. The model plays a little bit too, so are you geared up to do high-mix, low-volume? Are you looking at a place where you're one of five customers on a deep production engage- ment? Johnson: You said something about PCB fabri- cation that I want to talk about. You used the phrase "dangerously consolidated." PCB fabri- cation is an industry sector where we can iden- tify quite a few smallish players as well as a trend for ownership to be reaching retirement age and looking to move on to the next phase in their life. So, that's a great niche of the mar- ket in which to be consolidating, if that's what a financial investor wants to do. Yet, you also said that it's dangerously consolidated. Does that imply that there's room for new business model innovation there? O'Neil: I think there is. I don't know what that new business model is, but I know that the fab- rication industry has matured tremendously. There is less of a need for the designer or OEM to sit next to the CAM operator in the factory. There was a time when there were thousands of PCB fabricators, and every board was a step into the wild blue yonder, so there was a lot of face-to-face collaboration. There are still ultra-complex projects, but the application engineers can get out there, and the equipment sets, capabilities, and toler- ances have matured, which has led to a lot of the consolidation too. Now, your equipment is set to be a player in that rarified air. It's prob- ably the continuous capital investment of mil- lions of dollars annually. That definitely limits the ability of the sub-$10-million revenue cate- gory players to continue to gain market share. It's a tough one, and there are still around 200 that fit in that category. Feinberg: Our chairman of the board back in the day, Charlie Lock, converted Morton from just Morton Salt primarily to a bigger, more conglomerated company. He used to say exactly the same thing that Joe did. He often said, "Nothing is for sale, and everything is for sale." He and his successor, Jay Stewart, built the company up with enough cash that, as division presidents, we had goals every year to start an acquisition. We didn't need to secure an acquisition, but because the chairman of the board and the board of directors said we needed to expand, we wanted to make acqui- sitions. So, there are other reasons why companies make acquisitions, and you must understand what they are if you're going to be acquir- ing or selling to a company. What is your