Building a Network Of Plastics FirmsTechnology and Talent Are Components Of SciTech’s Plan to Modernize an Industry

Spotting an opportunity to capitalize on the expanding growth and profit potential of the injection molded plastics market, a group of five industry professionals approached C3 Holdings LLC, a Kansas City, Mo.-based merchant banking firm, with their vision for reaping the benefits of improved efficiency and profitability of molded plastics companies through the use of state-of-the-art technology and “best-in-class” management techniques. In June 1998 C3 formed SciTech Plastics Group LLC, also based in Kansas City, which aims to apply advanced plastics processing technology and the management expertise of the five industry veterans to the manufacturing, marketing, and financial controls operations of acquired companies in order to increase profits. A key component of the strategy is Scientific Injection Molding, a proprietary process developed by two SciTech executives that uses in-mold sensors to monitor production specifications of plastic parts to ensure high quality. Wally Meyer, SciTech CEO, explains that his company is striving to transform the highly craftsman-like approach of the injection molded plastics business to a more high-tech approach, which will maximize the growth potential of acquired firms. “Since scrap rates, down time, and machine inefficiency are the nemeses of the manufacturing industry, the application of high technology and management expertise to those problems will allow us to dramatically improve the profitability of the companies we acquire,” he says. Initially, SciTech’s plan is to target for acquisition three to five companies, each with revenues in the $10 million to $20 million range. Backing up its acquisitions, SciTech is working to forge a joint venture with an operational software development company to commercially develop its proprietary technology. The acquisition of Days Molding & Machinery, a Constantine, Mich.-based manufacturer of specialized plastic medical parts, was SciTech’s first, and several more deals were in the pipeline. Next SciTech will scour the market for larger companies, with $50 million to $250 million in revenues, in order to fully implement its technology and business process improvement systems. The company chose not to immediately acquire larger-sized firms because it feels that their values are currently overinflated – with multiples of 7 to 8 times EBIT-DA. The field is wide open in terms of choices, he notes, adding that there are more than 8,000 plastic injection molders in the country doing about $45 billion in business. SciTech has the human and technological resources that will directly benefit the operational capabilities of the companies it buys. Its top-flight management team is composed of individuals with know-how in process control technology, plastic injection molding, business building, acquisitions, finance and marketing, and in working with independent management teams. The company gives a portion of the equity it acquires in a company right back to the existing managers – a practice which encourages managers to act as owners and pursue goals that will enhance the productivity and profitability of their company. Rather than rolling up its acquisitions, SciTech will allow the companies to operate as stand-alone businesses which have access to the SciTech network of management skills and systems they need to improve their operations, such as improved production methods and enhanced financial tracking systems. “In that sense, SciTech essentially is a management holding company with a talent pool available to the network of acquired companies. As the network grows, we will have an opportunity to better serve our customers’ needs, by moving production jobs from one company to another, ensuring that the right job is in the right plant,” notes Meyer.