By Alexandra Lopez-Pacheco (Financial Post)
April 11, 2011 (Originally published in the Financial Post)
The Challenge: Since 2000, CCI Thermal Technologies Inc. has been on a fast track to achieve its mission: becoming a worldwide industry leader in its core competencies. The company’s acquisition strategy has played a key role in this. In fact, CCI Thermal today is the result of the merger of seven heating and filtration equipment companies from Canada and the U.S. over the past 11 years: Ciscan Industries Ltd. of Edmonton; Ruffneck Heaters of Calgary; Caloritech Inc. of Oakville and Orillia, Ontario; 3L Filters of Cambridge, Ontario; and three US-based companies, DriQuik Inc., Wellman Thermal Systems and Flo-Dri Inc.
“There were four acquisitions in four years, and then there was a gap and we did two acquisitions in a two-year period,” says Bernie Moore, CCI Thermal’s president and COO. Through all this, CCI Thermal has faced the challenge all companies undertaking such a rapid acquisition strategy face: how to integrate or consolidate new acquisitions quickly and successfully.
The approach: “I think one of our strengths is integration of acquisitions and consolidation of companies and cultures,” says Mr. Moore. “It’s one of our areas of expertise.”
To begin with, the company is highly selective in what companies it will consider acquiring. “We have typically purchased companies we’re familiar with,” says Mr. Moore. “The companies we’ve acquired have either been competitors or suppliers or we’ve had some relationship with them before the acquisition. That way, often a phone call leads to the start of the process.”
What’s more, when looking at acquiring a company, CCI Thermal ensures there is a strong common foundation, even when the acquisition is for the purpose of diversification. “The real diversification for us was when we got into filtration in 2006 and 2007,” says Mr. Moore. “It’s a fairly obvious diversification for us for several reasons. It’s a similar customer base and similar manufacturing methods. As well, for a company to be of interest to us it has to value customer service and engineering as very important in its value stream because to be a North American manufacturer and to prosper, you can’t be low-tech and high-volume. Customer service is important because it gives you an advantage over the offshore competition and if engineering and complexity matter, that also gives you an advantage over offshore, lower cost competition. So filtration met those needs.”
The Implementation: “You have to ask yourself which areas of the companies you plan to centralize and which functions you will leave to local autonomy,” says Mr. Moore. CCI Thermal centralizes its IT, marketing and financial departments but leaves engineering and customer service to the companies it has acquired.
“There are certain corporate standards that we set when we consolidate companies,” says Mr. Moore. “You maintain standards of safety, quality, absenteeism and set high standards from the corporate level. We’re very proud of our safety record. We have had five years without a loss-time accident and we have impressive loss-time accident free streaks going in all four of our plants. You do have to leave local autonomy to recognize the unique nature of the companies you’ve brought in to the family, the unique nature of the clients they serve, so they do have some flexibility. You also have to preserve the value of what you purchased and in the value of what you purchased is the people and the engineering and the drive but it’s also the brand, what the product line represented to its customers and that has to be preserved even as you move manufacturing plants and change companies so that’s why we’ve kept the brand names alive.”
The payoff: CCI Thermal’s growth has been about 50/50 through acquisitions and organic growth. “The acquisitions have allowed us to expand in new markets,” says Mr. Moore. “For example, we’re a leading supplier of heating to the light rail sector, which we picked up from the Wellman product line, and we managed to grow that business quite significantly.”
As for worldwide recognition, consider this: CCI Thermal exports to China. “I think it’s a testament to a manufacturer’s ability to compete if they can export to China,” says Mr. Moore. “Typically, China just causes fear among North American manufacturers.”