Creating PCB Industry Giants and Mid-majors Through Acquisitions

In December, 2018, Summit Interconnect announced the acquisition of Streamline Circuits. Summit itself was created in 2016 through the merger of KCA and Marcel, and is backed by a private equity firm. In the PCB and PCBA industry, TTM Technologies is the giant King Kong of acquisitions, growing from just $80 million in revenues 20 years ago to over $3 billion today. Due to acquisitions, there are now several “mid-majors” in the PCB industry. Some examples include:

• Advanced Circuits: Five acquisitions since 2008 ($90 million in revenues with $25 million + EBITDA, owned by a publicly traded private equity firm)
• APCT: Two acquisitions in two years (owned by a private equity backer)
• FTG: Multiple acquisitions or partnerships ($100 million + revenues, $10 million EBITDA, publicly traded)
• Summit Interconnect: One merger and one acquisition since 2016 (owned by a private equity firm)

Most likely there will be more U.S. PCB shops in the $50–250 million range in the coming years due to consolidation in the market as well as more capital available for acquisitions. In addition to acquisitions, there is certainly some re-shoring going on as well as a shift by customers away from smaller shops not investing in new equipment. These trends will help to consolidate more revenue into fewer shops.

There are approximately 210 PCB-making companies in North America. Of those, 100 are under $5 million in revenue, and about 50 are between $5–10 million (representing around $500–700 million in total revenues). Many of these smaller shops are true survivors, but few are investing in new equipment such as direct imaging, laser drills, via-fill equipment, etc. It is already difficult to compete without new equipment, and within 10 years, it will be practically impossible. I expect the total number of shops in North America to drop to under 100 with the bulk of that revenue transferring to larger shops through acquisitions and competition.

The shops making acquisitions are focusing on key areas of growth for them to become one-stop shops. Some of the key areas of growth these days are the following:

• Military and aerospace: U.S. budgets are strong with more emphasis on electronics and high density versus weight
• Rigid-flex and flex: Many new applications require rigid-flex and flex boards
• Prototypes and quick-turns: The U.S. economy is good, and speed is more important than cost
• RF and microwave: IoT, connectivity, and communications applications are up
• Medical: None of us are getting younger, and there are many new applications in the medical field
• Overseas and brokered boards: U.S. prototype and mid-volume shops have leads that turn into high-volume projects, and many customers do not want to work directly with overseas shops (if you can’t beat ‘em, broker ‘em)
• Assemblies: More and more bare board shops are being asked by their customer to handle the entire assembly, which they either consign to trusted third-party electronics contract manufacturers or do the assembly in-house

Acquirers can choose to focus on one sector and be a category killer or expand into new sectors by acquiring shops that add capabilities. Overall, acquisitions are not easy to find, finance, close, and integrate, which is another reason why the larger shops will grow faster. It takes a skilled set of experienced executives with the right financial backing to make acquisitions successful.

Acquisitions are risky, but they can be a quicker and lower cost way of growing a company. In general, larger shops enjoy higher market multiples, are more profitable, and attract buyers with deeper pockets (more cash, better terms), so M&A can really pay off for the owners. Through M&A, there will be fewer PCB shops in North America in the coming years, and the larger shops that remain will be stronger and more efficient.

Tom Kastner is the president of GP Ventures, an M&A advisory services firm focused on the tech and electronics industries. He is a registered representative of StillPoint Capital, LLC—a Tampa, Florida member of FINRA and SIPC—and securities transactions are conducted through it. StillPoint Capital is not affiliated with GP Ventures.