PCB Chat 160: Tom Kastner on M&A Trends and Global Manufacturing Challenges

Andy Shaughnessy (0:11)

Hi, I'm Andy Shaughnessy, Content Architect for PCEA.

Here with me this afternoon on the PCB Chat is Tom Kastner. How are you doing, Tom?

Tom Kastner (0:22)

Doing great, Andy. How are you?

Andy Shaughnessy (0:24)

Good. Tom is the president of GP Ventures, an M&A firm and a long-time friend of ours.

Tell me, how did you get into this? How does one become an M&A guy like you are?

Tom Kastner (0:41)

Sure. Well, so I used to work for a company called Hakuto, which they're known in the PC board industry because they make automatic cut sheet laminators.

And back in the 90s, we used to sell a lot of those. And at one point, I became the US manager for Hakuto America. But at the same time, I was working with Hakuto to help them with investments and acquisitions. Hakuto is still around and they're still selling plenty of laminators, some in the US, but mostly in Asia, of course.

And so I started doing M&A for Hakuto back in 1996 And then in 98, they sent me to the US. Then that was in Japan, I was doing that. And then in 98, they sent me to Illinois, near Chicago, a town called Schomburg to run Hakuto America. But I was still doing the M&A stuff. And then after about three years of that, we had the whole Y2K downfall. And so I got out of the PC board equipment distribution world and focused on M&A advisory where I've been ever since.

Andy Shaughnessy (2:13)

What do you have going on right now? What is, what do you see happening, you know, as far as trends?

Tom Kastner (2:19)

We've done a lot of work in PC boards and EMS. You know, overall, we've done over 20 deals in those sectors.

And we're currently working on several deals, both for sellers and for buyers in those sectors. And, you know, we're seeing a number of trends. I mean, for one, activity is just really through the roof. So there's an awful lot of interest on behalf of buyers who are looking for either PC board shops or EMS companies to acquire in the US. Much of that is driven by the reshoring trend. A lot of it is the strong US military budget, as well as data communications is very strong right now.

And then two trends on the buyer side really is the amount of private equity money that's out there. It just keeps growing and growing. And then as kind of a subset of that, the number of individual buyers has absolutely exploded over the last, say, five years or so. These are individuals or small groups who have said, you know what, I don't want to work for a big corporation like my old dad did. I want to buy, I want to buy something. And somehow not all of them are interested in PC board shops. I don't know why, but a small subset of them are interested in PC boards and EMS, and they're buying up a lot of the smaller companies. So there's some strong trends on the, or a lot of interest from buyers these days.

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Andy Shaughnessy (5:11)

Are most of the potential buyers for the US shops, are they typically from North America?

Tom Kastner (5:18)

Yeah, you know, at least 90% or so are domestic. And that's probably true for almost any industry.

Just, I mean, it's so much easier to buy a company within your own country.

But we are seeing a lot of interest from foreign buyers in both PCFab and EMS. A lot of that is due to reshoring and the strong economy, and then, you know, stronger enforcement of ITAR, perhaps an expansion of ITAR to say, you know, communications products and maybe others. So we're seeing a lot of interest from foreign companies. Now, typically the interest from foreign companies is for larger shops. So whether it's Fab or EMS, a lot of the large, you know, if you're gonna buy something from overseas, you want it to be fairly substantial. So a lot of them are looking for companies that are, you know, at least say 20 million in revenue, if not 50 million plus.