Acquisition fast tracks
Demand for VMI and related inventory services spurs consolidation on both sides
By Industrial Distribution Staff -- Industrial Distribution, 6/1/1999
CONSOLIDATION IN THE FASTENER INDUSTRY IS ACCELERATING with recent moves by both suppliers and distributors, such as Textron Inc.'s acquisition of vendor managed inventory provider Flexalloy.Textron Fastening Systems, a division of the Providence, R.I.-based manufacturer, will greatly expand its reach into distribution with the acquisition. With revenues of about $185 million last year, Flexalloy will become part of Textron's North American operations and strengthen Textron's existing
capabilities in VMI, company officials said in April. Flexalloy has about 300 customers.
Textron already operates an Illinois-based distributorship, Textron Logistics Co., that primarily serves the DIYs [do-it-yourselfers] market like large hardware companies and retail stores.
Firms such as Textron Fastening Systems expect to continue their rapid growth by offering VMI and related logistics management programs.
"This is really going to be a continued trend for the fastener industry overall as more OEMs look to this service from fastening companies," says Textron spokesman Brian Sullivan. "We see this as where the real growth of the market is."
VMI services are outpacing the growth of fastening manufacturing itself with revenue increases of 10 to 20 percent anticipated during the next few years, says Sullivan. VMI involves managing the procurement and supply of an OEM's materials in inventory and may include just-in-time delivery and value-added inventory management systems.
Streetsboro, Ohio-based Flexalloy has 11 distribution facilities from Canada to Mexico and serves the heavy truck, automotive, construction and structural fabrication industries. With sales of more than $2 billion, Textron Fastening Systems has 93 locations in 18 countries.
Other companies have made acquisitions and entered alliances to increase business with key customers such as the aerospace industry.
Locknut manufacturer Continental-Aero of Harrison, N.J., entered the Southwest market through a strategic partnership with Arlington, Texas-based manufacturers' representative T.J. Teegarden Co. this winter. Aero, which had $10 million in revenue last year, expects to triple its sales in the region.
Pentacon, Inc., the rollup of fastener distributors formed in 1997, recently announced the formation of separate divisions to focus on aerospace and industrial groups.
Questron Technology, Inc., a fast-growing distributor that focuses on inventory logistics management programs, made two key moves recently. This spring it acquired Cleveland-based Olympic Fasteners and Electronic Hardware for $9 million. In February, Questron acquired AFCOM, Inc. of Sanford, Fla., a $7 million firm that also provides inventory logistics programs. In 1998 Questron made three acquisitions, including two Texas firms that primarily serve aerospace customers.
CEO Dominic Polimeni says the logistics group should continue to grow markedly as Questron moves into new geographic areas and broadens its customer base. The latest two moves add to Questron's presence in the Midwest, strengthen its Southeast position and should help the $57 million firm secure contracts with OEMs nationwide.
"We see some interesting opportunities continue to expand," says Polimeni. "We think it's going to show nicely in our results as we proceed."
At least one fastener manufacturer went on the block recently as well. To help finance its acquisition of Aeroquip-Vickers, Eaton Corp. put its Brunswick, Ohio-based engineered fasteners division for sale, along with a fluid power division. One of the reasons Eaton CEO Stephen Hardis cited for the sale was the demand for modular assembly of products by automakers that continue to consolidate their supplier base.
Final push is on for FQA revisions
Industry officials urged distributors to press their lawmakers not to sidetrack Fastener Quality Act amendments as a June 24 deadline neared to implement the old law.
At press time, National Fastener Distributors Assn. executive vice president Dave Merrifield said two bills that would greatly reduce the number of fasteners covered by law were moving ahead. The Senate bill is S795; while H.R. 1183 was being considered in the House of Representatives.
Merrifield hoped that in the Senate, at least, lawmakers would resist the temptation to attach other legislation to the FQA amendment, which had broad support. That maneuver -- attaching a bill to a popular measure -- doomed product liability reform, he said.
"We've got to have this done by June 24th," he said. "It's absolutely essential before the old one goes into effect. Delays are our enemy at this point - delays or inaction."
"I'm not sure how you can prevent it," he added. "We're trying to get the word out to support it."
Updates on the bills are posted at www.nfda-fastener.org.
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