By Tim Heston, Senior Editor
In 2011 the top company in the FAB 40 reported 2010 revenue of $111 million. This year that same fabricator, Mayville, Wis.-based Mayville
Engineering Co. Inc. (MEC), remains the No. 1 company on the FAB 40, reporting 2014 revenue of $335
million. Through organic growth and acquisitions,
the company has more than tripled in size during
the past four years.
While MEC stands out, it isn’t alone. Other companies in this year’s list have grand plans of growth. As
just one example, the president of Millenia Products
Group said within a few years he expects the company to earn $250 million. For a company that reported
2014 revenue of $76 million, that’s saying something.
Among the FAB 40’s three largest fabricators, revenue growth between 2013 and 2014 averaged 15 percent. For custom fabricators that earn well more than
$100 million annually, that’s also saying something.
Such optimism isn’t surprising considering the
current dealmaking environment. In a presentation
at the 2014 FABTECH® show in Atlanta, Doug Nix,
vice chairman of Corporate Finance Associates in
Oakville, Ont., Canada, said that the amount of cash
in global business has reached record levels, which
in turn may have a dramatic effect on M&A during
the coming years. “There’s an incredible amount of
liquidity—that is, cash—in the system,” he said.
How will this shape the custom fabrication business in the years to come? This year’s FAB 40 list provides a few clues.
Ripe for Consolidation, or Not?
The FAB 40 is The FABRICATOR’s attempt to provide
a snapshot of metal fabrication in the U.S. By collecting this information, we hope to give metal fabricators an idea of how some of the leading shops
performed financially last year, and what they are
forecasting for the current year. For more information on how this list was compiled, see the
Delivering the FAB 40 sidebar.
Investors might look at this list and see an industry ripe for consolidation, and in some markets this
certainly may be the case. Many OEMs are reducing
the number of shops they work with and awarding
more contracts to their preferred suppliers. In such
an environment, bigger would seem to be better,
especially when it comes to revenue diversification.
So many fabricators want to broaden their customer
bases. Yet diversification remains a continual challenge, simply because current customers are giving
the best fabricators more and more work.
In these cases, it would make sense for companies to combine forces, and some are doing so in
unconventional ways. Service centers have offered
some level of custom fabrication for years, and
some are expanding even further down the supply
chain. Our No. 2 company, O’Neal Manufacturing
Services (OMS), is the distribution giant’s contract
manufacturing arm. Millenia Products Group, our
No. 7 company, launched in 2001 as a distributor
but with a strategy to expand into manufacturing,
including stamping, custom fabrication, and complete assembly. Today contract manufacturing
makes up most of Millenia’s revenue.
A Complex Business
So what’s the argument against consolidation?
Again, the FAB 40 list provides some clues. First, custom fabrication is an extraordinarily horizontal industry. Fabrication touches an amazing number of
sectors that demand amazingly different products,
from the smallest automotive parts to the largest
industrial assemblies. Each custom fabricator has
a unique product mix that changes over time. This
sets the stage for some complex business planning.
This becomes evident when you look at revenue
growth between 2013 and 2014. Growth numbers
average in positive territory, but the range is extremely wide. This may again go back to revenue
concentration. If a top customer sends more work
or slows down, the fabricator’s top line follows suit.
Revenue growth for the top seven FAB 40 companies alone (that is, those that submitted revenue for
this and last year’s FAB 40) ranged from positive 27
THE BIG GROW
by the FAB 40 continue
to climb, but will this