GP Ventures: Facilitating ‘Multi-layered’ M&A Deals

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One of our newer I-Connect007 columnists is Tom Kastner of GP Ventures, an M&A advisory company.  I spent a few minutes with Tom at SMTAI recently, and he filled me in on his background in the electronics industry, which includes specializing in buying, selling or merging businesses; his columns deal with many of the requirements and issues on all sides of those changes.

Patty Goldman: Tom, it’s nice to finally meet you. Why don't you tell me a little bit about your background, GP Ventures and your new column.

Tom Kastner: I got my start 25 years ago in the electronics industry in Japan.  I came here to Chicago 18 years ago for a company called Hakuto, which was selling equipment into the PC board industry. At the same time, I was making investments for that Japanese company and eventually it transitioned into mergers and acquisitions. I started GP Ventures 10 years ago. We currently have six people. I've done about five deals in the PC board industry, as well as a couple in the PC board assembly sector and our focus is on technology and electronics. Sensors Midwest [another show in the convention center] is next door to SMTAI, and we did a deal in the IoT space last year. This is the sector that we work in.

Goldman: That's interesting. You also are writing a column for our newsletter. What are we calling it?

Kastner: Yes. It's called “Punching Out!”

Goldman: I love that. Tell us what you are writing about.

Kastner: Sure. The last article was about war stories, which is a very interesting topic, but a little painful to go over again. The most common issue is, we take a business to market and their revenues start to drop.  A little less common are internal squabbles between owners.  On the far end of the rarity spectrum, we’ve had owners who became ill or even died while we were marketing the company for sale. In the end, a lot of those ended up working out okay, usually because both parties were motivated to complete a deal and stuck with it.

Goldman: Those are learning experiences.

Kastner: That's exactly how I approached it. Through my pain and my client's former pain, you too can learn and try to prevent the same types of things from happening.

Goldman: Do all of your columns have to do with the approach to mergers or acquisitions and what each side has to do?

Kastner: That's right. Most owners only get one chance to sell the company. The first time around, maybe you make a couple of mistakes here or there or you could do things differently. I always think the best client is an educated, prepared client. It helps everything go smoother and helps me do my job better. Usually it gets better results and the outcome is a smoother deal.

Goldman: Are you sort of like a go-between? Is that what GP Ventures does? You find companies willing to sell or you find companies willing to buy, whoever contracts with you? Explain that a little bit how that works.

Kastner: Yes, that's right. We work with both sellers and buyers. If we work for a seller, we'll help them put together good materials and get prepared. We'll talk to multiple buyers on their behalf. If we work for a buyer, it's the flip side of that. Sometimes buyers are looking for specific things, maybe specific geographies, specific technologies, different sizes of business and so on. We'll work with them according to their criteria. We're not exactly working both sides of the street, so to speak. We try to avoid any conflicts of interest. Not every seller is appropriate for every buyer. We try to help them out one way or another.

Goldman: Any recent things that have happened, or maybe of something in the works, that maybe you can't talk about it?

Kastner: We have things in the works and we can't talk any specifics, but we're selling a $4–5 million PC board shop that's heavily focused on military and prototypes and quick-turns. Back in April, we closed the sale of Tech Circuits to APCT, which is backed by Saugatuck Capital. We're not exactly working with any specific buyers at this point, but we have a number of buyers who are looking for certain types of deals and so we’re on the lookout. Part of the characteristics of the market is there are probably about 250–275 board companies left in the U.S.

Goldman: Right, it is narrowing even weekly and monthly. You always hear about something else going.

Kastner: Some people will tell me that number's high, some would say it's low; but in any case, it's definitely shrinking and you could say about half of them are under $5 million in revenue, perhaps.

Goldman: There are still a lot of very small shops. It's surprising, really. It's got to be hard to invest in equipment.

Kastner: If you're under $5 million, it's a little difficult to invest, especially investing $2–3 million. It's probably not in the cards. And that's probably what it takes to really keep up. The average age in the market is up there, of the owners. I don't want to be Dr. Doom in the market or anything like that, I think there are plenty of great companies, but I think there's plenty of work to keep me busy probably for at least 15–20 years.

Goldman: Not all companies have owners, a relative or someone willing to carry on.

Kastner: That's right, or they've already taken over from the last generation and the third generation is not there. They've moved on to something else. Between the surface mount industry, PC board assembly, and wire harness cable assembly, would you agree there are probably 1,200 companies or so?

Goldman: There are quite a few out there, but a lot of them, again, are very small. We all know that SMT equipment is big bucks.

Kastner:  It's big bucks. The industry is moving forward in general and so, average age is maybe a little younger than in the bare board side of things of the owners. Still, some of the dynamics are very similar.

Other than that I'm very happy to continue doing the articles and hope to find interesting topics to continue to write about. 

Goldman: Great. Tom, thank you very much for your time.

Kastner: Thank you very much for having me.


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