by Dianna Brodine, managing editor
In October, two Ohio companies merged to operate under one ownership umbrella as Thogus (Avon Lake, Ohio) acquired Proto Plastics (Tipp City, Ohio). Separated by nearly 200 miles, the two plastics processing entities were connected by a thread that ran through MBS Advisors and a meeting a few years ago at the Manufacturers Association for Plastics Processors (MAPP) Benchmarking & Best Practices Conference.
Acquisition as a growth strategy
Founded in 1950, Thogus has evolved into a family-owned custom injection molder focused on medium- to high-volume molding solutions for the medical, automotive and electronics markets, among others. Over the years, Thogus has grown organically through customer and market expansions, and its ownership team also founded another company in 2010 – rp+m, an additive manufacturing business – to fill the need for rapid prototyping and low-volume 3D production printing. As Thogus CEO Matt Hlavin viewed future opportunities for his company, one gap stood out.
“We’ve had customers over the years with low-volume programs and have struggled to meet their needs while achieving profitability targets,” Hlavin said. As a result, Thogus has been referring those programs to outside injection molders.
“What we’ve learned in the process is that our great customers want Thogus to have the capability to provide low-volume molding and complex value-added secondary operations to support their needs. Additionally, we consistently hear from potential clients the expectation of supporting these programs before they award us high-volume programs. In other words, we were missing opportunities that could help us achieve our goal of growing profitably and building the Thogus brand.”
Thogus recently hired Larry Sansom as president, and Sansom has significant experience in acquisitions. “When I decided to hire a president, I wanted someone who was stronger in areas where I didn’t have experience, which meant acquisitional growth,” said Hlavin in a recent interview with Plastics Business. “We hadn’t approached anyone yet when Andrew called.”
Matching the seller to the acquirer
Andrew Munson is a partner with MBS Advisors, providing mergers and acquisitions advisory services to the plastics industry. MBS represented Proto Plastics when owner Tom Gagnon was ready to sell.
Proto Plastics was founded in 1969. The family-owned, low-volume plastic injection molding and contract manufacturing company specialized in technically demanding, close tolerance parts and assemblies for more than 80 customers in industries as varied as automotive, aerospace, medical and telecommunications.
It was a short conversation at a MAPP Benchmarking Conference that led to the opportunity to work with Proto Plastics, according to Munson.
“Tom came up to our booth at the conference and wanted to learn more about what we did and how we might be able to help him in the future if there was an ownership transition,” he said. Although MBS likely followed up with Gagnon after the event with more information about the services the company offers, no more contact occurred until late in 2018.
“Tom called and said, ‘We remember meeting you, and we think we might be ready to consider selling the business,’ ” Munson recalled. “When we talked through all of the high-level details – sales, profitability, customers and capabilities – we determined that MBS and Proto Plastics were a good fit.”
Proto Plastics was unique, according to Munson, with its mix of low-volume production, secondary capabilities and value-added services – most notably, plastics machining. “Proto Plastics had a very successful business,” he said. “The company stuck to its niche and didn’t deviate from what it was good at over the course of 30 years. It’s an interesting case study – staying small and focused, with no debt. We knew somebody would be interested in that.”
Munson continued: “Finding the right acquirer can be tricky – especially when you have a client who is very interested in keeping the culture intact and preserving the family-owned aspect of the business.” Proto Plastics preferred not to sell to a private equity group. “Tom and his team had specific desires for the potential buyer, so we had to think long and hard about who would be a good fit.”
After originally considering low-volume producers, MBS looked at Thogus as the right match – family-owned, with a cultural fit and a location in Ohio. Munson contacted Hlavin.
“When we saw the original information deck, we had to move fast,” said Hlavin. “We immediately saw the value in the company – it was the perfect size for us in a location that expands Thogus. We have no overlap in customers and culturally we match.”
One important factor in the fit was the fact that Proto Plastics had several family members working within in the operation, just as Thogus has family members involved in the business on a daily basis. The acquisition would provide some stability for the next generation. “What Tom saw is that synergy in our cultures – a family feel that reinforced the understanding that the company wouldn’t be chopped up and sold,” said Hlavin.
Munson said the timing was right for both organizations. “I think the stars aligned. The opportunity came in at the very perfect time to fill a need that Thogus had already been looking to fill. Proto Plastics’ capabilities matched with the direction Thogus was looking to go.”
The ability of MBS to match the two companies, however, may be the real star of the show. “It lends credence to our philosophy that, as much as you think you know who the buyer might be, you really don’t,” Munson said. “It’s best to evaluate a variety of companies – smaller, bigger, lower volume, higher volume, private equity firms and even companies based overseas – try a little of everything, because that gives us the best chance to find the right fit.”
Moving forward together
The addition of Proto Plastics completes what Hlavin refers to as an innovation conveyor belt – customers, he said, can get on or off right where they want while remaining within the Thogus family of companies. The suite of services begins with rp+m for rapid prototyping and low-volume 3D production printing, continues with the low-volume/value-add focus of Proto Plastics and finishes with the medium- to high-volume capabilities of Thogus – enabling end-to-end product and service offerings to the plastics industry. In total, the group will have more than 200,000 sq. ft. of manufacturing and warehouse space, 52 molding machines and 12 3D-printing machines.
“We tried over the years to build our own low-volume model,” said Hlavin, “but, the way we have our overhead and operating systems set up there was no way to do it efficiently. With the acquisition of Proto Plastics, we fill that need and it comes with an existing set of customers.”
Proto Plastics will continue to operate as a separate company, like rp+m and Thogus, thanks to a strong team already in place. “The cross infusion of customers is where the synergy is,” he continued. “Proto Plastics has longtime customers that have large volume and prototyping needs. Thogus refers out several million dollars a year in low-volume production. What we’re focused on now is introducing customers to both companies and explaining the synergies we now provide.”
Although Hlavin is moving forward full steam ahead, he stopped to remember the reason the acquisition came his way – the value provided by an industry association.
“Where’s the power in this?,” he asked. “It started 16 years ago when I first met Troy Nix at MAPP and eventually became a board member for the organization. It started with MBS Advisors becoming a sponsor of the association and meeting Tom Gagnon at a conference. And, it started in 2011 when I hosted a plant tour at Thogus for MAPP. We had more than 100 people in our facility, and one of them was Tom Gagnon, the owner of Proto Plastics. He remembered our culture, and now we’ve merged our organizations. That’s powerful.”