In times of economic uncertainty, where there is challenge, there is also opportunity. Now is an excellent time for organizations to look for ways to grow and take advantage of opportunities that otherwise wouldn’t be available in a thriving economy. Shifts in risk profiles have opened up the competitive landscape for strategic partnerships and acquisitions, which can be a smart way to get ahead and set your company up for success coming out of this cycle.
K-Tec Earthmovers’ recent merger with Ashland Industries is a great example of that kind of forward thinking. Completed just as the COVID-19 crisis began, it’s a case study of what business owners can do right now to solidify their futures with strategic acquisitions.
In 2018, ORG Opportunity Fund III acquired a majority interest in this global manufacturer of large-scale earthmoving equipment. In collaboration with the management team, we developed a disciplined growth strategy to expand into new geographic territories, make strategic acquisitions, increase K-Tec’s product offering, expand the company’s dealer network and more. With that unified focus, ORG went to work on building a relationship with Ashland, another highly-regarded company occupying a complementary space in the earthmoving industry. Soon after, both companies jumped at the chance to merge two strong players into one team that is better together.
“We’re very excited about the partnership between K-Tec and Ashland and believe in the long-term growth potential of both companies,” says Jonathan Gormin, ORG Managing Director. “This transaction supports the vision of both management teams to be a global leader in the earthmoving industry. It allows the business to expand its product offerings, enhance innovation and provide outstanding support to dealers.”
Ashland’s leadership was also thrilled at the opportunity, as they had previously identified unique goals for expansion, including moving into larger scale scrapers, which is K-Tec’s expertise. It was the right time for their prior owners to sell, and ORG had a solid plan around putting the two companies together for their mutual benefit.
A strong partnership, a bright future
“The value we bring our customers, employees and investors is greater as one organization, and we couldn’t be happier with the fit of the two companies,” says Mike Palitsky, K-Tec President. “This merger will allow for various organizational synergies, shortened production lead times and enhanced service for our customers.”
“We share K-Tec’s excitement for the merger,” says Randy Rust, Ashland President. “Our customers have trusted us to deliver performance, toughness and value for generations, and it didn’t take us long to see that K-Tec has those same goals. Their emphasis on quality, culture and transparency with customers and employees is exceptional.”
Since the merger, operations have continued smoothly and leaders of both companies are continuing to execute on the combined organization’s strategic goals. Ashland continues to experience a strong backlog of orders and moved some of its manufacturing to K-Tec’s production site, in order to benefit from the state-of-the-art facilities completed during ORG’s involvement. This strategic action has helped Ashland produce their longer-run equipment better and more efficiently.
“Being able to leverage the new facility has made a real impact,” says Rust, “It’s like the difference between driving a car you’ve had for years versus the latest model – both vehicles will get you where you want to go, but the newer model will get you there faster and way more efficiently.”
The merger offers benefits for both companies:
- Organizational synergies (cross-selling, purchasing, ERP improvements)
- Increased production capability
- Shorter lead times
- Cross-border advantages
- Better customer service
- Accelerated product development
- Expanded dealer network
- Better ability for K-Tec to take on smaller jobs they previously had to turn down
- The advantage of economies of scale
Even though the broader economy is down, there are many things companies can do now to prepare for a strong future and having the right capital partner in your corner can be critical. ORG works with a variety of clients to strengthen their organizations in the midst of the most challenging time we’ve seen in a decade.
Please reach out if we can help you not just maintain your business’ status quo, but position your company for extraordinary success in an unusual time.
Melissa Sprinkle is a Principal at Owner Resource Group (ORG), partnering with business owners since 2009. She is fortunate to meet with hundreds of companies each year to learn about their unique goals and invest in their future growth. Outside of work, Melissa enjoys traveling, getting outdoors with her husband and three daughters, and winding down with a nice glass of cabernet.