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TPW: What is your precision-machining businesses model?
GK: Our customers design the products, and we manufacture them. These range from parts for motorcycle suspension, communication satellites to observe the Earth, and semiconductor equipment. We supply the knives that are used to produce curly fries. We make onion scanners – camera systems that look inside an onion. Rotten ones are pushed out with an air beam. We make surgical needles used to operate in the eye – very thin pieces of metal, with very specific medical applications. All the functional parts and modules we supply are metal, and we recently adopted 3D printing. We are at the heart of the technology of our customers’ products.
TPW: How resilient are you to end-market volatility?
EU: We deal with a wide variety of sectors – automotive, aerospace, packaging, food and medical. A large chunk of our revenue is from semiconductors, which was unscathed. Aerospace has suffered. But most of our industries fared comparatively well and some benefitted from the pandemic – such as those in the medical industry and towbar producers [due to the lockdowns people bought towbars to transport bikes or caravans].
GK: Here in The Netherlands, luckily the government was reluctant to shut down industries. For manufacturing, this meant everything stayed open across our eight factories.
TPW: What are your greatest challenges as you scale up?
GK: Our biggest challenge is growth itself. All our customers are growing, some very fast, and as a supplier, we must grow with them. And that means we are continuously scaling up, while maintaining uncompromising quality every time. The critical parts we make need to be the same shape and have the same tolerances and positioning. Even miniscule differences are a problem. The product we ship in three years’ time needs to be an exact replica of now.
Also, precision mechanic parts have tight tolerances and complex geometries and are often on the edge of manufacturability. Adding capacity is not only beneficial for stable production processes, but also requires tight production control.
EU: Of course, growth is a positive thing. But we are talking north of 20% growth year-on-year. This has been our track record for the last two years and we hope to see this for the next two to five years as well. This is all autonomous growth; acquisitions will be on top of that. An ongoing task is finding high-calibre people – and then holding on to them. The labour market in The Netherlands is tight.
TPW: What is the market opportunity?
GK: Business is extremely strong. The worldwide semiconductor shortages and the exponential growth in applications are creating an extreme demand for producing equipment. Apart from our early supplier-involvement capabilities, we are differentiated thanks to our scalable production processes.
EU: We have big investment plans, new locations, buildings, infrastructure, machine capacity. We have clear and well-defined KPIs from our customers: the quality of the products, repeatability, lead times and so on. In this rapid growth market, these remain important.
TPW: What financial reporting is expected from Equistone, your private equity backers?
EU: We have a system in place whereby our five operating companies report to the group weekly, on items such as the last week’s revenue, order book development and cash positioning. We have a monthly detailed financial package and we discuss specific topics as needed (M&A ideas, the hiring of senior staff, relocation, building plans). The key drivers are our investment strategy (with significant capex) to accommodate expected growth. The plan is in place, and we are ahead of it.
GK: The better the performance the fewer the questions! All the information that we provide Equistone we find extremely useful as management. The reporting is therefore not a burden; it’s critical information we need to run the company. Then there’s the informal exchange of ideas and plans, which is often more important. When needed, we just give Equistone a call. Our management comes up with ideas and the Equistone team, with their experience, act as a sounding board.
TPW: What was the deal process with Equistone like?
GK: Adwin Kannekens (now Group CCO) and I were working at Wilting, one of the group companies. We were asked to be the future management of the group. We had a very good first encounter with Equistone towards the end of 2020. We felt Equistone wanted to support us, but not interfere. It was important to have a shareholder that believed in our ambition to grow the organisation by investing in people and technology, while further improving our operational performance. It was clear from the management presentation and due diligence that Equistone took this on board.
EU: I have worked with private equity for many years as a banker and CFO. The risk when a PE company steps in, is in over organising. At the root of our company is a very entrepreneurial culture. We do need to scale up and reset some processes. But on the other hand, we need to safeguard our family culture; Kusters was family owned. And that can be a tricky balance. The Equistone team understands this.
Our main contact is Hubert van Wolfswinkel in Amsterdam, as well as Philipp Gauss and Marc Arens in Munich. Discussions and board meetings are open, informal, rational, and constructive.
TPW: What’s next for Andra Tech Group?
EU: Buy-and-build is part of our strategy.
We will focus on Germany and The Netherlands – aiming for suppliers of precision components with a core in machining and complementary production technology or customers. Equistone actively supports us in identifying acquisition targets, execution and deal structuring.
GK: The Andra Tech Group name is being rolled out officially, having recently rebranded from Kusters Beheer. Andra is derived from the Greek word for human being. It’s the right people and the right technology that make our advanced products. And that’s why our tagline will be: People. Make. Technology. Other than that, my firm belief is not to change companies that are running well. We are a group of five companies now, but we are not looking to centralise activities. Often when you consolidate, you lose entrepreneurship. It’s been a year since Equistone invested, and 95% of our time and effort is still at a local level. This is good for customers and employees. ☐
A full version of this article appeared in PLATFORM 07, Summer 2022