Go Big or Go Home with Industry Consolidation

Consolidation in any industry is a term often looked upon differently depending on what side of the fence your business lies on.

If you are a finishing operation, seeing some smaller and midsize shops consolidate or be bought up by a conglomerate often has no effect on the way you do business. If they want to get bigger and have more locations, ‘who cares?’ you might say. Does it affect your operation? Probably not in the real world. Good for them, and best of luck.

Does consolidation of shops — which seems to be happening more often with the Valences, Pioneers, and Aalberts of the world buying up more operations — have any effect on the other thousands of shops? That remains to be seen.

I address this because this month, we feature one of those global conglomerates — this one, Aalberts Surface Treatment from the Netherlands— and the gradual growth they have had in the U.S. by purchasing Roy Metal Finishing in SC and Precision Plating in IL. Aalberts has also purchased several heat treating and other metalworking operations in the U.S. to give them more reach and diversity in how they can better serve the OEMs they do business with who want to consolidate, as well as the number of vendors they use.

“It’s all built around people,” Aalberts U.S. leader Richard Wright says. “We can’t do any of these things that we do at a local level if we didn’t have good leadership teams and good people inside of our organization.”

Aalberts has ownership of 27 operations in the U.S. that offer various heat treating and surface treatment applications and employs over 1,000+ people in those locations. 

On the other side are the shop owners of some smaller operations who see a chance to make a big payday by selling out to a larger conglomerate and still work for a few years until the golden age of retirement.

“I’d like to get out sooner than later,” a shop owner told me recently. “Would I entertain an offer from one of the Big Guys? Hell, yes, I would.”

Running a business in the global economy we have today tough. Getting out of one seems even tougher. Do you have family members who can come on and run the business for you, all while sending you nice profit checks each month? Do you have a management team that can take over while you retire to Florida and watches the checks hit your account each month while you sip cold drinks on the golf course? For some family-owned businesses — and let’s be honest, any small business is usually family-owned — there may not be an heir who wants to take over running the grind of a finishing operation, and you may not have someone outside your family who can run the place the way it needs to be run.

“I know there isn’t anyone here who has the stomach to run a business,” another shop owner told me recently. “I can either look for a buyer when I’m ready to get out or just close the doors and sell the building and the land. Those are the choices.”

It takes guts to run a finishing operation and a plan for how to get out when the time comes. That’s something that I commend for those who meet payroll each week.