Flexaust Co. Inc. recently completed an acquisition that complements its product line and brings back some manufacturing jobs to the U.S. from Mexico.
The Warsaw, Ind.-based firm purchased the United Electric Co.—known in the business as TUEC—which is a manufacturer of commercial and industrial vacuum hoses and vacuum cleaning attachments. The hose part of the business is similar to Flexaust's Genesis product line, but the attachments and accessories really interested the firm because it "dovetailed into what we were trying to do to add more value to the product than just the hose," said Mike Harvey, Flexaust vice president and general manager.
"It took us from just making hose," said Harvey, who discussed the purchase during NAHAD's annual convention, held April 20-23 in Washington. Terms of the deal weren't disclosed.
Harvey said TUEC had moved the manufacturing of the products to Mexico about 2½ years ago, but kept its sales office in Burlington, N.C. It became clear, he said, that the setup wasn't going to work, so the firm approached Flexaust about acquiring it.
After the deal closed late last year, Flexaust moved the manufacturing from Mexico to Warsaw. It packed up 46 semi trucks to transfer the entire operation to a 36,000-sq.-ft. leased facility about a quarter-mile from its main factory in Warsaw.
"We were shipping in a little less than three weeks from the time the deal closed," Harvey said. "We were not licensed to operate in Mexico, so we had to shut the machines off as soon as the deal closed."
Flexaust set up the accessories manufacturing and assembly side of the business in the newly leased space and put the hose-making production in its main plant near its Genesis manufacturing because the processes are similar, he said.
It makes more sense having the operation in the U.S. because of the difficulty in transferring things across the border, according to Harvey. He said TUEC had to have a warehouse on the U.S. side and another at its Mexican facility. "If just became very cumbersome to support the type of business with the small orders that they had," he had. "We have all the components in inventory. When we get orders for it, we put it together and ship it out the door."
Flexaust will merge the hose products, because in some areas it had the better line and in others TUEC made a superior product, he said.
The addition of the accessories line will save Flexaust much effort going forward. "We hadn't taken the time to source all of this, to find the right suppliers, to find out what made sense and to figure out the trigger points on supply," Harvey said. "It would have taken us years to get to this point."
Flexaust is retaining the four sales persons and one support staff member from TUEC, who will continue to be based in Burlington. In addition, it hired 20 production employees for the new location in Warsaw, Harvey said.
About 60 percent of the TUEC business is sold through OEMs and 40 percent through distribution. It's not a normal channel for most of its NAHAD distributors, so it could open up a different channel of distribution for Flexaust, he said.
"Our goal is not to sell to OEMs," Harvey said. "That's not how Flexaust is built. It's not the direction we're going. It's just that this business happened to have a lot of OEM business, and we'll continue to keep it if it makes sense. But if there are opportunities to run it through distribution because it makes sense, then we'll do it."