Incoming CEO Steve Pudles on the Acquisition of Zentech
Nolan Johnson talks to Steve Pudles about the recent acquisition of Zentech Manufacturing Inc. by BlackBern Partners LLC and Zentech management. Steve, also an investor in Zentech, steps in as the incoming CEO of the new organization and discusses the deal, his new role, changes to management, and the company's plans post-sale.
Nolan Johnson: Congratulations on the acquisition of Zentech and your new role. What is your plan moving forward as CEO?
Steve Pudles: The company will continue to be flexible, responsive, and all the things that we learned in diligence that impressed us and confirmed that we were acquiring a first-class company. Nothing is anticipated to change in that respect. The only changes long term will be to take all of the things the company does well, look at some of the systems and tools that we deploy, and attempt to improve the automation levels of data transfers, scheduling, manufacturing executions, software, better usage of some of the ERP tools. We want to give customers a marked improvement on what they already like.
Johnson: Overall, you’re working on creating a tighter, more optimized manufacturing flow to give more options to your customers.
Pudles: The thing that’s important is that during diligence, we discovered that the customers had nothing but positive things to say regarding the performance of the company in the view of the customers. When you talk about optimizing, we’re going to improve and put things in place that are going to allow us to be more productive, but all it’s going to be is accelerating and advancing the things that are already being done well; I’m just going to make them be done well better (laughs).
Also, this is not a turnaround or a fire sale. This was a solid transaction that allowed BlackBern Partners and me to get involved in a company that is an outstanding base to both organically grow and geographically expand within the mil/aero and medical markets. We anticipate keeping the company focused on the markets that they’ve done well in, including high-reliability mil/aero and medical. We would like to put in more of that here in Baltimore and Virginia and expand with other key, strategic acquisitions as we identify them.
Johnson: Is it safe to say that with a strong business model currently at Zentech and adding on some of the operational efficiencies that you mentioned, you’re setting the company up to accelerate?
Pudles: Yes. You look at the platform that you have, and you look at the companies that you’re expanding with, and you select the best of the best in terms of the operational excellence in the areas where all of the involved companies are differentiating themselves. You create a best-in-class platform in that narrow mil/aero and medical space. Right now, very few companies have done the IPC validation services program and are certified as a trusted source. Five companies have validation, and three are trusted sources, and Zentech is already one of each of those. Therefore, you start to look at the rest of the industry, and if you can add that to more of your acquisitions and at the same time take some of what those companies bring to the table, you can create a truly best-in-class company.
Johnson: Were you retired before this?
Pudles: I was semi-retired for about five and a half years. I spent the last two years on the board of advisors of an EMS company in New Hampshire, and it was truly in an advisory role. I have been involved with some different boards and investments, but not spending any more than 10–15 hours per week actively engaged other than some of the other hobbies I was contributing my time toward.
Johnson: What led you to enter back into this business, especially the EMS business?
Pudles: I’ve been fortunate. I received a call from the managing partner at BlackBern Partners, Jon Bernstein, about eight or nine months ago. I’ve known Jon for well over 10 years, and he said, “We have an interesting description of an operation somewhere in the mid-Atlantic region. Would you be interested in jumping back in along with BlackBern?” Once he described the company, I figured out who it was and said, “Absolutely.” There’s a great opportunity here to work with BlackBern and Zentech, and I’m still young enough that my retirement wasn’t because I was too old to get out of bed in the morning. I was 54 when I retired. There is plenty of time for me to get back into the saddle and do what I enjoy doing.
Johnson: With you stepping into that role, it looks like there have been some changes for Matt Turpin.
Pudles: First, I want to applaud Matt on the platform he has created. The choice for him to go do some other things long term is his own, and it wasn’t forced on him by any means. If he wanted to stay for another 10 years, I wouldn’t be sitting here today. This is 100% his choice. Having said that, we’ve talked about how the transition is going to work and I’m happy. We had all-hands meetings at both of our facilities, and Matt and I addressed everybody and answered questions together. He’s going to attend customer meetings as we talk about the transition as well as supplier meetings. Matt is going to be around as much as I need him through the end of the year.
After that, he’s more than willing to put the time in if we need him, and the good news is it’s all being done on a friendly basis. This isn’t a case where he’s leaving the company to go on and do other things; it’s a personal choice, and I can’t think of a person that I would rather work with than him. We’ve known each other since 2005–2006 and have had a lot of interaction at different IPC events. I enjoy his counsel and working with him during this transition. We’ve discussed a lot of topics, we view the business very similarly, and I’m just looking forward to hopefully providing good stewardship to the company he built.
Johnson: Shifting gears just a little bit, earlier, we talked about what might change around the business model or the customer direction, but from a customer perspective on the outside working with Zentech over the next 12 months or so, what should they expect to see that will be different?
Pudles: They will not see a change at all in our pricing model, the way we go to market, or how we provide technical support. If a customer requires some kind of change and wants to do something different that makes business sense, we’ll sit at the table and discuss it, but otherwise, it’s business as usual. The reason we acquired the company is because of the company, performance, and customer base are things that we place a high value on. To change that and the way we approach the market would be crazy when we think we have one of the better execution models out there. So, we’re happy to keep it in place.
Johnson: Do you want to comment on how this is structured for ownership?
Pudles: The company used to be a structure where NewSpring Capital and management owned the company, and in all cases, management shareholders have elected to keep a portion of their proceeds into the company. I’ve also made an investment, and BlackBern, through its fund and limited partners, has raised the balance of the equity. At the end of the day, the shareholders are the entire management team, including Matt and me, and then BlackBern has the lion’s share. The structure is what you typically see from any private equity, and we have a senior lender and a mezzanine lender, so we have a pretty conservative equity and debt structure.
We take it as a compliment that the management team, including Matt, felt comfortable enough that they wanted to be a part of the next phase of the company. That’s not something we see every time we do a transaction. If you go back to all of the things I said about our relationship with Matt and the relationships with customers, the fact that with are so similarly aligned with the way that Matt’s vision of this company was provided a degree of comfort for the management team to remain part of that investment.
Johnson: Steve, is there anything that I didn’t think to ask about that I should have?
Pudles: I bring 30+ years of EMS experience to this, and I always cherish my time. I’ve been on the IPC board for almost 20 years, and it’s just good to get back into the industry again. I’m happy to be working with a team of people that I think can take us to some new heights here. I’m just excited, and today’s day one, so we can talk again in six months and see how excited I still am (laughs).
Johnson: I’m looking forward to that!
Pudles: And I’m more than happy to do it.
Johnson: Thanks again, Steve.
Pudles: Thank you.