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Punching Out: Acquiring a PCB/EMS Shop: Brownfield vs. Greenfield

We often get asked about establishing a new company (greenfield) rather than buying an existing PCB or EMS shop (brownfield). There are many criteria to consider. Many buyers want to grow through M&A, but they cannot find acquisition targets that fit their criteria. Perhaps they can find the right shop, or at least one that fits five out of 10 criteria, but they encounter obstacles, such as owners who do not want to sell, price expectations that are too high, or negotiations that are too difficult. Despite the interest in building new facilities, since 2000, few companies have gone the greenfield route. Here is a look at the pros and cons of buying vs. building.

Buying an Existing Shop
This has many advantages over building a new one:

• Speed: Acquiring an existing company is usually much quicker than building a new facility.  Once the deal is closed, the buyer can immediately start working on improving things, cross-selling, or whatever the buyer wants to do.
• Customers: An existing shop has customers that may expand the buyer’s target markets.
• Permits: In the PCB sector, it is very slow to obtain new permits. Building permits may also be a long and difficult process.
• Equipment/facilities: Existing shops have running equipment and workable facilities.
• Employees: Especially these days, with sub-5% unemployment rates, it is very hard to find trained employees. Buying a business gives you an instant workforce.
• Technology/know-how: As hard as it is to find any employee, finding one who knows the PCB/EMS sector is increasingly difficult as many industry veterans are retiring.
• Known entity: An established company has a reputation with customers and suppliers, the value of which is substantial.
• There can be many negatives to buying a company, aside from the purchase price, negotiations, and deal drama. For many acquirers, they experience cultural and integration issues, legacy problems, unmet expectations, and a variety of other issues.

Building a New Shop
A greenfield facility has many advantages:

• Build to suit: Many PCB and EMS facilities are old and were not designed to optimize production workflow.
• Customization: Rather than buying a company that meets five out of 10 criteria and making investments to get to 10, a greenfield can meet 10 out of 10 criteria right away.
• Brand-spanking new: There is nothing like the smell of a brand-new facility. It looks great and has no legacy issues.
• Environmental: Especially in the PCB sector, not having to worry about inheriting environmental issues is a big plus.
• Attractiveness/image: Particularly for higher-tech markets, the image of a brand-new facility will gain points with customers and employees.
• State-of-the-art: It can be easier to fill a new facility with state-of-the-art equipment than to retrofit an old building.
• Control (training): Greenfields allow the company to control the employee training process.

Negatives: The main cons of greenfields are the cost—not just building expenses, but the ramp-up to profitability can be substantial—and the time it takes to do so. The required permits may take quite some time, and finding employees may be difficult. Even then, it is uncertain whether the market demand will justify the time and expense of establishing a new facility.

There are a few recent examples of greenfield PCB shops. GreenSource in New Hampshire (parent company Whelan Engineering) and Schweitzer Engineering Laboratories in Moscow, Idaho, were both established in recent years. It is believed that both were established as captive shops by their parent companies. GreenSource is currently selling to outside customers. According to recent announcements concerning expansions, both TTM Technologies and Calumet Electronics plan to invest in new facilities that will produce advanced substrates.

Compared to the small number of greenfields and expansions, there have been between five and 15 M&A deals each year in North America in the PCB sector since 2016.

Since 2000, there have been very few greenfield facilities in the U.S. in the PCB and EMS supplier sectors, so the market has spoken until now. There has not been enough market or technical demand to help outweigh the cons of building a new facility.

Going forward, especially in the sectors of advanced substrates and ultra high density PCBs, more U.S. and overseas companies may go the greenfield route. As the number of existing PCB and EMS shops decreases, the opportunity to acquire an existing shop will decrease, possibly leading to the establishment of some new facilities. Also, with rising government subsidies and an overall trend toward reshoring, the capital and markets will be there to help companies build new shops. For now, most companies will be interested in acquisitions, but the number of greenfields and expansions may increase in the future.

Tom Kastner is the president of GP Ventures, an investment banking firm focused on sell-side and buy-side transactions in the tech and electronics industries. GP Ventures has offices in Chicago and Tokyo, with five people in total. Tom Kastner is a registered representative of, and securities transactions are conducted through StillPoint Capital, LLC—a Tampa, Florida, member of FINRA and SIPC. StillPoint Capital is not affiliated with GP Ventures.