It’s an interesting proposition to consider: one company purchases another, thereby increasing its capabilities and product offerings in one fell swoop. The challenge, however, involves incorporating the purchased company’s capital assets into the existing structure–as Overton Gear found when it acquired Illinois Gear in May of 2005.
“In addition to moving in the 60 or so pieces of equipment we’d purchased, we had to move another 30-40 of our own to make room for them, so that’s 100 machines that had to be handled,” according to Louis Ertel, the company’s president and CEO. “We also had to bring in new electrical power and distribution, lay extensive foundations for the larger machines and install overhead craneways to handle the product, and integrate Illinois Gear’s IT system into our own so that we could continue processing their orders–and we did all of this in a period of six months, which was an incredible undertaking.”
And one that was part of a major initiative begun some three years earlier to expand Overton Gear’s product and service portfolio, Ertel continues. “Up until that time we were a one-meter company, and we decided to go up to two meters and to invest heavily in capital equipment in what we considered to be our core operations: heat treating, gear-making equipment, including both hobbing and grinding machines, and gear-measuring equipment,” he says.
The acquisition allows the company to now offer large straight- and skewed-tooth Gleason gearing up to 100″ in diameter and Klingelnberg spiral bevel gearing up to 85″ in diameter. “We’re interested in producing high accuracy, high quality gearing, and these machines certainly allow us to achieve that.”
They have also helped Overton Gear to double its business in recent years, says CFO Pete LaMontagna. “I’ve been with the company for a little more than 12 years, and while we had somewhat slow growth in the late eighties and nineties–and we experienced the same downturn as everyone else from 1999 through 2001–the rebound since then has just been unbelievable. Our sales volume and company morale is at an all-time high.”
Part of the reason for this involves the company’s decision to adopt the Employee Stock Ownership Plan (ESOP) in 1985, which makes them partners in the success of the enterprise. “Not only that, but we’ve actually held classes so that every one of our employees could learn how to read a financial report and a balance sheet, which we share with them,” LaMontagna adds. “We’ve always been an ‘open books’ company.” Others benefit from this openness, as well, through Ertel’s activities as chair of the AGMA’s Small Business Council. “We basically meet once a year, and we’ll bring in speakers to address topics of interest to small and large business owners alike,” he explains. “We also like to include plant tours–we’ve held it here at our facility, and Scot Forge and Brown & Sharpe have also been hosts–but one of the biggest benefits involves networking opportunities. I’ve had other AGMA members who were interested in learning more about the ESOP program, and that’s allowed me to discuss our experience with them.”
Now that the dust raised by the acquisition of Illinois Gear has begun to settle, Overton Gear–which celebrates its 50th anniversary this year–is continuing to build on its growth initiative by considering the expansion of its heat-treat capacities, looking into new IT software to further unify and streamline its inventory and tracking system, and adding equipment to its tooth finishing operations.
“The bottom line is that we’re shipping more on a monthly basis than we ever have before, and our backlog is the highest it’s ever been in the company’s history,” Ertel says. “We’ve grown our business each year over the past four, and we’re constantly looking into opportunities that will allow us to continue that trend.” “We’re just getting started,” LaMontagna says with a smile.