Unitas completes Edwards reorientation

"Edwards was technically strong but the operational focus was much less strong," says Sir Kevin Smith, the former CEO of UK-based GKN and now a partner at Unitas, who spent two years working with Edwards. "If your manufacturing footprint is fundamentally Europe-based it takes 10 weeks on a ship to get products to Asia so the flexibility to meet customer requirements was limited."

Unitas - then known as CCMP Capital Asia - and CCMP Capital agreed each committed around $150 million in equity and bought Edwards from The Linde Group in March 2007 for an enterprise valuation of EUR685 million (then $902 million). An additional EUR65 million due if the PE firms successfully developed and exited the business.

This process was duly completed last week as Sweden's Atlas Copco bought Edwards for approximately $1.6 billion, including debt. Unitas and CCMP Capital have made a 3.many5x return on their investment. At the heart of the value creation story, which saw EBITDA margins increase from 14% to 22% during the ownership period, was a root and branch reorientation of Edwards' operations.

First, manufacturing bases were relocated. The company now has eight plants, of which only two are in the UK. Semiconductor and flat-panel display operations were shifted to Asia, primarily South Korea, while the industrial vacuum products group went to Eastern Europe.

As a result, major semiconductor customers like Samsung and SK Hynix are doing 10% more business with the company than before. Of the $595.3 million in revenues posted for 2012, 40% came from sales of products to semiconductor manufacturers and a further 20% from after-sales services to these same manufacturers.

Second, the company focused on producing just 400 key components in house and outsourced much of the rest. Smith admits that progress hasn't been perfectly smooth. Supply sourcing required improvement and then the sheer scale of new product implementation Edwards went through resulted in a few process gremlins.

However, he believes that Atlas and Edwards will benefit from the acquisition. The former has gained a semiconductor business to complement its existing industrial vacuum capabilities, while the latter has found a partner that can support its after-sales operations. "Edwards' installed base of vacuum pumps is around 800,000 and only 40% have service and support," Smith says. "It should be significantly higher and with Atlas' capabilities they can create significant momentum."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Exits
• Industrials
• Buyout
• Unitas Capital
• Europe
• Asia
• buyout