Combining Strengths Synergistically: PDS and Green Circuits
When it comes to a pulling off a successful merger, surely a good starting point would be having like-minded goals and the ability to provide the other party with something it lacks. Such is the case with the merger of Power Design Services (PDS) and Green Circuits, one providing expertise on the sales, marketing and supply chain side, and the other providing extensive engineering capability and production level capacity. Barry Matties recently sat down with Joe O’Neil and Matthew Becker of PDS, along with Ted Park of Green Circuits, to get the full scoop.
Barry Matties: Joe, please give us an overview of what's happening.
Joe O’Neil: Well, we are excited to share the news about the merger between Power Design Services and Green Circuits. It's been a long and thorough process.
Matties: Let’s start with some information about the companies connected.
O’Neil: Both PDS and Green Circuits started operations around the same time in 2006. PDS found its niche in the manufacturing industry in speed and service. When customers engage with PDS, it's because they need a solution this week, full turnkey, “look at my files, provide me feedback, get my board fabricated, acquire all the parts, assemble the board, and ship it to me all by Monday.” That's what we do on a day-in and day-out basis. We have an approximately 15,000-square foot facility, with two lines, and as we continue to expand, we look at not only growing organically, but also by acquisition. We looked at a lot of companies globally, and had an amazingly good conversation with Ted Park, founder of Green Circuits.
That really was the beginning of what led to where we are today. We immediately saw the alignment that's possible between the two companies. The Green Circuits operation is magnitudes larger than PDS but has a lot of similarities in terms of the service component, speed component, and ability to meet those quality and delivery requirements. The capacity, capabilities, and commitment that the Green team brings to the table is what is really exciting about the transaction. Our customers are going to benefit from engineering services, backend flying probe test, and five surface mount lines - each with more capacity than what we have currently at PDS. Both companies have a customer-focused program management team. There's going to be no change in terms of point of contact or daily interface. The ability to transition from prototype to full production will give customers what they have been asking for. In my six months with PDS, I've had a chance to meet with our top 10 customers. I always ask them, "If there are two or three things that we could be doing better or differently for you, what would they be?" This really checks the box for the transition from rapid prototyping to full rate production. Green has AS9100, ISO 13485 certifications in place, a great quality and MRP system. I know our customers are going to be excited about it, and I’ll let Ted talk about Green and Green's customers.
Matties: Ted, please tell us a little bit about your history.
Ted Park: Well, I enjoy this market and this product, SMT and PCBA. I started at a CM company and worked there for about five years. During that time, our PCBA market transitioned to a tin product, and lead-free products came out for PCBs. Then, people had a very difficult time transitioning to the lead-free process because the temperature was different, among other things.
Between 2004 and 2005, our team at the previous company developed an expertise in making lead-free products for the end-customer. In 2006, with the team, we opened Green Circuits. Green means lead-free. We selected this term as we were proud to be the developers of this cutting-edge lead-free process.
So, from 2006 until today, the team has steadily grown. Now, we have 127 employees and like Joe said, we have five lines and grew from five customers to 150+ customers. So, I think this merger is beneficial for both PDS and Green, as it combines the synergy of both organizations. We can expand and provide quality service to the end customer.
Matties: When you decide to merge companies, there's both a financial and business aspect, but there is also bringing together two cultures. What was the appeal?
Park: You are right. Culture is very important and our team and the PDS team didn’t know if the cultures matched or not. During three months of negotiation, we learned more about each other’s team and realized that there were numerous synergies within the cultures. First, both organizations are very flexible. There is also a respect of each organizations team and the value they bring to the merger.
We have a strong capacity, five lines, and a good robotic system and acumen, however, the people in the organization are number one. At Green, one thing we have not had any employees leave since 2006. Many employees are devoted to working at Green. I see the same employee dedication at PDS. Because PDS management is like our management, we respect the people and give ownership to them. So there is a very strong cultural connection between PDS and Green Circuits making the merger decision more enticing.
Secondly, Green Circuits has been in business for more than 10 years. We don't have strong sales because we focused our expansion on the capability and capacity of the engineering team and service to the customer. I did not spend the time expanding the sales side. My expertise is not around bringing in new customers. However, PDS has a very strong marketing and sales team. The complimentary benefits of the strong capacity and capability of Green Circuits, and the strong sales team of PDS, is a good match for future growth.
O’Neil: The growth that Green has seen over the last 10 years, without a sales team, is a testament to quality, delivery, and customer first commitment, and it resulted in word-of-mouth growth. They don't lose their employees because they respect them, and they don't lose customers. In this industry, that's a key differentiator.
Matties: The last 10 years hasn't always been an easy.
Park: Yes. Our first two to three years was a tough time. In 2006, I secured a few customers because we gave customers confidence that we could do lead-free assembly.
Other CMs were struggling, but my team worked with Qualcomm in the past, and Qualcomm was one of the big customers that had to change to a lead-free process. We spent six months developing a lead-free process profile which was our key to successful securing customers.
In one situation, our customer, gave their boards to a large CM. The end-customers computers began to fail due to an inadequate lead-free process. We stepped in and built the boards using our lead-free process, which solved the computer failure issue and resulted in a happy customer.
Matties: I think you learn a lot in tough times, too. You learn what makes you stronger.
Park: Right. Two years later, we had good customer growth. But I explained to our team, we’re not finding new customers because we don't have good marketing skills yet. So we just focused on our current customers. We tried to deliver on our commitment, and we never missed. There’s always a shipment, there's a promise, and there is quality. So we grew those things and then we’d get another customer, and so on.
Matties: So your growth has been kind of a steady curve?
Park: Pretty much.
Matties: With this new merger, do you expect your growth to take a sharp turn upward?
Park: That's what I am thinking (laughs).
Matties: You're talking about capacity. If you are accustomed to slower growth, how will you handle the potential sharp growth?
Park: Now we have five lines using only 50-60% of our capacity.
Matties: With the team you have in place?
Park: Yes, that's no problem at all.
Matties: From your point of view, Joe, having a facility geared to grow already in place, that's just a marketer's dream come true I think.
O’Neil: Yes. Having Ted, the godfather of Green, is a valuable benefit. Ted’s experience, working with a major OEM, quality engineering, doing global supplier audits, understanding needs the customer's standpoint, and what's really required on the EMS side is a huge advantage. That level of understanding, commitment, and care is has built Green Circuits. This transaction doesn't have Ted disappearing. He's a core part of the technology and operational leadership. I have enjoyed working with him through the process.
Park: I am not leaving. I am here (laughs).
O’Neil: Bringing customers in and knowing that they are going to be happy is an exciting value proposition.
Park: It's exciting and a good partnership because to me, I can focus on my area of expertise, to put the customer number one and let PDS focus on their areas of expertise; sales and marketing.
Matties: Well, that's what makes this partnership so valuable, that there are clear lines of talent here that are stronger together.
Matthew Becker: What attracted us to the integration of these two organizations is the culture. There are lines of responsibility and there's a good jigsaw puzzle piece fit. Both organizations have the exact same attitude: The customer comes first.
These guys will do anything the customer needs, quick turn, constant communication. They are not manufacturers, they're service providers, and they have that service attitude. PDS grew without a real sales process. They would get referrals and customers would trust them, and they would build that trust and meet their commitments. If they didn't do it, they would give them rebates or whatever it took to satisfy the customer.
The customer was always first. Green has the exact same philosophy as PDS. And the employees all know it. I always say the hardest thing to do when you integrate a company, or start a company, is to get that sense of urgency into the culture of the company. If you don't have it, creating it is almost impossible. You must start with it. And the beauty is both organizations have it. One is not going to have to pull the other along the way. They both understand that when “the customer needs it on Tuesday and we will work Saturday and Sunday if we have to.” It is a quick-turn service industry.
Matties: It’s an aligned mentality here, then.
Becker: Yes. It's really nice.
Park: If a customer wants it same day, no one says no. Our people do it. They’re responsible. Even if they stay until one or two a.m., they finish the job. Of course, PDS does the same thing. We give people a very flexible environment.
I tell our people, don’t rush in the morning because everybody has life to deal with… a baby, children off to school, etc. Being late five or 10 minutes is not a big difference. If you come five minutes later, then you cover five minutes, no problem at all. That's just one example, but that's the same message to the whole team. They feel ownership because they have flexibility and are free to take care of their responsibilities. So, if you don't create a good working environment, then you cannot expect people to go the extra mile. It’s the same at PDS.
Matties: With the combined companies, you expect sales to grow. What sort of growth do you expect and in what time frame?
O’Neil: We've talked about capacity and roll out and all those things. I'd say doubling revenue within 18 months is a controlled, realistic milestone for us.
Matties: I would think anybody with an investment in this company would be excited about that prediction.
O’Neil: Prediction or projection? (laughs) The pieces are all in place. Green is one of the industry’s best kept secrets. There are OEMs out there who are actively looking for this solution and just don't know where it is. We have what they want, we have it at the price they're willing to pay, and they just don't know about us. We just have to let the world know.
Matties: What do the OEMs want?
O’Neil: They want what they want, when they want it. And they want that flexibility. For the most part, we want to find OEMs that look at the business as a partnership and want a healthy supply base. We offer quality, and quality is the price of poker. If you don't have that ante, you don't get in the game. Quality is there, along with flexibility, creativity, and the openness to listen to what they want and come up with a solution.
For instance, an OEM might say “We need you to manufacture between 500 and 600 systems a year, but we usually order 250 twice a year because that's how we get our best price.” Well, would it make more sense for you to get 40 to 50 a month, and you tell us what you want and when you need it? We have some stock on hand. For a lot of them, that just opens their world, changes their cash flow, changes their business, and allows them to invest money into engineering and marketing. They shouldn't be investing their time in trying to figure out supply chain and inventory turns. That's our expertise. So that's what they are looking for.
Matties: Where are most of your customers located geographically? Are they within a couple hundred miles?
Park: No, actually this is one of our strengths at Green, which for PDS is probably a little different. At Green, 50% of all customers are out of state, and California customers are probably the other 50%. I like the geographic diversification. So, the customer base we have is good for us. It’s not really risky and we’re not depending on one customer. There’s a lot of diversity. Now Joe's sales team can focus more on out of state customers, so we can diversify our customer base even more. Because we didn't do that, we were just busy building the boards.
Matties: You were paying attention to process and detail.
Park: Right. So that's something Joe and his team can bring in for revenue growth in 2018.
Matties: Well, you are both well experienced. And Joe, you’ve been in this industry for how long?
O’Neil: I’ve lost count; 25 years or so.
Matties: What haven't we discussed that you feel like we should be sharing with the world?
Park: I want to mention that almost 80% of my background, almost 16 years, is as a quality engineer. I can be successful in this business because for 14 years I was a quality auditor for a contract manufacturer and it was usually Flextronics or another big name. I audited their process, their quality, and how they built the board. That's the thing that made me realize how to enhance the process; that was good experience for me. I then worked for a small company that was created by the VP of Flextronics. He opened a new shop and I joined as quality manager and later on I took care of the operation and engineering side too. So in the sixth year, it was small company but had many customers. It was good for me to see I could manage a larger operation. It was a good experience. In 2006, I decided to open Green Circuits. Now I'm 60, so I should be preparing to retire in five or six years.
Matties: So this is a five or six-year exit strategy for you?
Park: This is my goal because Green Circuits is my baby, this is definitely my baby. I don't want to be leading; now I want to be in the backend and support. In five years I can retire peacefully to do something else. That's my goal.
Matties: Good for you. How are the employees reacting to the merger?
Park: When we announced it to the team they took it very positively because of the very strong growth, and good financial strength of the organization. They trust me, they know why I did this. I think they’ll realize I’m not doing this because I don’t care about them. But that it’s better for everyone.
O’Neil: I think the opportunities far outweigh any concerns. This is the combination of two strong companies, and those companies are the result of dedicated teams and people. They're the ones that are making this possible. It's two peers and both teams should be very proud of what they’ve created and very excited about what they are going to be creating going forward. They are teams of people who are very experienced. The quality of employees in both organizations is extraordinary and those types of people understand the synergy and what the future may hold. They're the ones working on the customers' product or interfacing with the customers every day and they see the benefit to the customer, not just to themselves, although there will be benefits for those employees as well.
Matties: Currently you have two factories. What's the plan there?
O’Neil: We're going to take the best practices of both, but as far as the SMT board level assembly we’ll be combining, and we will be utilizing both facilities to some degree for at least the near future, until we have a third facility.
Matties: What do you think the greatest challenge is in all of this, Joe?
O’Neil: The ability to discern the next step in terms of growth by acquisition. The California facilities are going to be growing and are going to be executing. The teams here are already there and in place. Strategically, the next step is the one we are going to be very cautious with and the answer will probably lie somewhere between our team and the voice of the customer. We’ll continue to listen to them now that we've solved their problem. What's the next one? Because they tend to always have a next one. We'll listen and will act accordingly.
Matties: What markets are you going to pursue?
O’Neil: I think the quality systems that Green has put in place lend themselves to some high reliability, high-value markets. Medical, aerospace and defense, and we'll be pursuing TS this year as electronics moves to become part of the driving force of the automobile. Those three will certainly be on the horizon. One thing I've found in this business, and one thing that makes this interesting every day, is that there are markets I don't even know exist, that we service tomorrow. I don't think we will be in the high-volume consumer markets anytime soon, but I've been surprised before. We'll provide quality and delivery and let the markets fall where they may.
Park: You must diversify. So, if we take care of all our customers that’s good for the strength of the company, the strength of our team and the strength of the business. The team is very busy because there are so many jobs and so many different customers; I think that's why our Green team has such a great skillset. If you do one customer’s job, they cannot learn. If you do work for numerous customers with all types of PCBs, all types of different material, our team learns, and we can provide a solid solution.
Matties: Congratulations. This is exciting.
O’Neil: Thank you.
Park: Thank you very much.
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