25 Jul 2024


Eurotherm`s MBO team looks East for growth

Eurotherm`s MBO team looks East for growth

The management team that recently bought Eurotherm Drives from Invensys for $145m, says it has no plans to move production away from its Littlehampton, UK, headquarters, or to cut its 900-strong global workforce. According to Mark Hartley, a member of the buyout team, who has been appointed the new company`s UK sales director, “we have no plans to move to lower-cost economies”.

He points out that the Littlehampton plant (shown above) is highly automated. “If you have an automated plant, what`s the advantage of moving a surface-mount machine to China?”

The new team is not planning any radical changes to the organisation. “All of the time that we were part of Invensys, we were profitable and well run,” says Hartley. “There`s going to be no immediate change.” He adds that Eurotherm is ahead on orders and sales on this time last year: “Not many drives companies can say that.”

However, one area that is changing is the company`s stock-holding policy. “Previously, we used to build to order,” says Hartley. “We`re now stocking complete drives so we can guarantee next-day delivery”. “We can now take the decision that it`s good for the UK business to have finished stock,” he adds. “We don`t have to worry that there`s undue pressure from above to keep stock levels down If that means losing orders.”

He says that being independent will allow Eurotherm to be faster on its feet. “Big companies are driven by keeping an eye on the share price,” he says. “We can look to the longer term.”

Hartley reports that there were many potential bidders for Eurotherm. “Very few quality companies come up for sale in the drives business,” he says, “so it was bound to generate interest. Most of the household names in the world of drives showed an interest.”

Eventually Invensys sold Eurotherm to a management team backed by an investment group, Compass Partners, which includes former Invensys chief executive Allen Yurko on its payroll. As Hartley points out, “Yurko knew us well … and was hardly going to push the boat out for a company that was going nowhere”.

The new management team includes representatives from all of Eurotherm`s global operations, including Germany, Italy, France, Sweden and the US. Apart from Hartley, the only member who has been identified is Dan Barnhouse, the former president of Invensys` drives systems division, who is the new company`s chief executive and president.

The business includes the French servo motor manufacturer, Parvex, which Hartley says complements the drives business well. “We`re a drives company with an interest in motors,” he remarks. “They`re a motor company with an interest in drives.”

“We`ve always outsourced motors,” Hartley reports, “but in-house knowledge of motor design is becoming more critical. As sensorless vector improves, the drives designer needs to understand how a motor works far better.”

Although many UK customers regard Eurotherm as being primarily a British company, around 90% of its production is now exported. For example, the Far East is an important market for the company`s DC drives with Eurotherm being the Korean market leader. Hartley says that sales of Eurotherm`s AC products are now taking off in Asia. “What`s going on in the Far East dwarfs any growth in the UK.”

Another area where Eurotherm is hoping to expand is in brand-labelling its products for other suppliers. “We haven`t actively pursued brand labelling in the past, partly because the product range was disjointed,” Hartley explains. “Now we can offer one range of products to do systems work, and another for simpler jobs."

Acquisitions are a possibility although “organic expansion is the key driver,” says Hartley. “We`re not planning to become another engineering conglomerate.”

Eurotherm`s origins were in the DC drives business, but AC sales now dominate accounting for about 70% of its UK business, and about 60% globally. “However, our DC market is still growing because we`ve had so much success in the Far East and North America,” Hartley reports.

One of Eurotherm`s big strengths, according to Hartley, is that all of its current AC and DC ranges and most of its servo products, are less than two years old. He feels that there are few gaps in its portfolio although the company is likely to expand its upper power ratings beyond the present 400kW limit.

One in five of the 300 employees at Littlehampton works on new products, says Hartley, “and there will now be even more emphasis on R&D”. A third surface-mount line has recently been commissioned at the site.

In addition to the UK plant, which produces around 100,000 drives a year, Eurotherm has a similar-sized factory in the US, which concentrates on drives systems and fibre optic work.

Eurotherm`s new management team has no plans to make changes to the workforce, although Hartley points out that, “like any company, if we saw a sharp deterioration in order levels globally or in a particular country, we`d have to look at our overheads”. But he identifies substantial potential for growth, especially in areas such as Asia and Eastern Europe. “We have hardly touched on AC, let alone the servo side of things in the Far East,” he points out .