JimPinto.com - Connections for Growth & Success
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Matrikon's present market cap of $156M (US$ 137M) represents a 2X ratio - creditable for any industrial automation business. In my view, this company is now well on its way to breaking the famed 1,000 people, $100M barrier I've often discussed.
History: Matrikon was founded by Nizar J. Somji in 1988 as a consulting firm in Control and Automation (PLC & HMI programming) and Custom Interfaces. These days Nizar Somji, 46, is more interested in developing new businesses, but remains involved with Matrikon as Board Chairman.
Matrikon's present technology emphasis and growth are attributed to Amin Rawji, who took over as President and CEO in Dec. 2005. In his 10+ years, he has led Matrikon from being a small, local systems integrator to a world class solutions provider.
Amin Rawji (43) has worked in various positions at Matrikon before he was appointed CEO in Dec. 2005. He helped build Matrikon from a staff of 20 to over 550, while expanding globally, remaining profitable and becoming a publicly traded company.
Markets: Matrikon is diversified across a number of industries such as oil & gas, energy & utilities, pulp & paper, chemicals. Products include web-based data presentation, industrial alarms, process monitoring, optimization, decision support.
Global sales channels: To expand globally, Matrikon has acquired some of its distributors - Hunter Control in Australia, PI Automation in Scotland and Best Solutions in Germany.
Products: Matrikon OPC represents real-time drivers and software for devices based on OPC (Object Linking and Embedding for Process Control), with global leadership in this arena.
Growth & Success: A key success factor is that management has always been focused on profitability. The company never took on any debt, and is still debt free, with all software development expensed. Growth was always cash-flow positive.
Growth Objectives: For FY 2006 (YE Aug. 31, 2006) Matrikon has a revenue target of $77M. The objective is 15%-25% revenue growth per year, with 30%-50% net income growth per year. Linear growth projections will take Matrikon to ~$150M in ~3 years.
I asked CEO Amin Rawji about growth barriers. His response: "We have only one enemy: OURSELVES! I believe the market is very large and competition at is not the limiting factor. The key is how to re-invent/re-organize for the next growth phase."
I probed further: Will Matrikon be acquired by a larger company in the next few years? Amin Rawji's spontaneous answer was spot-on. Most large companies are only interested in acquiring for 1x revenue; Matrikon is already trading at 2x revenue, and will soon be commanding a 3x-5x premium. Nobody would wish to pay that price.
Matrikon Culture: Given that founder Nizar Somji was President & CEO of Matrikon for 17 years, much of the company's culture was initially established by him. Amin Rawji now keeps stimulating and building on the positive attitudes.
The company has traditionally employed young, aggressive people who have an entrepreneurial spirit - the kinds of people who make things happen. They keep hiring good technical people, and give them opportunities to develop different areas of the business. Management (and the Board) own 40% of the company's publicly-held stock.
Mission Statement: Delivering value; Innovative solutions; Exceptional people; Customer satisfaction; Protecting assets - employees, customers and stakeholders; the environment; the community.
When Action made the acquisition, a strange gloom hung over Hardy - they'd been acquired yet again. When even low level Action people came to visit, they were treated as "superior"; the Hardy people were always subdued, "You've acquired us..." And it was too easy for the Action employees to swagger, "We've acquired you!" It took months for Hardy employees to feel that they were indeed participating in the spirit of growth and success.
Well, the acquisition didn't work - the "cultures" were just too dissimilar. Also, it was a mistake for an instrument manufacturer to acquire a specialist integrator. Two years later, Hardy was sold to Dynamic Instruments and I'm happy to report that the new Hardy Instruments is now quite successful.
Let me tell you this same story from another angle. A couple of years ago, an eNews reader (a senior manager) contacted me when his company was being acquired by a much larger international business. Should I stay to see what happens? Or should I be looking for another job now?
My advice was simple: The acquirer is paying a high multiple for your company, and will be looking for good people, to make the deal work. Stick around and show that you're a solid, growth orientated person. He did. And he contacted me again within about 3 months - he had just been made country manager for the parent company, a significant promotion and step up in responsibility. Clearly good companies are always looking for good people when they make acquisitions.
Under the right circumstances, acquisition can be a good way to generate growth. Successful acquirers pay as much attention to the details of post merger integration as they do to making the deal itself. Beyond just cost and revenue synergies, they study the cultural differences.
Culture is a unique, deeply entrenched part of the fabric of each organization. Serious problems often arise when even similar cultures are brought together. The people in the acquiring company always (mistakenly) seem to have the psychological advantage. Unless post merger integration is very carefully managed, power struggles sabotage the integration effort and the best people simply leave.
Too often mergers seem to be bottom-line driven, inspired by a bigger-is-better mindset. Many acquirers don't give much thought to how newly merged colleagues must cooperate to succeed. People in both companies must engage in open, honest communication and build new relationships. Personnel diligence must equal, or even exceed, the usual financial diligence.
The acquirers who succeed are those who maintain constant communications to introduce, educate, and update new colleagues; dedicated high-level personnel must serve as liaisons, stressing the importance of acquired groups and including them in all major decisions. There must be a strong, common, post-merger mission.
In industrial automation, few mergers are successful for both acquirer and acquired. With shrinking margins and no organic growth, acquisitions are made primarily to consolidate the customer base and generate cost savings through shared overhead and divestiture of non-complementary parts. I have predicted that more automation majors will be acquired - and my predictions stand.
The star attraction to stimulate attendance will be Engineer, Inventor, Entrepreneur and Visionary Richard E. "Dick" Morley.
Dick Morley will give the keynote address on Tuesday, 2 May, at 9:00 a.m. His topic: "The Future of Automation: Where Does the Road Lead?" Get ready to be stimulated, challenged and entertained.
Dick Morley also presides as czar of "Innovation Alley", an exciting display of the latest ideas, straight from the drawing boards of today's emerging technologists. Hand-picked by Morley, each company offers a sneak preview into the not-so-distant future.Innovation Alley will showcase 7 technology companies:
See you next week in Long Beach!
The plague of patent-trolls came to the forefront with the recent NTP patent lawsuit which threatened to interrupt service to 3 million RIM BlackBerry users - until it was settled in March 2006.
On March 29, 2006 the anti-troll crusade went to the US Supreme Court. They are now hearing arguments in the case of eBay against a company called MercExchange which claims to own the patent on eBay's online auction process. Many consider this to be the most important US patent case in a decade - whether "patent trolls" should be granted injunctions to shut down supposed patent infringers.
There is indeed a problem in the patent world. But it isn't companies that don't commercialize their own patents. Rather, it is bad patents. These days, too many patents are granted, too often for "inventions" that are obvious. In part, that happens because the Patent and Trademark Office is understaffed and overwhelmed.
A good first step would be to beef up the patent agency. This is one form of regulation that, if practiced properly, is clearly good for the economy, not bad for it. Right now, examiners often work in a vacuum. If patent applications were published prior to final approval and allowed to be contested - a process that already occurs in many parts of the world - fewer bad patents may be issued.
In any case, the end result means more work for lawyers. Nearly a third of the $612 million RIM paid to NTP ended up in the hands of law firm, Wiley Rein & Fielding.
Author and seminal thinker Michael Crichton brings up the rather bizarre question of whether simply thinking about a "patented" idea infringes the patent. His discussion highlights the uncomfortable truth that, in recent decades, the Patent Office and the courts have ruled themselves into a corner from which they must somehow extricate themselves. Interesting read - weblink below.
Compiled and edited by my friend Jim Strothman, editor-in-chief of ISA's InTech magazine the last half of the 1990s, the 2nd edition's 314 pages (54 more pages than the 1994 handbook) adds three new chapter topics not previously included: Industrial Communications Buses, Safety, and Environmental Measurement.
Eight topics in the 1994 handbook were maintained and significantly updated. This 2nd edition took nearly 18 months to complete. During that time, Jim Strothman sought and received advice and input from several industry experts in specific disciplines.
According to ISA and Jim Strothman, the handbook's purpose, is to enable engineers and technicians designing and controlling industrial processes to find answers needed to solve day-to-day problems. The hundreds of equations, conversion values and tables in this handbook will speed technical problem-solving.
I recommend this book. Industrial Process companies should buy several copies for plant engineers and technicians. They'll be carrying it around till it gets dog-eared. Buy it on the ISA website or on Amazon.com.
"In the case of the Enron ship, the captain and officers took the ship's money box, got into the only lifeboat and rowed away leaving everyone else to drown. Whether they sank the ship thru negligence or deliberately is immaterial. This is not likely to be the reason they are on trial, but it should be.
"The central corruption of the present system is that of rewards at the top, no matter what the performance. The magic word of 'accountability' is only good for underlings.
"So, now a comparison between GM and Toyota. The former is in dire straits, laying off tens of thousands, closing dozens of plants, etc. This record of abysmal corporate failure is blamed on unions, globalization, cheap labor elsewhere, cheap parts from overseas etc. The blame goes anywhere except the boardroom in Detroit. None of the top executives are made responsible for this disaster, none are to be fired, or demoted, or penalized in any fashion for the way they ran the company in the past decades. We can look forward to read of the bonuses they will give themselves in consequence.
"Meanwhile, Toyota has union-operated plants in the US, uses US made parts, and is doing ever better. The reason is that in Japan, if a company does not do well, the execs are fired, demoted or made to take pay cuts, and in some cases even commit suicide to atone for the disgrace.
"This in my opinion is a central reason why GM does badly, and Toyota does well: a true sense of corporate responsibility."
"I believe that our country is rich because of our immigrant heritage. They have been our inspiration and drive throughout our history. However, I see a big difference between legal and illegal immigration. Our own grandparents were immigrants, but they had to show skills and financial support and wait their turn.
"I disagree that illegal immigrants take only jobs that citizens will not take. They take jobs that others will not take at the poor pay that is acceptable to those that cannot complain for fear of being deported. This year many strawberry fields in Oregon were left without picking because no one would work for the pay. Even illegal immigrants chose construction, rather than pick berries.
"The argument that our economy will fail without cheap labor is unfortunately the same argument used for slavery. That is hardly a solid stand to take. We cannot build our comfort on the backs of the unfortunate."
"The barriers to most companies (except for the very largest ones) are driven by people. Entrepreneurs present one limitation - their vision and judgment is often very narrow - since evangelism and focus make a small company succeed. Many entrepreneurs make the classic marketing error that is exactly counter to the segmentation and differentiation needed to grow in a niche!
"Few entrepreneurs cross over into the broader vision for a broader market when that's what's needed to make the company grow. My observation is that most prefer to do what they're good at - starting something new and focused. Further, many entrepreneurs lack the skills to manage a large or global organization - global growth is often the barrier they won't or can't surmount.
"The other side - the "lackeys" and "layers of management" - are the other limitation. Bad management is bad management, and an acquirer who installs bad management in an acquired company is certain to have problems. If the purpose is to integrate the company - skills, people, channels, clients, products, etc. - into the larger fabric, then the layers are there to ensure the maximum benefit to the whole. Bad management in the layers is bad, but the layers are not inherently bad if they are working for the whole."
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