Materials handling automation and systems: What do you get when you merge HK and Dematic
August 06, 2010 - MMH Editorial
Discussions about the potential acquisition of HK Systems by Dematic began just four to five months ago, lightning speed given the size of the two companies. But, Dematic had its eye on HK for several years, according to John Baysore, president and CEO of Dematic Corp. “We talked about doing this for years in our inner circles,” Baysore said. “We always thought HK was the one company that was a perfect fit in terms of being complementary to what we already do with the least amount of overlap.”
What’s interesting about this acquisition is that it feels strategic and not desperate. Although considerably smaller than Dematic, with about $200 million in revenue, HK has remained a strong player through the recession. In addition to the products and solutions it provides, HK remains an industry thought leader – last year’s logistics conference in Park City had a strong turnout. “This was not a merger where we needed to do something,” said John Splude, HK’s executive chairman. “HK is financially very strong and profitable.” Instead, Splude said that he and HK’s investors believed that the time was right to look for investment opportunities and a partner.
As for Dematic, with about $1 billion in world-wide revenue in 2009, the company has gained 10 points of market share in recent years, according to Baysore.
So why now? The timing was right, said both executives.
For HK, it was the reality that the world is going global. Up to now, HK had only stuck its toe into international waters. Based in Luxemburg, Dematic is by definition an international company. “Dematic brings us a global presence, they are a very strong financial partner and they bring us European technology in each and case handling,” says Splude. “That is very exciting, since that is the part of the US market that seems to be growing the fastest.”
Splude added that the complexity of the supply chain, especially the proliferation of SKUs in the food and brewing industries where HK has a number of customers, is demanding more case and each handling solutions. That’s not HK’s strong suit. Its strength is in pallet handling – unit load AS/RS systems, AGVs, and engineered systems for manufacturers – and parcel handling systems.
Dematic, on the other hand, does have strength in case and tote handling mini-load systems, along with pick-to-light and voice-enabled case and each picking solutions. While Dematic manufactures pallet-handling cranes in Europe, it does not have North American production of those cranes. HK does.
In addition to manufacturing, HK is stronger in a couple of industry segments where Dematic is not represented, including document storage (think mini-load AS/RS in libraries) and the military. Because of the potential acquisition, Dematic can once again sell into the parcel handling business. “Through past agreements with former owners, Dematic can’t sell our sortation solutions into the parcel market,” Baysore said. “HK does sell into that market.”
Dematic can also add AGVs to its portfolio, something they don’t produce anywhere.
Both companies have warehouse control systems (WCS); HK, however, brings ready-built software functionality to areas like unit load handling that Dematic doesn’t have. “Software is like a foreign language,” said Baysore. “Just because your software is good in general merchandise doesn’t mean it’s good in storage.” HK also has warehouse (WMS) and transportation management (TMS) software; Dematic does not.
While Dematic is already one of the largest producers of conveyor, it gains access to HK’s network of distributors.
How big a deal then is this? “I had a company-wide town meeting with our employees on Wednesday,” Baysore said. “I told them that I believe in a few years the industry will look back at this as a watershed moment. It’s a perfect marriage.”