Company Profile: Auxo Investment Partners

Auxo Investment Partners is an investment firm whose focus is partnering with high-growth, founder or family led companies in the industrial and business services sectors. Over the past two years, Auxo has embarked on the formation of a wire harness company with a national footprint focused on low-volume, high-mix applications. In the last issue of WHN, we highlighted Golden State Assembly (GSA), Auxo’s first investment in the industry. Since then, three additional investments in Morgan Royce Industries (MRI), located in Fremont CA, SOS Manufacturing in Roberts, WI, and Tack Electronics in Grand Rapids, MI have followed with more on the horizon.

The company recently appointed Glen Fish as its CEO whom we met at The Battery Show to discuss the rationale behind these investments and what the future of the company holds.

Glen explained that this high-mix, low-volume focused company with national scale is being built to fill a gap in customer needs. “Like many manufacturing industries in the US, the high-mix, low-volume segment has emerged as a highly fragmented market with hundreds to thousands of harness suppliers serving customers within a geographic region, or a specialized industry” Indeed the Wire Harness Manufacturer’s Association alone has over 400 members. “That makes sense when you consider the history of the industry but it’s not where we think this segment of the industry is headed” Glen continued. “There are two fundamental challenges with the current industry structure. The first is a lack of economies of scale due to the small size of most companies in the high-mix, low-volume end of the market. In this segment many companies have somewhere between 5 and 30 million dollars of annual revenue, but each of these companies needs to have their own financial systems, procurement processes, quoting, scheduling etc. All of that infrastructure is expensive, and, while everyone tries to be lean, it is still generally going to be more cost effective to run those processes for a $300M revenue company than a $30M one. That’s one reason why we believe this segment of the industry is going to see a wave of consolidation in the coming years.”

“The more important reason however is that customers are demanding it.” Glen added. “In my role I have the opportunity to meet with engineers, purchasing managers, and supply chain executives from our customers and we hear one recurring theme. They need a supplier they can trust as their partner for wire harnesses. In the current, fragmented supplier landscape customers complain that they end up either over-exposed to a small wire-harness supplier, with all the supply chain risk that entails, or they find themselves with an unmanageable number of suppliers. One executive at a Fortune 500 company recently told us they have over 200 wire harness suppliers! Mid-sized and large customers with low-volume applications are screaming for reliable, long-term suppliers who can support the full breadth of their wire harness needs. That’s what we’re hoping to build here: a company than can provide the full suite of capabilities our customers need, whether that’s specific manufacturing capabilities, locations, or the right trade-off between cost, quality, and service.”

Mid-sized and large customers are increasingly demanding a comprehensive suite of solutions from suppliers they can partner with

Glen pointed out a few examples of the benefits a broad set of capabilities delivers for the company’s customers. “GSA is world-class when it comes to new product introduction. They get customers to market faster and better than anyone else. They helped a start-up in Silicon Valley quickly become a ‘not-so-start-up’. Now our customer has decided to open a large manufacturing location in the Midwest and has asked us to move production to one of our nearby facilities to reduce working capital and provide more timely deliveries. With our range of capabilities, we can do that for them. Another of our Midwest customers was having trouble increasing their production rate because the harness they had asked us to build was taking 45-60 minutes to install in the overall assembly. We had our engineers in Fremont, who routinely work on new applications, re-design the harness which now takes about 7 minutes to install. With our range of capabilities we can do that even for a fairly low-volume application, which is hard for a small independent company to do. I’ll give you one final example: we have a customer with lots of low-volume applications. At one point they approached us asking if we would consider manufacturing some really low volume box builds. We’re talking single digit number of units. Well, as it turns out, one of the companies in our platform has specialized in ultra-low volume builds for almost 20 years. Our customer was delighted when they learned they wouldn’t have to go through a whole supplier sourcing and qualifying exercise just to build a handful of these boxes, and we’ve been doing a lot more quoting for them since. Ultimately, it’s our intent to maintain the same passionate focus on customers as we translate the capabilities across our different facilities into what we believe is a better customer proposition.”

A broad range of high and low-voltage manufacturing capabilities are needed to provide complete solutions to customers.

Glen’s background makes him ideally suited for the changing industry landscape. “Previously I was in injection molding and assembly of appliance components where very similar industry dynamics to the current state of the wire harness market have played out.” During his tenure in those industries, Glen managed multiple acquisitions and put the right business practices in place to make the companies acquired work with common systems, processes, and technologies. “That’s exactly what the high-mix, low-volume segment of the wire harness market is ripe for at this stage” he asserted.

Now a few months into the role, Glen has gotten a good feel for Auxo’s DNA and what they look for in new potential additions to the platform. “It’s all about character, integrity, and how you run your business—that’s what is most important to them.” Auxo seeks well-run wire harness companies that have the potential to accelerate their growth as part of a national platform. “Auxo has evaluated a lot of other acquisitions in this space and decided they were not the right fit, and it is primarily culture driven,” Glen advised. “Auxo wants owners who have built a culture and capability set that has made them a success. They look for the right people first, then the right book of business and a track record of staying true to their strengths as a company.”

The ultra-low volume capabilities at the company helped a custo- mer avoid having to qualify a new supplier when the need arose.

When it comes to potential future acquisitions the company plans to stay active. “We expect to make a number of additional acquisitions over the coming years as we work to grow this national platform” Glen elaborated. “It is our belief this market will continue to consolidate and we want to be at the forefront of that trend. There are many great small wire harness companies in the US, Canada, and Mexico with the right culture and capabilities that would greatly benefit from being part of this platform. Whether the owners are looking to retire, stay with the business, or something entirely different we have completed transactions with a variety of structures. If the company is the right fit, we can craft the solution that best suits a seller’s needs.”

SOS Manufacturing has developed extensive experience with panel and box-builds.

To date, all of the businesses they have added to the wire harness platform seem particularly poised for growth. We look forward to providing details about this company’s future successes and will keep a close eye on whether their predictions of industry consolidation prove true.