By Dan Miner, originally published in Buffalo Business First on 6/3/16.
Defying a trend
Conax Technologies is a prime candidate to be acquired by an outside entity, whether it’s a larger competitor or an investment firm.
The Cheektowaga company has about 130 employees and has grown steadily in recent years. Its high-tech niche – temperature sensors for a variety of markets, including power generation and semiconductor – requires significant investment to stay ahead of the competition.
And owner Robert Fox is 63 years old, closer to the end of a long and successful career than the beginning.
The story has played out consistently in Western New York in the last few years – Curtis Screw, Jiffy-tite, Niagara Blower, Niagara Thermal Products. All rolled up by larger manufacturing competitors in an industry sign of the times where growth must be accompanied by deep pockets and corporate breadth.
Fox knows all this. He gets serious emails every month from potential buyers – a commonplace occurrence for mid-sized manufacturers whose products could work as part of a broader portfolio. It means that sole ownership of Conax is probably a gold mine.
But his answer never wavers: “No thank you.”
Fox said Conax can walk the tightrope between midsized and large manufacturer, using its own funds and banking partners to take “measured, well-thought-out risks.”
And in doing so, he’s become a test case for corporate strategy in Western New York, home to hundreds of midsized companies with owners contemplating their future in a rapidly changing economy.
“You can survive by being little and you can survive by being big, but if you’re in the middle, then you’re losing dexterity,” he said. “You have to decide who you want to be when you grow up. We want to be a market leader.”
Fox wouldn’t share specific financial information about the company or give a comprehensive picture of how he expects the company to grow, citing strategic concerns about his competition. But he said Conax can use its current position to stake out competitive edges in its chosen markets by staying close to customers. Some recent initiatives include:
- Conax recently opened sales offices in Shanghai and California and is considering another in the United Arab Emirates.
- Fox hired a new chief operating officer in December 2014. That hire, William Fierle, spent 16 years in leadership positions at Emerson Network Power.
- The company made active investments in several machines recently that typically cost several hundred thousand dollars.
And there has been a subtle but substantive re-imagining of what defines Conax. Specifically, it means the company is focused on active and constant product development. It means being actively engaged with customers on projects, being ready to do short runs to fill a customer’s immediate needs
The 2016 game plan is papered throughout the company’s Walden Avenue headquarters and emphasizes the phrase: “We become indispensable by understanding and meeting our customers’ current and future needs better than our competition; otherwise, we risk becoming irrelevant.”
“We’re not selling ‘putting things together’ anymore,” Fox said. “We’re selling technology.”
Manufacturing sellouts aren’t necessarily a bad thing for a region. Niagara Blower, Curtis Screw, Jiffy-tite and Niagara Thermal each were purchased by larger competitors that pledged to build upon the operations that exist in Western New York. Those larger corporations also purchased the local facilities, a sign that they’re serious about investing in their new subsidiaries and divisions.
In conversations with Buffalo Business First this year, senior leaders at those companies who have stayed on through the acquisitions explained the advantages of their new corporate parents.
Jiffy-tite President Michael Rayhill said the new owner, Switzerland-based Oetiker Group, is investing in the Lancaster and Batavia facilities while selling Jiffy-tite products through its international network, including 130 technical sales reps in 20 countries.
Paul Hojnacki, who was president of Curtis Screw and now runs the newly named division MacLean Curtis, said corporate owner MacLean-Fogg Co. has given Curtis access to a much larger sales team and new customers.
“We were in good shape and could have continued on,” said Hojnacki, who has been with the Buffalo operation for 32 years. “But the growth would have been limited because of our limited amount of resources, from financial to human resources to equipment. All of the above.”
It might be easy from the outside to analyze company management, especially in hindsight, but the actual process of navigating a business is an ambiguous one, said Ben Rand, president of Insyte Consulting, which has worked as a consultant with Conax.
Leaders must understand their own companies and contend with many headwinds, including economic trends that range from local to global, he said.
In the case of a midsized manufacturer that faces large-scale investments and the need to bring on new expertise and changing strategies, it’s easy to see why a larger partner is attractive, Rand said.
“The challenge for a lot of companies is: How do I get through a transition without running into big problems and making big mistakes? But the fundamental upside is independence and control,” he said. “And if you’re successful, it’s the folks in control who benefit the most.”
Thus, the desire to navigate a complex business equation and the lucrative possibility of success are balanced against the risk of going it alone. It’s not for everyone.
“I think Bob Fox is a relative rarity,” Rand said. “There aren’t too many folks like Bob Fox.”
In one sense, the Conax story is about the psychology of the person in charge of a business and how that psychology interacts with the realworld decisions that must be made, said Frederick Attea, a partner at Phillips Lytle LLP who has worked with Conax and many other Western New York businesses.
Attea said that Sovran Self Storage, which was co-founded by his brother Robert, was at various times a lifestyle business and a regional business before it rode a wave of industry consolidations to become one of the largest self-storage companies in the United States.
Then there’s CTG Inc., the Buffalo IT company that “started with three people in a garage” and grew in various stages, Attea said. Now it has 3,500 employees, according to public filings.
Those are a few of the many stories of ambitious Western New York entrepreneurs, balanced against others who founded successful businesses and eventually sold.
“The thing about companies like Conax is that the story isn’t finished yet and you don’t know what’s around the corner,” Attea said. “You do know that if you have a top-notch management team, when opportunities come along they’ll take advantage of them.”
Fox said his contemporary stance on acquisitions could change, if it proves to be the best route for Conax and its employees. He has a succession plan in place, though he wouldn’t discuss specifics.
He joined the company in the early 1980s as a member of the senior leadership team. It went through two acquisitions several years later, once by a financial group and then again by a strategic competitor. Fox and a business partner, Timothy Webster, purchased the company in 1997. Fox bought out Webster in 2008.
Western New York has been an expensive place to run a manufacturing operation, he said – particularly because of New York state’s regulatory and tax framework – but it also has inherent strengths.
That includes the University at Buffalo, through which Conax has worked to develop new products and a motivated workforce.
He may be 63, but in the case of Fox, that number doesn’t mean he’s about to retire; it means he’s using his experience to pursue his greatest trick yet.
“I’ve already been a hired gun,” he said. “I have no interest in doing that again.”