Behind the Dearborn Mid-West Acquisition of W&H Systems

The consolidation of the materials handling industry is being driven by traditional players looking for ways to enter new verticals outside their established areas of expertise, along with the retirement of baby boomers.

Those were among the takeaways from my conversation two weeks ago with Joe Colletti about Dearborn Mid-West's acquisition of W&H Systems. Colletti will be the new president and CEO of DMW&H, the name for the combined organizations. For full details of the acquisition, you can read the press release here.

If you're not familiar with them, Dearborn Mid-West is probably best known as a provider of manufacturing solutions to auto makers like GM and Ford. In 2013 and 2014, they were ranked Number 19 and 17 on Modern's list of Top 20 Systems Suppliers ranked by prior year with estimated sales of between $150 – and - $155 million. W&H Systems, meanwhile, has long held a leadership position in the wine and spirits industry, with customers such as Southern Wine & Spirits and Wirtz Beverage. In recent years, W&H has also developed case and unit-handling systems in sporting goods, apparel and specialty retail, to name a few. Colletti expects the combination to deliver over $200 million in revenue in 2016.

As to what it means to the market, Colletti said that the combination should highlight the strengths of both businesses. “Dearborn's overall strength has always been with a handful of key automotive customers like General Motors and Ford,” he told me. “We are a long-standing brand associated with financial strength and project management experience. W&H has experience in verticals where we are not strong, like wine and spirits and retail distribution. We're now able to bring those together in one company.”

As to those two trends I identified earlier, both were at play in this acquisition, according to Colletti.

Enter new verticals: Colletti said that Dearborn's board urged its management several years ago to expand outside of the automotive industry. An acquisition of 24V and garment-on-hanger (GOH) technology at auction from a company in bankruptcy in November 2013 was followed by the addition of S&S System personnel to the group in early 2015. “After S&S, our business increased significantly and we realized the need for a larger team and a more robust infrastructure to support our growing customer base,” said Colletti. That search led them to W&H Systems, which offered the experience and vertical expertise Dearborn was looking for. In addition, W&H has a warehouse control system, Shiraz, to synchronize sophisticated order fulfillment operations in highly automated facilities with multiple picking methodologies. “The software is an absolute requirement today,” Colletti said. “There are a number of organizations out there that don't have the infrastructure to support a full WMS, but still have the need for software. Those are the type of customers we will be targeting.”

Exit the boomers: Something else is at play here, which is that we now have a generation of company owners that is ready to retire and hand the reins of their companies to larger organizations that can ensure their viability. “A big piece of putting this together was the impending retirement of W&H's leadership,” Colletti said. “Then, as we started talking to them, we found a culture that we were very comfortable with. They're down to earth and experienced.”

Going forward, Colletti said that Dearborn Mid-West will continue to be headquartered in Michigan, close to the automotive industry, but the DMW&H material handling system division will operate out of W&H's home turf in Carlsbad, New Jersey. “Overall, we're now part of an organization with over 400 employees and over $200 million in revenue,” said Colletti.

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