7 September 2018—The Somerset, U.K.-based photonics firm gandh.com (G&H) announced that it has acquired the trade and assets of Gould Technology LLC, based in Baltimore, Md., USA, for a total of U.S.$16.4 million.
The acquired firm, which does business under the name of Gould Fiber Optics, specializes in the design, development and manufacture of fiber optic components and subsystems. G&H hopes that the acquisition will give them a foot in the door for approaching the potentially lucrative U.S. aerospace and defense market, an arena partly closed to the U.K.-based firm owing to international trade regulations.
Immediate earnings contribution seen
G&H said in a press release accompanying the deal that it expects the acquisition of Gould to be “earnings enhancing” in the first full financial year of G&H’s ownership. Gould’s annual revenue clocked in at around US$6.3 million, with an “underlying” operating profit, according to the G&H release, of roughly US$1.6 million (taking into account G&H’s planned investments in Gould’s Baltimore facility and U.S. staff).
The US$16.4 million total consideration in the deal will include an initial payment of US$13.0 million, consisting of US$1.4 million in G&H stock and the balance in cash drawn from a new US$40 revolving-credit facility from RBS, the company’s bank. An additional, deferred cash contribution of up to US$3.4 million will be on tap, and will be contingent on the performance of the acquired operations through September 2019.
Prying open the U.S. defense market
G&H sees the Gould acquisition as a way to boost its presence in some attractive U.S. sectors—and also to take some of the cyclical edge off of its overall business profile. The company notes that Gould is “a market-leading supplier of key enabling components into tier 1 U.S. aerospace and defense customers,” with a particular focus on polarization-maintaining fiber components for defense.
The U.K. company says that heretofore, it has largely been cut out of the U.S. aerospace and defense fiber market owing to the U.S. State Department’s International Traffic in Arms (ITAR) regulations. At the same time, G&H believes that its large and well-developed U.S. sales operation for its other businesses groups can be leveraged to help pump up the Gould operation.
In a statement in the G&H press release, the company’s CEO, Mark Webster, said that the Gould deal “enables us to take another step towards diversifying our business.” In addition to opening up the previously restricted U.S. defense market, Webster added that the acquisition would have the effect of “reducing, still further, [G&H’s] dependency on what remains a cyclical microelectronics sector.”
One month, two deals
The acquisition of the U.S.-based Gould comes exactly one month after the announcement of another G&H purchase somewhat closer to home. On 8 August, the company reported that it had acquired all share capital of Integrated Technologies Ltd. (ITL), an Ashford, U.K.-based developer and manufacturer of diagnostic, analysis and other instruments for the health-care and life sciences sector. The consideration for that deal weighed in at £22 million (US$28.6 million at current exchange rates).
ITL has manufacturing facilities in both the U.K. and China, with a sales operation in the U.S. as well. In announcing the deal, G&H CEO Webster said it marked “a key step towards achieving our strategic aims of establishing ‘critical mass’ in our life sciences business and moving up the value chain, through a more systems based product portfolio.” And, as with the Gould deal a month later, Webster stressed that the ITL transaction would lessen G&H’s dependence on the cyclical microelectronics business.