FABRICATION M&A
Summit Interconnect Scales New Heights
Fresh off its latest acquisition, there’s a sense of déjà vu. Is this the next big American fabricator? by MIKE BUETOW

When a pair of West Coast US fabricators called Pacific Circuits and Power Circuits merged more than 30 years ago, probably no one knew the new entity would someday become the largest PCB manufacturer in the world. The deal was financed by two private equity firms, one of which was Thayer Capital Partners. With it came a rebranding to TTM Technologies. The deal was the first in a long series of M&A activities that over the next 15 years eventually rolled up Details, the PCB units of Honeywell and Tyco, Hong Kong’s Meadville PCB, and Viasystems, among others.

So, observers are forgiven then if the narrative developing with Summit Interconnect feels a little familiar.

It begins with the formation of the company in 2016 through the merger of two Southern California – where else? – board shops, KCA Electronics and Marcel Electronics. Separately, several Thayer partners had formed HCI Equity Partners, which funded the new entity, now renamed Summit. A follow-on acquisition took place in December 2018, when Santa Clara-based Streamline Circuits was added to the fold.

Then in July, Summit announced the acquisition of ITL Circuits, a Toronto-area fabricator with a 65,000 sq. ft. factory and approximately 130 employees. At a glance, the company resembles its new parent. It has historically served the high-rel market, holding certifications for AS9100, Nadcap, MIL-PRF-31032 and ITAR registration, and features an in-house custom metal shop capable of producing heat sinks and metal-backed boards.

That brings to four the number of facilities Summit operates, including the three in California. Moreover, the privately held Summit becomes the second-largest fabricator in North America, behind the aforementioned TTM, with estimated annualized revenues topping $160 million and a head count of about 810 employees, based on NT Information data and PCD&F sources.

Another coincidence? Summit chief executive and president Shane Whiteside was TTM’s chief operating officer during its 1998 to 2015 run.

Whiteside discussed the rationale for Summit’s latest acquisition and its broader goals in an interview with PCD&F in August.

Mike Buetow: ITL can do some pretty interesting things: high-layer count boards, up to 200 mils thick, and maybe more at this point rigid and flex boards. It’s certified to AS9100. It looks like it has quite a bit of drilling capacity. These capabilities seem to line up with the capability you have in the California shops. What was it that you found attractive about ITL?

Shane Whiteside: We’ve been looking to expand for quite a while. The opportunity to expand with ITL was attractive because we are at or near capacity at our three locations in California. We have a fairly large and very effective sales force, and they were very clear to me and other senior executives that if you can do anything for us, get us more capacity. A shop with ITL’s capability and capacity was attractive to us.

MB: What’s Summit’s basic strategy, and how does ITL fit into it?

SW: Our strategy is to provide leading-edge capabilities to our customer base, which is mostly defense and high-end commercial focused and to assemble operations with complementary capabilities and create something of value for our customers and shareholders. For our customers back in the 1990s, we used to be able to make the board and put it in a box and ship it. Now the value proposition customers expect is more specific: DfM on every job, stackup assistance, assistance with materials selection, a lot more statistical reporting, a lot more data, reliability testing. The value expectations these days are quite extensive. We believe it requires scale to deliver that value effectively and consistently.

MB: Do you currently build for any OEMs that are located outside North America?

SW: Yes.

MB: I know you have partnerships with offshore fabricators. Do you anticipate expanding to owning plants offshore?

SW: That’s not in our front-sight focus at this time.

MB: Are there other time zones or geographies you find attractive?

SW: We don’t really have a geographically based strategy. California is not a very business friendly place, or maybe I should say, other places are easier to do business in, so anything outside California is going be of interest.

MB: The IPC bare board numbers have been pretty good: 13 months of a B2B ratio above 1.0. Still, we are a long way from the peak 1999-2000 era. How would you characterize the state of the PCB market right now?

SW: We see a lot of strength, consistent with the IPC reporting. We see it very much driven by defense OEMs and, to a lesser extent, certain commercial OEMs. The demand outlook with some of our largest customers is very solid.

MB: Dr. Nakahara sent me his latest NTI-100, and he has Summit at $120 million in revenue for calendar 2019, double that of 2018. (Ed.: See the latest NTI-100 in this issue.) The acquisitions are paying off on the topline, it seems.

SW: We’re seeing a very strong business environment, even with the Covid-19 impact. All three plants (in California) have grown significantly since we purchased them. ITL is relatively new, so I’m referring to the California plants.

Summit building
Figure 1. In addition to the newly acquired ITL, Summit has three plants, including Anaheim …
Summit building
Figure 2. … Orange …
Summit building
Figure 3. … and Santa Clara.
MB: Summit is now the second-largest PCB fabricator in terms of North America revenue. That happened fast.

SW: We’ve been operating as Summit for four years now, and the company as it exists today is the result of four acquisitions to build the company to where it is now. We introduced a new brand name to the PCB industry, which we were cautious about doing, but I’m glad we did it. We are proving we are investing in our business and organizational depth, and we are seeing a great reception from customers.

MB: How would you characterize the private equity interest in the fabrication industry today? They kind of took a breather for a while there, but it seems like activity has picked up quite a bit in the past couple years.

SW: I think there’s interest because there’s an understanding the industry found bottom and has been growing. Since the middle of 2017, our industry has been growing pretty consistently from an overall vertical market perspective. There’s now a strong and widely held expectation of PCB market growth going forward. That will attract investor interest.

MB: You went through a similar experience with TTM. Do you feel a sense of déjà vu?

“The value expectations these days are quite extensive.
It requires scale to deliver that value effectively and consistently.”
SW: That’s an interesting question. Yes and no. Yes, because I’m feeling the same excitement in building something. But no, because much of my time in TTM was navigating a declining American market and the plant closures and restructuring we had to do. I’m in a different place in my life now, but very excited because the industry is back in growth mode, like it was in the mid-1990s. I really enjoyed my time at TTM; it was a great experience, and I enjoyed great working relationships. I’m enjoying that again at Summit in this new chapter in my career.

MB: Looking 12 to 18 months out from now, how will you know you’ve been making progress? What metrics are you using to define success?

SW: We are measuring success metrics like our year-over-year growth, the ability to hit an ambitious budget, and customer metrics like on-time delivery and quality. We have external investors as well, so providing them return on investment is also a success metric. They have certain expectations, and if we can deliver on them down the road, that will be a success as well.

Mike Buetow is editor in chief of PCD&F/CIRCUITS ASSEMBLY; mbuetow@upmediagroup.com.