If Mark IV Industries Inc. is going to meet its goal of nearly doubling its annual sales to $4 billion within the next four years, the Amherst manufacturer will have to step up its hunt for acquisitions.
"We cannot do it internally," said Sal H. Alfiero, chairman and chief executive officer of the automotive and industrial products manufacturer. "We need to do acquisitions to accomplish that."
In fact, with an internal growth rate that is expected to run about 5 percent to 7 percent a year, Mark IV probably will have to make acquisitions that will add between $1 billion and $1.2 billion to its annual sales if it wants to meet its target, Alfiero said Monday at the firm's annual meeting.
At the same time, the company expects to reap about $40 million to $45 million a year in savings through a $112.5 million restructuring program that will eliminate about 1,000 jobs worldwide and reduce its manufacturing and distribution space by about 1 million square feet. "What this is really about is . . . doing more with less and doing it in a shorter period of time," Alfiero said.
The restructuring program is expected to produce a small amount of savings during the second half of this fiscal year, but the bulk of the benefits are not expected to be realized until next year, he said.
Any acquisitions that Mark IV
makes likely will involve companies that can enhance or expand the firm's niches in its main businesses of making products for the power transmission, fluid transfer and filter markets, Alfiero said.
He said the company, which only months ago raised $313 million by selling most of its professional audio and transportation products businesses, is looking for companies with sales ranging from just a few million dollars to as much as $500 million.
Mark IV also wants any acquisitions it makes to help keep the company balanced, with its sales being roughly split between its industrial and automotive businesses, its foreign and domestic markets and its original equipment and replacement part operations.
For now, Mark IV has succeeded in keeping its desired balance with its original equipment and new parts businesses as well as with its industrial and automotive product mix. But foreign sales, which accounted for 32 percent of Mark IV's revenues during the fiscal year that ended in February, fell well short of the firm's long-term target, Alfiero said.
As a result, Mark IV's acquisition hunt will put a special emphasis on deals that can boost the company's overseas sales. "We're looking primarily overseas," Alfiero said after the meeting.
"Our efforts will be redoubled to bring foreign sales more into balance," he said. "Global expansion is a must, particularly in the automotive business."
Mark IV hasn't been on the sidelines when it comes to acquisitions, paying $78 million for Imperial Eastman, a hose and couplings maker, as well as Cinotto Tecnomeccanica SpA, an Italian maker of automotive dampers, for $17.2 million.
Still, Alfiero said the company is in its best financial shape since it began its acquisition-based growth spurt in 1985, with investment-grade ratings on its senior debt.
And debt now makes up just 41 percent of the company's total capitalization, down from its peak of 93 percent during the height of its takeover binge in 1989. Alfiero said the company hopes to keep its total debt to no more than about 60 percent of its total capitalization, even if it makes some substantial acquisitions.
Mark IV also said it has bought back about 2.7 million shares of its common stock under its ongoing program to repurchase up to 7.3 million shares. Alfiero said the buyback will begin to bolster the company's earnings per share during the current quarter.