For Australia-based Codan Ltd., the acquisition of Daniels Electronics last month made sense on a variety of levels.
But dollars and cents aside, the success or failure of the partnership will depend on how the companies' cultures mix, says Codan chief executive Donald McGurk.
McGurk, who was touring Daniels' facility in James Bay Monday, said the two firms are naturally aligned and he believes the transaction will be a home run.
McGurk said now that the initial meetings are over he's been able to see what happens when Daniels takes off its metaphorical suit-and-tie and relaxes.
And he likes what he sees. "Sometimes it isn't pretty," McGurk said. "But these guys are real. They've been around for 63 years.
We're real. We have been here 53 years. They think like we do and they are trying to build something they are proud of.
"It's what makes the dfference in being successful or not - the cultures of organizations are generally what causes acquisitions to fail. We like the look of these guys and they have substance. Our job now is to not stuff it up."
That means integrating the two companies without having Daniels feel like it's being swallowed and destroyed, he added.
Codan, which manufactures value-added electronic products for radio communications, metal detection and mining technology, bought Daniels for $25 million in August.
Daniels designs and manufactures customized digital and analogue radio repeater systems capable of working in extreme climates.
The appeal for Codan was a foothold in North America while Daniels would get exposure to markets around the globe.
The attraction was obvious from the outset, said McGurk, though he noted it became more appealing as they went through the due diligence phase of the acquisition.
"We are delighted. There's a lot to like about Daniels," McGurk said, noting that started with an opportunity to establish Codan's North American foothold. "We do business in 150 countries. This is a chance for us to expand into North America."
Daniels sells 95 per cent of its equipment in North America.
McGurk pointed out both companies tend to sell to the same kind of customer as well. "So we don't have to scale up our global sales team, we now just train our guys to sell this stuff so they are now carrying two bags," he said.
McGurk said Daniels was also attractive because it is naturally hedged against the strong Australian dollar - expenses in Canadian dollars and sales in U.S. "We don't want costs in Australian dollars because it's too strong at the moment and we end up losing our shirt when we try to bring funds back into Australia," he said.
"The other thing that's important is here they stay away from ITAR (international traffic of arms regulations) in the U.S., so we can take products here and export anywhere in the world," he said. If they had set up an American production facility, they would be confined to selling only within the U.S.
The excitement over the acquisition appears to be a two-way street.
According to Gerry Wight, Daniels' vice-president of sales and marketing, there has been a noticeable new energy in the company and people are eager to see growth as the company reached its capacity to grow on its own and required new resources to expand.
McGurk said if the Victoria operation needs to expand, it will do so carefully given space is at a premium at its current location. "Obviously, if we get their products into more countries, we will absolutely have to ramp up," he said.
All of it sounded like a win to Victoria Mayor Dean Fortin, who was on hand to welcome McGurk Monday.
"This [deal] is about keeping Daniels here. It's about growing the company and keeping jobs and investment in Victoria," Fortin said.
Codan is a publicly traded company and last year reported earnings of $170 million AUS and a profit of $23 million.
