Circuit Technology, Inc. Case Study

Circuit Technology transaction
Cirtech white logo

The Company

Founded in 1984 by Clare O. Parker, Circuit Technology, Inc. (“Cirtech”) is a leading contract manufacturer of mission critical, complex Printed Circuit Board Assemblies (PCBA). Since inception, Cirtech has built long-term relationships with its customers – mostly in the military and defense industry – on quality, service and speed.  With over 35 years of service within the EMS industry, Cirtech is known for its quality manufacturing of PCBAs in the high-mix, high complexity, low-volume production environment. 

The Challenge

Cirtech was established and run as a family business but the founder and his son, a majority owner, both understood that a third generation would not be able to take over the business and that they were not willing or able to continue to scale the business to compete with larger Tier 1 and Tier 2 EMS companies.  In 2011, the shareholders began to seek the expertise and advice on how to best prepare and position the business to find a new majority investor that could sustain the Company’s culture as well as continue on the growth trajectory to achieve its full potential. The shareholders wanted to understand the transaction process and find an advisory partner that could identify any weaknesses in the business model and assist in implementing the appropriate changes to allow for the best possible outcome once they were ready to sell. They wanted to ensure the operation continued in New Hampshire, to find an investor that could sustain and grow the valuable and long-term customer relationships within the military and defense community as well as continue to support and retain the “family-like” employee base of the company.  To add an additional area of complexity, both shareholders wanted to retire from the business at closing.

The Solution

Phase I –  Cirtech’s advisors identified three main issues for the company to address – First, find a manager that could run the day-to-day operations of the business;  Second, reduce its customer concentration which included a » 70% relationship with a manufacturer of mission critical military equipment; and Third, spin off the real estate that was owned within the company into a separate affiliate entity to provide for arm’s length commercial terms as well as flexibility in a potential transaction.  

In 2014, Cirtech hired a senior manager with a wealth of experience in the EMS industry having operated large scale contracting businesses.  The shareholders supported this manager in making certain lean manufacturing and operational changes as well as his suggestions for reinvesting capital into the company and its equipment.  In addition, over a 5 year period, Cirtech focused on diversifying its customer base by adding several new significant customers while maintaining its niche area of expertise of producing high-mix, high complexity, low-volume production of PCBAs.   The shareholders also spun-off the real estate and implemented an arm’s length commercial lease.

Over this extended time horizon, Cirtech had annual compound growth rates of revenue and adjusted EBITDA in excess of 15%, while allowing the shareholders to step back from the operations and the senior management to take a lead role.  

Phase II – As sales increased and the senior management became more entrenched in the operations of the company, the shareholders and Peloton determined it would be best for Peloton to proactively seek out an Investor candidate that would appreciate Cirtech’s reputation, capabilities, culture, employees, and long-term customer relationships. Peloton’s 5 month focused process resulted in multiple alternatives available and Cirtech choose to partner with Virtex Enterprises, a portfolio company of Insight Equity Holdings LLC.  This is a great example of Peloton’s partners working with a client over a long-term period to optimally position the company, which resulted in an excellent outcome for the shareholders and the company.

Every detail was taken care of. They would call anytime they had updates or new information; we always felt very informed.

Clare Parker, Founder of Circuit Technology, acquired by VIRTEX

By joining with VirTex, Cirtech broadened its geographic reach and strengthened its vendor relationships while also adding a low-cost labor region solution for its customers through VirTex’s existing Mexico facility.  Additionally, the company can now offer full electro-mechanical design and development services, cable harness assembly, precision machining, and box and system build capabilities to its customers.   Although the combination with VirTex provides many advantages to its customers, there will be no change in the way it operates or interact with its customers and its employees on a day-to-day basis.  

View transaction announcement.