Transformation
Waples Manufacturing is a custom machining and fabrication company that provides customers in the aerospace, defense and health care industries with turnkey production services. Prior to 2014, Waples primarily served the oil and gas industry with customized parts. However, shortly after Capital For Business® (CFB) acquired the company, oil prices cratered and Waples began to struggle with cash flow. Although this meant overcoming demanding challenges in the following year, CFB was accustomed to working with cyclical businesses and understood that it is difficult to predict changes in oil prices. CFB’s immediate action plan was to shrink Waples and implement a transformation plan to diversify it away from oil and gas. A new management team was subsequently hired to implement the diversification plan.
Relationship with CFB
Prior to CFB’s involvement in July 2014, Waples experienced growth every year and had record months prior to gas prices cratering. However, when hydraulic fracturing (fracking) came to a stop as a result of the steep decline in gas prices, Waples struggled to diversify into alternate industries due to its close ties to the oil and gas industry and specialized staff. These conditions dictated that CFB become more involved in planning and decision making, and quarterly meetings were replaced with monthly meetings to track turnaround metrics and address immediate challenges. CFB attracted a specialized and highly experienced management team that had worked with companies in similar situations. This new management coinvested in Waples, which resulted in alignment and a smooth transition.
Transformation strategy
CFB empowered the new management team to stabilize the current business, diversify away from oil and gas as well as transition to tighter tolerance and higher quality end markets. Darryl Smith, the current President of Waples, led the new management team and focused on “strategically placing Waples in new verticals” such as aerospace, defense and health care, which all had higher quality requirements than oil and gas as well as greater precision. In fact, Waples was able to build upon its past experience developing metal components and refining existing processes to meet the needs of the new end users. As a result, while Waples still develops parts for oil and gas, the industry only accounts for 20% of the business when it used to be 90%.
At the same time, Smith’s financial turnaround management goals were to:
- Manage cash flow
- Shrink organization overhead
- Identify valuable employees
- Ensure customer satisfaction
- Closely work with vendors
- Implement a new marketing strategy
Current status and future plans
With the help of the new management team under Smith, Waples managed to come out of its 2014 down cycle and is now a completely transformed company with meaningful new end markets aerospace, defense and health care, while not abandoning the expected future rebound in oil and gas. Stephen B. Broun, a managing partner at CFB, noted that it is critical to “get the right people and give them the right resources to tackle the challenges in front of them.”