Friday, December 26, 2008
by Trey Heath (theath@bizjournals.com)
Amidst one of the most challenging credit markets to hit the U.S., Memphis-based Centro Inc., has acquired yet another company for more than $1 million, its fourth acquisition since 2001. Centro has secured ownership of its former competitor Trigon Engineering Co.’s Memphis operation.
Little Rock, Ark.-based Trigon’s main niche in Memphis was the distribution of process pumps at its facility at 1650 N. Shelby Oaks Drive. Trigon will retain its Little Rock facility, however the company’s Memphis location will be consolidated into Centro’s building at 3315 Overton Crossing. All five of the Memphis Trigon employees will take jobs at Centro, bringing Centro’s total employee base up to 66.
Centro, which distributes industrial solutions such as valves, filters, seals and pumps to the manufacturing industry, expects the deal to provide more than $6 million annually in revenue, helping Centro expand its revenue totals to around $40 million by 2010.
“The reason we felt that Trigon was an attractive acquisition for Centro was they were in the same market space we were in, which is flow control products,” says Michael Gallagher, president of Centro. “(Trigon) was much stronger in pumps, heat exchangers and some filtration products. We believe that the combination of Trigon’s operation in Memphis, combined with our operations, is synergistic and a very complementary business decision.”
Though Centro has continued to find success after each of its acquisitions, growing revenue from $11 million in 2005 to around $36 million in 2008, Gallagher says the company’s current deal was one of the more difficult acquisitions to finance due to current economic conditions.
“It is not easy to borrow money in our current climate,” he says. “Both my partner (David Forell) and I had to provide additional collateral, but we both felt so strongly about how good this deal was going to be that we both stepped up.”
Gallagher even took out a second mortgage on his house to help push the deal through with Centro’s lender First Tennessee Bank.
Experiences like Centro’s are becoming the norm in the current credit market, where even financially sound and experienced companies are finding it difficult to secure a line of credit, says Debra Lejeune, senior commercial lender at Regions Bank.
“We are hearing a lot of things out there where there is a complete knee-jerk reaction from customers,” she says.
According to Lejeune, the trepidation banks are displaying to lend money has more to do with their own bottom line over the past year than many customers’.
Banks were driven by competition to lend more money to customers during the economic boom. But in the current environment, banks are shifting gears and hoarding cash.
“So many banks are driven by competition rather than normal banking paths to follow,” Lejeune says. “Banks were getting so aggressive because the customer was saying, ‘Another bank is calling me.’
“Banks were doing things left and right and doing things that didn’t make good sense.”
Besides the reluctance of banks to lend, Lejeune says commercial companies looking for a line of credit should expect to see higher rates. That has nothing to do with the customer’s history, but more to do with increases in costs banks are incurring, she says.
“We tell customers that this is about banking in general and not just about you as a customer,” Lejeune says.
Despite the challenges the credit crunch, Gallagher says the time is ripe to grow market share while competitors shrink.
“The world is not going to end,” he says. “While those around you are puling back and companies are laying people off and closing facilities, there is a possibility for us, if we have the courage, to move into those cracks and fill space that our competitors are no longer filling.”
Centro, Inc.
Control solutions for industrial manufacturing
President: Michael Gallagher
Founded: 1970
Employees: 66
Address: 3315 Overton Crossing
Phone: (901) 357-1261
Web site: www.centromemphis.com
Original article appeared in the Memphis Business Journal.