By Chris Mc Loone
FDIC International 2017 will be the first time many get a chance to see Spartan Motors and Smeal as one company.
I took the opportunity to speak with John Slawson, president of the Spartan Emergency Response (ER) business unit, to talk about the recent acquisition.
FA&EE: Provide a background on how the opportunity to purchase Smeal came about.
Slawson: Spartan Motors has a long history with Smeal as its cab and chassis supplier that dates back 30 years, so further expansion and cementing of that relationship was a natural progression for the two companies. That history and the fact that we had an existing supply agreement made it a natural fit for us in terms of a starting point for the discussion when the family first came to us. Ultimately, this acquisition will help Spartan Motors and Smeal increase our collective competitive position by participating in the industry consolidation and ensuring that Spartan Motors will continue to have the cab and chassis demand to supply not only Smeal but all of our important OEM and dealer channels.
FA&EE: What hurdles did both companies have to clear to make the acquisition work?
Slawson: An acquisition or transaction of this scale always has its challenges, but that’s why the due diligence process is so vital up front. I believe our long history together and the trust we share mitigated many of the traditional hurdles companies might run into. We’ll have learnings as we go forward, but it’s been a very smooth process thus far.
|1 This Smeal aerial is built on a Smeal S-600 cab and chassis. (Photos courtesy of Fire Apparatus & Emergency Equipment.)|
FA&EE: Will Smeal continue to provide its custom cabs/chassis, or will it use Spartan cabs/chassis exclusively?
Slawson: We intend to sell our full line of products on both the Smeal and Spartan Motors sides but will look at ways to share product and process innovations to better serve our OEMs.
FA&EE: Smeal aerials were used by at least one other apparatus OEM. Will these types of relationships continue?
Slawson: Spartan’s Emergency Response business unit will remain focused on growing business with all of its partners. We look forward to not just maintaining but strengthening our partnerships with our combined OEM customers and being the reliable, go-to resource for cab and chassis and complete apparatus amidst an increasingly consolidating industry.
FA&EE: Does “Smeal” become a brand within the overall company?
Slawson: Smeal will continue as its own brand, as we intend to sell our full line of products on both the Smeal and Spartan Motors sides. In fact, Smeal will continue to be on equal footing with all of Spartan Motors’ OEM customers. Spartan Motors has been a manufacturer of cabs and chassis, as well as full fire apparatus, prior to acquiring three OEMs over two decades. Both companies have always operated on a level playing field, providing consistent supply and standardized products, features, and pricing. Maintaining competition in the industry benefits us all, and we are focused on providing more value to our dealers and customers as a result of this acquisition.
FA&EE: Will the two facilities in Ephrata, Pennsylvania, merge?
Slawson: Our plans, at this time, are to retain both plants in Ephrata, Pennsylvania.
FA&EE: How does the Smeal acquisition enhance or expand Spartan’s global presence?
Slawson: The Smeal acquisition immediately enhances our global footprint, as the combined company will have a much broader reach with 47 dealers in 44 states, 10 provinces, and three territories. Spartan Emergency Response has the ability to serve customers in the entire United States and all of Canada, and the company’s products will be distributed in more than 11 other countries around the globe.
FA&EE: What is Spartan’s market share like in Canada, and how does the Smeal acquisition enhance it?
Slawson: The transaction drastically expands our distribution network, doubling our complete apparatus sales reach, particularly in Canada, where Smeal’s dealers have had a long-lasting superior presence.
FA&EE: How will the success of the merger/acquisition be measured? Is it solely based on how well it helps Spartan ER?
Slawson: The completed deal is projected to be accretive to Spartan Motors earnings in 2017, driven primarily by a combination of higher volumes, increased operational efficiencies, and other synergistic opportunities. We believe this transaction will bring significant scale to our Emergency Response vehicle portfolio by increasing revenue by more than 35 percent, which will help accelerate the turnaround of the Spartan Emergency Response business unit, which has been our number one priority. As we’ve stated in past earnings calls, we expect our current Emergency Response segment to be profitable on a run rate basis by the end of 2017. We believe this combination will allow us to accelerate that timetable. In 2017, we expect Smeal to add more than $70 million in incremental sales for the combined company.
|2 This Spartan ER tanker is built on a Spartan Gladiator cab and chassis.|
The team at Smeal has been working hard on improving its profitability, much like we’ve done in our own ER business over the last year. We expect to continue to improve on that run rate going forward.
We expect that our operating discipline, leveraged infrastructure, and integration opportunities will drive improved performance in our new, larger Emergency Response organization. We do believe this transaction can be a game changer for Spartan’s Emergency Response business unit and ultimately Spartan Motors shareholders.
We see expanding our international presence as a longer-term goal of the new Emergency Response business segment and an initiative that can be scoped concurrently.
FA&EE: What general comments do you have about the Spartan acquisition of Smeal?
Slawson: One of the most appealing aspects of this deal is the ownership of Smeal’s industry-leading product portfolio and innovation expertise. Notably, Ladder Tower Company has been designing and selling aerial products for more than 45 years, with more than 5,000 aerials sold. For context, Spartan has been selling aerials for approximately 10 years now. Together, this combined engine expertise, manufacturing expertise, and solid dealer channel reach accelerates our ability to better service the fire industry.
CHRIS Mc LOONE, senior editor of Fire Apparatus & Emergency Equipment, is a 23-year veteran of the fire service currently serving as a safety officer and former assistant chief with Weldon Fire Company (Glenside, PA). He has served on past apparatus and equipment purchasing committees. He has also held engineering officer positions, where he was responsible for apparatus maintenance and inspection. He has been a writer and an editor for more than 20 years.