Published in Food/Agribusiness

Chinese firm acquires West Michigan agtech/construction software developer

BY Saturday, August 18, 2018 04:59pm

SARANAC — Inking a deal with a Chinese firm will allow a West Michigan machine control software developer to reach a broader market, as well as possibly move beyond some legal troubles that have plagued it over the last decade.

In acquiring the assets of Saranac-based AMW Machine Control Inc., global satellite positioning technology and products firm CHC Navigation plans to update the company’s software, integrate it into one-source solutions, and further drive down costs to reach smaller farm operators and construction companies.

Founded by locals Mark Williams and Allen Williams in 2010, AMW Machine Control develops software to automate machinery commonly used in the agriculture and construction industry.

Traditionally, the company’s code has been integrated into third-party precision agriculture equipment and paired with positioning technology to help farmers map their fields and design drainage. The systems use the information to automatically adjust machinery to cut or till the ground as needed when it reaches a given site. The same holds true for products tailored to the construction industry for building roads and other infrastructure.

“When it’s fully automated, the shovel moves itself. It knows where it is, it knows how much earth needs to be pushed or removed,” said Phil Gabriel, the recently appointed president of the new AMW Machine Control Solutions Inc. “It’s more precise and it eliminates the stop-and-go and the error of having to push earth, go back and measure.”

By linking up with CHC Navigation, AMW now has a direct link to a global positioning technology provider and industrial tablet manufacturer, removing the margin for error that exists when dealers attempt to integrate all the pieces together for customers in the agriculture or construction industry.

With the deal, CHC Navigation also gains access to AMW’s established dealer channel in North America, while positioning the West Michigan firm as an integrated software and equipment solutions provider globally within the next couple of years, according to Gabriel.

“The situation with AMW is that they’re a small company, locally run with a good group of engineers. However, they were really lacking the capitalization, the financial wherewithal to really grow,” Gabriel told MiBiz. “We saw an opportunity to leverage their application knowledge … and bring it all together to offer a really nice solution to the industry.

“We have the channels overseas that AMW doesn’t have. They have a channel locally that CHC doesn’t have. Together, that strengthens both organizations.”

AMW had been a long-time customer of CHC Navigation, he said. As dealers often packaged the two companies’ products together, they would work together to ensure AMW’s software worked as intended with CHC’s positioning technology.

“The founders of (AMW) are retirement age. They really want to see the company continue and they recognize they needed some kind of investor, some kind of partner,” Gabriel said.

BRINGING RESOURCES

Casual conversations about a deal started in February and March of this year, and “got a little more serious” in the second quarter. CHC hosted the Williamses at its Shanghai headquarters to show them the technical resources an acquisition could unlock for the company, according to Gabriel.

CHC is a wholly-owned subsidiary of Shanghai Huace Navigation Technology Ltd., which held its initial public offering in March 2017 and is traded on the Shenzhen Stock Exchange. At the time this report went to press, the company’s market capitalization was the equivalent of more than $820 million.

Going public “created some opportunities for us to make some investments,” Gabriel said.

The deal also would allow AMW to offer its dealers a hardware solution with its software, meaning the company could participate at a much higher dollar value in the transactions and provide a single-source solution, eliminating some hassle for dealers, he added.

“It was our determination at CHC that their business model was just not sustainable without having more of the pie,” Gabriel said.

Over the next few years, the pie has the potential for strong growth as more farmers adopt precision agriculture technology. According to a July report from Dublin-based Research and Markets, the global precision agriculture industry is projected to expand at a 16 percent compound annual growth rate through 2023, when revenues are expected to reach $9 billion.

“The evolution of the GIS (geographic information system) and GNSS (global navigation satellite system) ecosystem, falling prices of sensors, and adoption of navigation systems will revolutionize the agricultural market,” according to the report.

MOUNTING DISPUTES

According to Gabriel, AMW had partnered with other companies in the past, but those arrangements failed to work out.

In fact, AMW has been embroiled in a long-running federal lawsuit with one of those past partners.

Waterford, Mich.-based GeoLogic Computer Systems Inc. in September 2010 alleged the Williamses — both of whom were former employees — took code they developed during their tenure at the company and used it for their own ventures, according to documents in a federal copyright infringement lawsuit filed in the U.S. District Court for the Eastern District of Michigan. As the case dragged on, AMW Machine Control ended up filing for Chapter 11 bankruptcy in 2016.

As part of the bankruptcy court proceedings, the company entered into a settlement agreement with GeoLogic in February 2017, saying it would pay $2 million over seven years and give GeoLogic a security interest in its AMW Works software.

As a result of the agreement, GeoLogic dismissed the copyright case without prejudice. A reorganized AMW Machine Control emerged from Chapter 11 in September of last year.

However, the legal saga continued after AMW defaulted on a payment required in the settlement agreement, triggering GeoLogic to foreclose on its interest in the software.

The default also resulted in the court reinstating an injunction against AMW in the copyright case. In May of this year, GeoLogic filed a motion for contempt, alleging AMW violated the settlement agreement by continuing to use the code.

Attorneys for both companies continue to trade barbs over the motion, which is set for a hearing on Oct. 17.

Court documents indicate that although it forfeited the operating code for its past products, AMW maintains the rights to the trademarked names under which it sold the software.

According to Gabriel, the engineers are developing new software to pair with CHC’s hardware solutions and are “working on marketing to get the word out.”

GROWTH PLANS

AMW currently employs eight people at its long-time operations in Saranac in Ionia County, but plans an aggressive expansion as CHC brings its resources to bear for the company. Gabriel said the company plans to quadruple its workforce “over the next few years,” and is currently hiring for an accountant and a technical support person. He expects AMW will relocate to a larger facility closer to Grand Rapids “within the next 12 months” to be in a better position to attract workers.

However, Gabriel cited political pressures as leading to delays and added costs in implementing that growth strategy. The company faces a 25-percent tax on products imported from China even though more than half of their content was sourced in the U.S., as well as issues with allowing CHC to transfer money from China to pay employees at the newly acquired division, he said.

“A global trade war, to me, is kind of crazy because very few companies only trade locally or only use a product made locally, especially in technology,” Gabriel said. “Unfortunately, it seems to hurt local companies more than anything else.”

Still, the CHC-owned AMW remains unfazed by those threats — or any ongoing legal trouble for the Williamses — because the company believes dealers buy into its vision and trust its legacy of innovation, Gabriel said.

He cited Mark Williams’ decades of firsthand experience in both the construction and farming industries as one of the reasons CHC was drawn to the deal in the first place.

“He … worked over 20 years in the (construction business) … and he’s also a farmer,” Gabriel said. “Whereas a lot of tech companies tend to have the key people designing the software who are engineers who went to some prestigious university, AMW has a unique angle that they have been users of the equipment for an entire generation.

“They really understand a construction worker or farmer and how he wants to interact with equipment. It’s got to be simple. It’s got to be easy. … What we’re trying to bring to the industry is a very simple user interface.”

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Editor’s note: A previous version of this story mistakenly described the GeoLogic’s federal copyright lawsuit against AMW as a trademark case. Also, AMW Machine Control was founded in 2010. The Williamses have 30 years of industry experience, but did not start the company 30 years ago, as stated in the original version. 

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