The Shyft Group was busy in 2020 — and a couple of major deals were only part of the dizzying year.
In a change in corporate direction, The Shyft Group — formerly known as Spartan Motors — divested from its emergency response vehicle division in a deal that also sent its company name to the buyer. The Shyft Group also acquired aluminum truck body and accessory manufacturer F3 MFGInc.
Meanwhile, the company re-branded under its new name and relocated its corporate headquarters from Charlotte to Novi — all while grappling with the limitations of the COVID-19 pandemic.
The pair of company-shaping deals was honored in this year’s M&A Deals & Dealmakers Awards, netting the honor for Deal of the Year in the manufacturing sector.
Daryl Adams, who took over as company CEO in 2015, admitted that he did not have much experience in the emergency response vehicle industry, nor did many members of his team. While analyzing the viability of the segment, the team started to realize the inherent pitfalls that came with the market.
Not only did fire truck sales nosedive by 30 percent during the Great Recession — sales that never recovered — but municipalities now find themselves with more frequent budget constraints.
All factors considered: Emergency response vehicles are a tough market for finding success.
Adams said The Shyft Group lost “a lot of money” in 2015 but slowly brought the division to a break-even point and slightly profitable in 2019, when management sat with the board of directors to discuss its fate.
In 2019, the emergency response business delivered $260 million of revenue out of a total of $1 billion for the company.
“We had a target of 10 percent adjusted EBITDA in 2020,” Adams said. “The other divisions are running mid-teens and lower teens. And ER was going to maybe break even and it was taking a lot of management’s time. When we saw it wasn’t going to be the same growth level as the other divisions, it was an easy decision.”
The nature of the deal, which shed 25 percent of the business, was a bit new for The Shyft Group — the first carve out the company had ever embarked on as it sold the division to Wisconsin-based REV Group Inc. for roughly $50 million in cash.
“It was a carve out, so we had to change the campus in Charlotte a little bit and they bought a couple of the buildings in the deal and got the employees so we had to do some separation agreements and things. Maybe they weren’t hurdles, but it was new learning for us,” Adams said.
Investors reinforced the decision by responding favorably. The Shyft Group’s stock ticked up 58 percent for the year.
While The Shyft Group exited emergency response vehicles, it leveraged that money to invest more heavily in its specialty vehicles division, where it purchased California-based Royal Truck Body in September 2019 and then F3 MFG Inc. in October 2020, which included the DuraMag and Magnum brands in its portfolio. The acquisitions grew the company’s capabilities in steel and aluminum service bodies and provided greater margins.
“Maybe not right now, but in the next few years, we believe there is going to be a significant amount of infrastructure money spent in the U.S. because the roads are crumbling and the bridges are crumbling,” said Adams, whose company manufacturers key components for those and other service vehicles. “Eventually there is going to be some large infrastructure funding so we wanted to get a jump on that.”