Press Release - February 2001

Electronic Buyers News Article - February 2001

Former disty execs give EMS a whirl
Cacciatore, Mann of Richey spearhead founding of RAD Enterprises

By Claire Serant
EBN(source)
(02/16/01, 11:49:05 AM EST)

There was a time not long ago when distribution was what William C. Cacciatore was strongly focused on.

Now the former senior executive at distributors Avnet and Richey Electronics (later sold to Arrow Electronics) has a new job in the EMS industry. Cacciatore in December led a group of investors, including other former Richey executives, in the $1.2 million purchase of RAD Enterprises Inc., the Simi Valley, Calif., EMS division of Aircraft & Electronic Specialties Inc. in Avon, Ind.

Cacciatore is chairman of the company, which has been renamed RAD Technologies LLC. The new company, Cacciatore said, will cater to small and midsize OEMs that have been squeezed out of business with major EMS providers that are seeking bigger contracts with larger OEMs.

“We think we can build a company of significance,” said Cacciatore, who was chairman, president, and chief executive of Richey Electronics Inc.

Another former Richey executive, Charles W. Mann, is RAD's chief executive. Now, Cacciatore and Mann are gearing up to capture more business for their new venture. Both had studied the growth potential of Richey's value-added contract manufacturing division, which generated sales of $100 million before Richey was sold to Arrow in April 1999 for $180 million.

However, a noncompete clause in the Richey contract when it was sold to Arrow prevented both men from entering the EMS industry until last year. That's when Cacciatore and Mann learned that RAD's Indiana-based owners wanted to sell the company, which had annual sales between $5 million and $6 million. Aircraft & Electronic Specialities ran the California EMS division, which provided OEMs with consignment and turnkey manufacturing services.

“RAD's owners were involved in a pure automotive business in Indiana, and the California [EMS] operation represented an oil and water mixture [with the auto business],” Mann said. “It was too far away from them and they wanted to get rid of it.”

Unlike major EMS providers that target key markets such as telecom and networking, RAD Technologies' niche will be to serve broad market segments within the electronics industry, Mann said.

“We're going to be diversified, with customers in automotive, medical, and test and instrumentation,” he said. “Three or four large, $10 million customers [in one market] would control our business and put us in financial risk,” he added.

RAD Technologies currently has 20 customers and 35 employees. The new owners plan to acquire other contract manufacturers, primarily on the East Coast, to help round out their 15,000-sq.-ft. Simi Valley facility's offerings.

“We'd like to serve customers from several regional locations,” Mann said. “We have some East Coast targets that would offer regional support as a value-add for customers.”

The new venture hopes to have 15 additional customers and between 50 and 100 employees by next year, Mann said.

RAD Technologies might hit a home run with its focus on small and midsize OEMs, according to David Foropoulos, an analyst at SG Cowen Securities Corp. in Boston.

“Midsize OEMs don't have multiple products like the Ciscos, Hewlett-Packards, and Suns,” Foropoulos said. “They typically have one, two, or maybe three products. Success for the smaller EMS company therefore depends on the quality of those midsize customers' products.”

The new RAD also has the support of its employees, said Larry Veiga, sales and marketing manager. “[The new owners] bring excitement, depth of management, and [better] resources for us to have a turnkey operation,” Veiga said.

Along with his chairman duties, Cacciatore intends to keep his other job as vice president of strategic alliances at Need2Buy, a Westlake Village, Calif., online component exchange.

“Bill is an active RAD board member who is not involved in our day-to-day operations,” Mann said. “It's acceptable within our bylaws.”

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