Organic Growth Masterclass: VUES, backed by Arx Equity Partners

Arx is a small-cap Central European focused firm and invests in manufacturing companies with a high focus on its R&D development. VUES is a manufacturer of specialised electric motors, which need to perform to a very high technical standard. Arx first backed the business in May 2006.

Brian Wardrop says: “For us, VUES was a classic case of a CEE-based (Central and Eastern Europe) business producing specialised components. While it was specialised in component production, other areas of production had been neglected. That’s where we targeted to grow the business organically.”

PRICING MODELS

Brian Wardrop says: “The business didn’t understand where they were making money, so our first step was to look at how much, and where, the customer was willing to pay. This was a different approach where the business ran on charging a fixed rate based on hours of labour. The appointment of a new chief commercial officer built up the sales arm.

With CEE-based businesses in the engineering and manufacturing sector, a lack of self-confidence is commonplace. They typically undervalue themselves financially, giving a self-imposed “CEE discount”. We put in place a chief financial officer, to develop a more structured pricing model, to make sure the business was valuing its services and goods more appropriately, and to make up the backbone of the business.”

MANAGEMENT STRUCTURE

Brian says: “We gradually transitioned to a new chief executive, to give the business a fresh direction. When we invested, the current CEO worked alongside us to identify a new CEO together. We found someone who was incredibly expansion and commercially focused. The previous CEO remained a key part of the leadership team as a minority stakeholder in the business from when we first invested.”

INTERNATIONALISATION

Brian Wardrop says: “The next step was to further internationalise the business. The business was already spread over a few geographies when we initially invested, but we noticed that a significant number of sales were coming from the German market. We increased its direct presence in those end-user product geographies. This contributed to a growth in customer base, and with customer diversification and concentration.”

GROWTH OF FACILITIES

Brian says: “We acquired and built a new manufacturing facility, based in Brno, Czech Republic, to allow for more capacity in the manufacturing of these components. We very quickly noticed that this had both increased productivity and made the production flow a lot more efficient.”