Michael Knight, president of TTI's new semiconductor group (TSG), shared the acquisition-and-investment strategy behind building the business in a recent interview. TSG was formed as a unit of TTI, an indirect, wholly owned subsidiary of Berkshire Hathaway, to establish a strong semiconductor component distribution business.
The formation of TSG began just over two years ago with the acquisition of Symmetry Electronics. Less than six months later, Changnam was acquired as TTI continued to build out the TSG organization. Last week, it announced plans to acquire RFMW, adding another key player to the TSG team.
Knight explains that TSG has developed a profile for the types of companies they want to acquire. The first criteria is the fundamental strength and quality of the company. They chose to acquire companies that were already being managed well and had strong teams and brand names. They wanted to identify companies where investment would unlock growth opportunities that had previously been limited by tight resources. TSG brings the financial backing and private company profile that allows it to invest for the future.
TSG wants to identify companies that are focused on product sets where TTI has already built up industry specialization. This gives TSG companies the opportunity to leverage relationships and expertise that TTI already possesses. The acquired companies can form relationships with other TTI business units and sales teams to tackle bigger market opportunities. Mouser, for instance, can offer TSG companies insight into customers early in design process. When those customers move into volume production, TSG has its foot in the door.
Specific areas of TSG market specialization are: transportation, military, aerospace and industrial electronics. Changnam delivers a deep focus in the automotive space as a supplier of components that not only collect data but process and transmit the data. Symmetry brings deep expertise in IoT with products that support data collection and communication with their cellular and Bluetooth modules.
TSG can also introduce their customers to companies that provide services for connecting devices to the cloud, where critical analytics are performed. Where Symmetry brings solutions for the edge of the IoT system, RFMW supports the other side with components for wireless communications infrastructure. The deployment of 5G wireless communications represents a major opportunity for growth in the TSG business.
Knight sees TSG as restoring value that had been lost in the distribution business. Former distributors like Wyle Electronics offered specialization and enabled supplier-customer relationships that were a core part of their business. Many specialty semiconductor distributors have disappeared and their value has been missed, Knight said. With the creation of TSG, Knight jokes that they are, “bringing the woolly mammoth back to life."
As a subsidiary of Berkshire Hathaway, TTI and TSG have the benefit of operating as a private company with access to an amazing amount of capital and cooperation from other Berkshire Hathaway companies. This affords TSG the benefit of investing for the long-term. In particular, TSG has chosen to invest in people as key to its growth strategy. When asked about how they deploy their capital investments, Knight quickly explained that first and foremost they invest to allow their companies to hire people at a faster pace.
One example he gave where this approach has been employed is Symmetry Electronics. The infusion of new capital allowed Symmetry to add sales people, so they are now able to compete in every major market. Investments were made in inside sales, product managers and inventory to support their expansion into new markets.
In addition, these investments facilitate connections with other TTI teams. This supports sales executives from TSG companies joining other TTI sales representatives in introducing their products to existing TTI customers. While other areas of investment also benefit from access to new capital, it is clear that people are at the center of TSG’s investment strategy.