July 24, 2024
This article appears in the Baltimore Business Journal. You can read the full article here >
Crofton HVAC company expands to Canada with acquisition
Crofton’s UEP Group has acquired a Canadian ventilation systems manufacturer that it plans to expand tenfold, including constructing a Maryland plant to manufacture its products.
The UEP Group is a newly formed parent company that was created to manage its growing business in Texas, California and Florida. The parent company on June 24 made its first acquisition when it bought part of a Canadian manufacturing company called DuraDuct.
UEP has since created a new company called VaughanAir to manage its planned expansion of the Canadian business. Frank Smollon, UEP’s CEO, said his company can “easily” double the revenue of the company, which is around $12.5 million in Canadian dollars a year, by employing more sales representatives.
“We saw so much potential for the business, there were so many opportunities they weren’t taking advantage of,” Smollon said. “The team was good and the product was good, but they were missing everything in between.”
The deal will also see UEP, which does around $50 million in revenue, become a manufacturer, something it has never done before. UEP acquired a 42,000-square manufacturing facility in Toronto as part of the deal. Smollon said the company might open up a manufacturing facility in Maryland in three to five years if the company’s sales continue to grow. He will then consider adding a factory to service UEP’s West Coast operations.
UEP first started working with DuraSystems Barriers Inc., the previous owner of DuraDuct, around three or four years ago when UEP was chosen to sell the product locally. Smollon said that with little work, product sales started to take off in the mid- Atlantic market. In just three years, UEP’s local sales of DuraDuct products were more than $2 million a year. That’s about 20% of DuraDuct’s sales.
Smollon took a trip to Toronto early last year to meet with DuraSystems’ executives about selling the product in other markets where UEP operated Smollon found out during the visit that the owner was 82 and wanted to spend more time in Florida. The owner had brought in his nephew, but apparently, he had no interest in running the business long-term.
Smollon said the UEP team at first was worried that another buyer would swoop in, buy DuraDuct, and then cut them off as the product’s sales rep. However, the executives in Toronto realized that they could buy the company and scale it easily. UEP said DuraDuct was mostly missing structure, process, leadership, sales, marketing and vision, all things that can easily be put in place.
“Their sales representatives and sales relationships around the country were really weak,” Smollon said. “We thought that if only there was a better rep network and production capabilities that there was some big upside to be had there.”