Hudson’s C&M Machine Products expanding

The smell comes from the canola-based cooling liquid used in the many machines that churn out millions of small metal components for the family-owned “job shop.” The smell is evidence that C&M is not just surviving during the recession, it is growing.

“We had about 60 employees in 2008; now we have 100,” said CEO Dan Villemaire.

The firm is in the process of expanding and refurbishing a building in the Sagamore Industrial Park in south Hudson, where it has been located in various buildings for decades. When the work is finished by late winter, C&M will have 135,000 feet of manufacturing, office and warehouse space in two buildings a quarter-mile apart, roughly double its current footprint.

The expansion and move reflects the fact that C&M still has a lot of family involvement. It was founded by Villemaire’s late grandfather and his father, Paul, who is still a co-owner with Dan.

Ten family members work there in various capacities, including George Villemaire, Dan’s uncle, who as the company’s property manager has been in charge of the expansion.

“It’s going quite well. It’s on schedule,” George told a reporter during a recent tour, as they watched stucco being applied to the exterior of the new building.

“We were under budget until my father got involved,” added Dan. The two men laughed together.

Dan Villemaire says C&M has thrived by responding to the many pressures that result from bad economic times.

“A customer might have 3,000 vendors – buy components from 3,000 places – and wants to get it down to 1,500,” he said. “We have consistently come out on top of the supply chain.”

Making the manufacturing process faster and less expensive was key, through better processes, training, and better technology. The latter includes a $1.7 million rotary-transfer precision machining device from Hydromat which allowed C&M to reduce the turnout time for one piece from 90 seconds to 3 seconds.

But even older, simpler computer-controlled machine tools are big and expensive. They can take a 12-foot rod of metal and turn it into thousands of pieces during a single autonomous run, and most cost six digits: This is a capital-intensive business. C&M has “oh, a least $20 million, probably a lot more” worth of devices on the floor, Villemaire estimated. The company has four full-time maintenance workers just to keep them humming.

C&M – a name taken from initials of early partners – was started in Lowell, Mass., in 1979 by Villemaire’s grandfather and father to make metal components used in other firms’ devices.

Such companies, called machine shops or job shops, have a long tradition in industrial manufacturing, and remain a large, if largely overlooked, component of the region’s business scene. In particular, they provide much of the area’s manufacturing employment for the technicians needed to operate the computer- controlled machines that shape the copper, aluminum or steel parts.

C&M moved to New Hampshire decades ago, and their best source of employees remains Greater Lowell Technical High School in Tyngsborough, Villemaire says, although C&M is working harder with New Hampshire high schools and community colleges.

The company’s customers include defense, automotive and firearm manufacturers, and it does product runs ranging from 500 pieces to millions at a time. One customer, which Villemaire declined to name, has such a large contract that it prompted the whole expansion and move.

Villemaire, 29, a 2002 graduate of Bishop Guertin High School, joined the firm six years ago after getting a finance degree from UNH’s Whittemore School of Business. Like many children of business founders, he says he was initially uncertain about following his predecessors.

The story of what’s happened to First Data since it was taken over by KKR is an instructive look into the growing impact of private equity firms here and around the world. KKR, Bain Capital and other private equity firms have bought up roughly $3 trillion worth of companies around the globe with the backing of pension funds, Wall Street banks, foreign nations’ investment funds and other backers.

After KKR bought First Data, thousands of jobs were shed. First Data’s debt rocketed past $22 billion — more than double its annual revenue — due to the junk bond-fueled deal. The company went from earning $1 billion-plus yearly profits to losses of hundreds of millions or even billions of dollars. And it recently had to renegotiate most of its debt to get more time to pay back the loans.

KKR “went really to the edge, and then the economy tanked,” said Eric Grover, a longtime veteran from the payments processing industry, now with consulting firm Intrepid Ventures. Since KKR’s acquisition, he said, First Data has done a good job of re-tooling and recovering under KKR’s direction. But the company remains vulnerable because of its huge debt load, he said.

“The good news is they have a long runway” because First Data got extensions on most of is debt to 2017 or after, said Grover. But, he added, “the business is over-leveraged.” If interest rates shot up, driving up the cost of its debt, “that company would tank,” he said.

First Data, with 24,000 employees, is the world’s largest processor of credit and debit card transactions. It moved its headquarters back to Atlanta from Denver in 2009, and now employs 1,200 in metro Atlanta and 200 in Columbus.

Other local companies wholly or partially owned by private equity firms include Alpharetta-based Colonial Pipeline (KKR); The Weather Channel (Blackstone Group) and Church’s Chicken (Friedman, Fleisher and Lowe). Bain Capital, the firm co-founded by former presidential candidate Mitt Romney, owns stakes in The Weather Channel, specialty credit card firm FleetCor; former Home Depot wholesale arm, HD Supply; and radio broadcaster Cumulus Media.

Private equity firms — once more commonly called leveraged buyout firms — amassed their huge portfolios using a strategy that hasn’t changed much over time. First, the firms assemble a buyout fund by wooing money from pension funds and other big investors who become partners in the fund. The buyout firms then use that money, plus billions more of borrowed money, to buy up companies in highly-leveraged deals that are akin to buying a house with a small down payment plus a big mortgage.

The buyout firms try to look for “fixer-upper” companies that are still basically solid. They spend a few years retooling them by cutting costs or coming up with new products or strategies, then sell them again to new owners or through a public stock offering. The buyout firms and their partners then split up the profits.