Veritas Capital Fund L.P.
660 Madison Avenue, 14th Floor
New York, New York 10021
Telephone: (212) 688-0020
Fax: (212) 688-9411
Acquired by Veritas Capital's Integrated Defense Technologies in August 2000
Incorporated:1944 as Western Gold Mines, Inc.
Employees: 1,620 (1999)
Sales: $155.2 million (1999)
NAIC: 334511 Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing; 335314 Relay and Industrial Control Manufacturing; 33422 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing; 334514 Totalizing Fluid Meter and Counting Device Manufacturing; 334419 Other Electronic Component Manufacturing
1944: Western Gold Mines Inc. is established.
1961: Company named is changed to Western Equities Inc.
1966: Firm is renamed Westec Corporation during a period of rapid expansion.
1970: During bankruptcy reorganization, the company name is changed to Tech-Sym Corp.
1972: Tech-Sym begins its foray into the lumber industry.
1977: After years of reorganization, the company emerges from bankruptcy.
1989: Seventy-five percent of revenues come from defense contracts.
1990: Tech-Sym acquires Continental Electronics Corp.
1991: Company completes acquisition of Syntron Inc.
1994: Purchases Anarad Inc.
1995: CogniSeis Development Inc. and Symtronix Corp. are acquired.
1996: Firm creates GeoScience Corp. and plans for public spin-off.
1999: Company sells GeoScience Corp. to Sercel Inc.
2000: Tech-Sym is acquired by the Integrated Defense Technologies unit of Veritas Capital Fund L.P.
When Tech-Sym Corporation was purchased by Veritas Capital Fund L.P.'s Integrated Defense Technologies (IDT) unit in 2000, the firm was operating as a highly diversified electronics engineering and manufacturing firm that designed, developed, and manufactured various products for use in the fields of defense systems, communications, and weather information. Through its principal subsidiary in the defense industry, Metric Systems Corp., Tech-Sym provided airborne training systems, shipboard electronics, and mechanical systems for defense applications. Through subsidiary TRAK Communications Inc., Tech-Sym developed and manufactured highly technological materials and components for the wireless communications industry. Its subsidiary Continental Electronics Corp. operated as a designer and manufacturer of radio frequency transmitters, and subsidiary Enterprise Electronics Corp. was a leading manufacturer of weather information systems. Tech-Sym's operations became part of IDT--owned by Veritas Capital Fund L.P.--after the acquisition.
Although Tech-Sym had narrowed its focus during the 1980s and 1990s, for a long period of its history the company was a combination of different operations working in different fields. Initially formed and incorporated by a group of investors to take advantage of the uranium and gold deposits still undiscovered in the western part of the United States, from its inception the company was managed by a board of directors who were primarily interested in a return of their investment. This single, overriding interest led the company's management and board of directors to expand its operations. Not satisfied with the small returns garnered from collecting mineral deposits over a period of 15 years, the company began to diversify, among other fields, into the financial services industry and to engage in real estate ventures. The company changed its name to Western Equities, Inc. in 1961 and to Westec Corporation in 1966. The dizzying array of acquisitions made during the early and mid-1960s included Lee Ackerman Investment Company, Arizona Growth Capital, Inc.; Geo Space Corporation, a manufacturer of seismic products and instruments; TRAK Microwave Corporation; Pan Geo Atlas Corporation; Jet Set Corporation, a manufacturer of explosive devices; Engineers & Fabricators, Inc.; Carry Machine Supply, Inc.; Metric Systems, Inc.; and Seacat-Zapata Off-Shore Company, a gas and oil exploration firm.
By 1966, however, the company was suffering from the mismanagement of the past. Flouting such time-honored strategies as economies of scale, management had brought the firm to the brink of financial catastrophe. Many of the acquisitions made during the early part of the decade were losing money, while others had lost their traditional market share. As a result, the company was forced to file a petition in U.S. District Court under Chapter 11 of the Bankruptcy Act. The reorganization immediately went into effect, and the company was required to sell off many of its subsidiaries to pay outstanding debts, including Geo Space Corporation and Pan Geo Atlas Corporation. Other subsidiaries, such as Carry Machine Supply, Inc. and Metric Systems, were reorganized and merged to create more stable and profitable operations. By the time the company changed its name once again, to Tech-Sym Corporation in 1970, management seemed to have learned from its past mistakes and had implemented a reorganization strategy that was bringing the company back to profitability.
Yet the road to financial stability was a long and arduous one. With such an extensive history of varied diversification, even the new management at the company continued to delve into widely disparate businesses. In 1972, Tech-Sym purchased All Woods, Inc., a lumber company, and one year later acquired Alexander-Schroder Lumber Company. Later in 1973, management formed Coastal Lumber, S.A., in Costa Rica. These attempts to create a lumber division resulted in the opening of a retail store in Houston, Texas named "Fine Woods." Unfortunately, this foray into the lumber industry did not result in a significant financial improvement. By the late 1970s, management finally decided to focus on an area where profitability and growth were assured--the development and manufacture of electronic products for the United States defense industry.
Growth During the 1970s and 1980s
The first major acquisition during the early 1970s that introduced Tech-Sym to defense industry contracts was E&M Laboratories, a development and manufacturing firm specializing in electronic components for missiles and fighter jets. This purchase, successful both in terms of its amalgamation into the Tech-Sym corporate structure and its highly lucrative product line, helped the company complete its reorganization strategy and emerge from Chapter 11 in July of 1977. As management at Tech-Sym recognized the enormous profitability in procuring defense systems contracts with the United States government, and with other national governments friendly toward America, more attention was paid to possible takeover candidates in the defense industry. This shift in focus resulted in the sell-off of the company's entire lumber operation.
Although Tech-Sym was firmly established in developing and manufacturing electronic systems for the U.S. Department of Defense by the late 1970s, it was not until the election of Ronald Reagan that the company began to make a name for itself within the industry. President Reagan's commitment to the rebuilding of American armed forces around the world led to numerous contracts for Tech-Sym. During the early 1980s, Tech-Sym filled a huge contract for the development, design, and manufacture of electronic control and monitoring equipment for U.S. Navy ships. But this was only one of its contracts. The company also made airborne weapons systems and electronic countermeasure systems for the U.S. Air Force, microwave components for Navy radar, aircraft, and missiles, radar and missile simulators for training air crews, and a host of computer-based electronic systems used in air and naval defense.
The decade of the 1980s was one of the most successful financial periods in the company's history. As its cash flow continued to improve, management made strategic acquisitions that improved its position in certain fields both within and outside the defense industry. Two of the most important of these purchases included Tecom Industries, Inc. and Enterprise Electronics Corporation. Tecom Industries was a small but important California-based manufacturer of antennas and computer-controlled electromechanical components for aerospace, navigation, surveillance, and command control applications. Tecom had garnered numerous contracts from the U.S. Department of Defense, especially in the area of naval defense systems. On the other hand, Alabama-based Enterprise Electronics Corporation was a designer and manufacturer of highly sophisticated meteorological information systems that detect and display weather patterns and other natural events through the use of Dopplar radars and innovative computer processing. Although Enterprise Electronics was well known as a firm that custom designed and installed meteorological radar systems for countries around the world, Tech-Sym expanded Enterprise's markets to encompass a wider array of customers, such as government agencies, military organizations, and meteorology departments at large universities in the U.S., Europe, and Asia.
Transition and Development after the Cold War
With the end of the Cold War, however, the regular flow of contracts to Tech-Sym and its subsidiaries from the U.S. Department of Defense slowed to barely a trickle. The dissolution of the Soviet Union, and the growing perception within the United States Congress that appropriations for defense systems needed to be decreased, forced many companies that had relied heavily on defense business to alter their market strategy. Tech-Sym was no exception, and management at the company decided to implement a comprehensive diversification program that involved three key elements: acquisitions, new product development, and international expansion.
The transition from being primarily a designer and manufacturer of electronic systems for the defense industry to a more diversified company was not an easy one. Orders from the U.S. Department of Defense began to decline more rapidly than management could switch to commercial ventures. The area of satellite surveillance was especially hard hit and contributed to the company's earnings falling nearly 25 percent in 1991. But management had already made two important acquisitions that would help Tech-Sym ultimately break through the clouds of financial uncertainty. In 1990, Tech-Sym purchased the venerable 45-year-old Continental Electronics Corporation, the world's most famous manufacturer of high-powered radio frequency transmitters. Making transmitters that regularly produced between 500,000 and two million watts, many were used by the Voice of America and Radio Free Europe to broadcast news and various other general information programs throughout the years of the Cold War. Tech-Sym reorganized Continental Electronics and changed its focus from military radars and electronic warfare equipment to a firm that concentrated almost exclusively on manufacturing both high-powered and low frequency transmitters. Tech-Sym then began an intense marketing campaign to sell Continental's high-powered transmitters to foreign countries, including China, which employed the transmitters to broadcast radio shows to more than one billion people in rural areas. In addition, a Catholic organization in Alabama purchased $8 million worth of transmitting equipment to make religious broadcasts to people in South America. Tech-Sym also sold Continental's less powerful transmitters to numerous FM radio stations across the United States.
At approximately the same time, Tech-Sym acquired Syntron, Inc., a manufacturer of highly sophisticated, state-of-the-art seismic instrumentation and equipment. Syntron was one of the first companies in the world to design equipment that made it possible to use three-dimensional computer imaging for identifying gas and oil reserves as much as 25,000 feet below the Earth's surface. Syntron quickly became Tech-Sym's fastest growing and most profitable subsidiary. Based on Syntron's technology, Tech-Sym opened a brand new plant in Singapore in 1992 to take advantage of the growing demand in Southeast Asia for instruments used in the search for gas and oil reserves. Also during the year, the company's Enterprise Electronics subsidiary won a significant contract from the Moroccan government to custom design and install meteorological radar systems in the North African nation, as well as a contract with the Chinese government for the installation of similar radar systems. These acquisitions and sales helped Tech-Sym move away from its traditional reliance upon the defense industry. In 1989, the company derived approximately 75 percent of its total revenues from defense contracts, but by the end of 1992 defense contracts made up only 45 percent of Tech-Sym's revenues.
Diversification in the Mid-1990s
By the beginning of 1993, Tech-Sym was well on its way to succeeding in its strategy to diversify away from the previous heavy reliance on defense industry contracts. Syntron, Inc. was particularly strong, garnering numerous, ever-larger contracts for seismic information systems. One of the largest contracts during this year came from a company working along the Alaskan coastline. Contracts for meteorological radar systems, and for high-powered transmitters, were also growing more numerous, particularly from nations in Europe, Asia, and Africa. In 1994, Tech-Sym made one of its most important acquisitions to date, having purchased Anarad, Inc., an environmental instrumentation firm based in California. The purchase of Anarad was made specifically to take advantage of the impact that the 1990 Clean Air Act would have on manufacturing plants and factories stretching along the Houston Ship Channel in the Texas Gulf. More than 340 factories along the Channel were required to monitor the quality of their emissions into the atmosphere, and each of them needed environmental instruments to measure the amount of contaminated air.
In 1995, Tech-Sym acquired CogniSeis Development Inc., a seismic firm located in Houston, Texas, and Symtronix Corporation, another seismic company. These two firms were then merged with Syntron, Inc. to create GeoScience Corporation. Tech-Sym management brought the three companies together to build a major developer and manufacturer of seismic data acquisition systems used in the oil and gas exploration business. As the demand for three-dimensional data collection grew in the field of oil and gas exploration both on land and offshore, Tech-Sym planned a public spin-off for GeoScience Corporation. Tech-Sym retained solid control of the new company through its 80 percent ownership of GeoScience Corporation stock. With seismic activity continually increasing not only in the Gulf of Mexico but throughout the world, by the end of 1996 the companies that comprised GeoScience were reporting record levels of ever-increasing revenues.
Tech-Sym successfully transformed itself from a company dependent upon defense contracts to a highly diversified firm with growing revenues from markets such as communications, meteorological data systems, and seismic instrumentation and equipment. By the mid-1990s, the company's defense contracts had leveled off at approximately 25 percent of total revenues, with the other 75 percent derived from its diversification activities. With the help of its strategic focus, the company's net income improved from a 25 percent decrease in 1992 to a 20 percent increase by 1995.
Restructuring and Eventual Sale: Late 1990s-2001
Sales for 1996 reached $321 million. Tech-Sym's successes however, were overshadowed by its mediocre stock performance, which management viewed as being undervalued. J. Michael Camp, Tech-Sym's president and CEO, initiated a strategic movement in which the company would simplify its operations and restructure key segments in order to capitalize on high growth markets and lower operating expenses. In 1998, the firm began to restructure its subsidiaries including TRAK Communications and also began to look for a buyer for its GeoScience Corp. The company's new focus rested firmly in its communications products, as well as its defense and weather information systems. Revenue from its restructured units in 1998 was $140.5 million.
In 1999, Tech-Sym initiated a share-repurchase program in an effort to boost share value. At the end of that year, the firm sold GeoScience Corp. to Sercel, Inc., a wholly owned subsidiary of Compagnie Generale de Geophysique, for $53.6 million. The proceeds of the sale were utilized to pay off debt and fund the stock repurchase program. At the time of the sale, Tech-Sym also announced that it had retained an investment firm to review the company's operations. In a company press release CEO Camp stated, "we believe our current share price does not accurately reflect our current value or future prospects. Our operating strategy has been to increase the pace of growth of our core businesses while improving financial results and divesting non-core assets." Camp also stated that the market had failed to respond accordingly despite positive changes in the company's operating procedures. The company reported a $23.5 million net loss for the year.
Tech-Sym entered the new millennium with an uncertain future. The investment firm that began investigating company operations in 1999 ascertained that the best possible outcome for Tech-Sym would be to sell the firm. A flood of acquisition offers began to surface as a result of the findings, and in June 2000 the company announced that it would be acquired by Integrated Defense Technologies, a portfolio of defense electronics companies owned by Veritas Capital Fund L.P. The $182 million deal was completed in September of that year and was applauded by management for its positive effect on shareholder value. Tech-Sym's outstanding common stock was converted at $30 per share as part of the deal. The firm's operations were then merged into IDT's portfolio of companies. Under IDT, the former Tech-Sym subsidiaries Metric Systems Corporation and TRAK Communications continued to operate.
Byrne, Harlan S., "Tech-Sym Seismic Line Nears a Payoff," Barron's, March 8, 1993, p. 44.
Elder, Laura, "Tech-Sym Goes on Acquisition Spree to Offset Slump in Defense Spending," Houston Business Journal, July 15, 1994, p. 8.
Marcial, Gene G., "A Wallflower About to Bloom?," Business Week Online, June 2, 1997.
Payne, Chris, "A Farewell to Arms: Defense Firm Comes In From the Cold," Houston Business Journal, April 26, 1993, p. 1A.
------, "Diversifying Defense Contractor Reports Strong First Quarter," Houston Business Journal, May 10, 1993, p. 15A.
Pybus, Kenneth, "Tech-Sym Spinning Off Seismic Unit," Houston Business Journal, April 12, 1996, p. 1A.
"Tech-Sym Announces it Has Completed the Sale of GeoScience Corporation," Business Wire, December 13, 1999.
"Tech-Sym Corporation Announced Fourth Quarter and Fiscal 1999 Results," Business Wire, February 18, 2000.
"Tech-Sym Corporation Completes Merger," Business Wire, September 29, 2000.
"Tech-Sym Plans Stock Buyback," Wall Street Journal, June 26, 1996, p. A6.
"Veritas Capital to Acquire Tech-Sym Corporation for $30.00 Per Share," PR Newswire, June 27, 2000.
Source: International Directory of Company Histories, Vol. 44. St. James Press, 2002.