2026.09.25 | GP | Industrials | Davis-Standard ETG Acquisition

Its ETG Acquisition

Primary:

Davis-Standard GmbH

Associated:

HI

Husky Technologies Limited

Viewpoint:

Former Executive

Moderator: Oliver Thompson (OT)

| Sep 24, 2026 | 33 Min Read

James Murphy (JM), Former Vice Chairman of the Board of Directors - Davis-Standard

SU MMARY

The discussion focuses on the evolution and strategic direction of Davis-Standard, a company in the plastics machinery industry. The expert shares insights from their extensive career at Davis-Standard, detailing the company's history, strategic mergers and acquisitions (M&A), and market positioning. The conversation also touches on the company's product lines, market trends, and competitive landscape.

Key Insights

The expert emphasizes the importance of strategic M&A in Davis-Standard's growth, highlighting that a significant portion of the company's revenue increase was due to acquisitions. This strategy focuses on enhancing product offerings and expanding global capabilities to meet customer needs. The expert notes that the company has successfully doubled its revenue and nearly tripled its EBITDA over a seven-year period, attributing this to both strategic acquisitions and organic growth initiatives. The expert highlights the importance of the aftermarket business, which has grown significantly and is more profitable than the equipment business. This growth is driven by customer demand for maintenance and parts services.

Competitive Landscape

Company/Brand

Market Position

Key Strengths/Weaknesses

Davis-Standard

Leading

Strong in pipe, tubing, and sheet extrusion; robust M&A strategy

Windmöller & Hölscher

Strong

Focus on film and packaging; strong in Europe

Reifenhäuser

Moderate

Focus on packaging and non-wovens; smaller than Davis-Standard

KraussMaffei

Strong

Competitor in pipe area; owned by a Chinese conglomerate

Other Competitors

Various

Mostly smaller, regional players; some potential acquisition targets

Quantitative Insights

Metric

Performance Indicator

Revenue Growth

Doubled over seven years

EBITDA Growth

Nearly tripled over seven years

Aftermarket Business

Over 30% of total business, more profitable than equipment sales

Market Dynamics

The plastics machinery market generally grows with GDP, with extrusion being a leading process due to its efficiency and high- volume capabilities. Demand drivers include infrastructure needs, packaging innovations, and power distribution, particularly in developing markets. The expert notes that while the market experienced a downturn during certain periods, it has shown resilience and recovery, with strong backlog levels supporting ongoing operations.

Risks and Challenges

The expert identifies potential risks related to the use of plastics, workforce aging, and the need for continuous innovation and execution to maintain market leadership. Economic recessions pose a broader risk, but the company has historically managed to maintain profitability through such cycles by leveraging its backlog and aftermarket services.

OT: Hi, good afternoon. I'm Oliver Thompson with Guidepoint. Welcome to our call today on Davis-Standard. If you have any questions, please feel free to email ask@guidepoint.com, and I'll try to integrate those questions into our conversation. With that, I'd like to introduce our advisor for today, Jim Murphy. Jim, thank you for the time. We're excited to have you.

JM: Oliver, thank you for the introduction, and also happy to be here this afternoon. To start, I'll give you a little background of myself, my experience in the plastics machinery industry, and specifically my career at Davis-Standard. So my background, my education, I have an engineering degree, a chemical engineering degree. Most of the people you'll meet in the plastics machinery business tend to be mechanical engineers, electrical engineers, and/or chemical engineers, which is more of the process side of how the machine operates versus the nuts and bolts of the machine, how it operates from a dynamic process standpoint. So I spent almost my entire working career in plastics machinery, starting with some smaller businesses coming out of school, but spent the last 34 years, from 1989 to 2023, with Davis-Standard. I started with the company as a sales engineer, and in our world in plastics machinery, sales engineers are really the people that are in the front lines, basically territory-based, so regionally-based, and working directly with customers to develop specifications for proposals, ultimately to generate proposals and hopefully close new business for the company. You generally need somewhat of a technical background, because the customers you're mostly dealing with are in engineering or operations management, and they tend to be typically more senior roles in the organization as these are relatively expensive equipment, hundreds of thousands, if not millions of dollars. And so it's a decision that's made, you know, not very often, you know, they're not buying equipment every day. So it's a decision where they really put their most senior people on the projects to make sure that they're making the right decision for the business. So I was in that role with Davis-Standard for 7 years. I did it for a couple companies before Davis- Standard for about 4 years. So the first 10 years or so was in kind of that very front-facing part of the business, working with customers and understanding the applications and understanding kind of the customer dynamics. At that point, I relocated to Davis-Standard's headquarters, which at the time was in Connecticut, Eastern Connecticut, outside of Mystic, and was in a sales and engineering management role. So it was leading a product line and the product line

leader had responsibility for all the product engineering as well as the sales of the product. And it all went into a central manufacturing operation for kind of the order fulfillment, but it was really leading that product line. In that case, it was customers that manufactured pipe and tubing products, so we called it the pipe and profile product line, and we had specific products and market strategies aimed at those customers. I did that at Davis-Standard for about 5 or 6 years. Took on some additional responsibilities, and by about 2005, I was running that entire Connecticut operation, which at the time was the largest manufacturing operation of Davis-Standard's 4. It did about 40, almost 50% of the total sales revenue at the time and had our key product lines, pipe and profile, wire and cable, and the sheet business. Sheet extrusion. During that time actually was when Davis-Standard, when I joined the company until 2005, was actually part of a public company by the name of Crompton and Knowles, which became Crompton Corporation, which became Chemtura. And when I joined the company, Davis-Standard was roughly a third of the revenue of Crompton and Knowles. It was really, you know, they had 3 businesses, each about a third. Corporate was more just managing those 3 units. And, you know, one was machinery, one was colors, and one was specialty chemicals. Ultimately, they expanded more in the specialty chemical category, and in 2005, they decided to find a different home for the machinery business, because by this point in time, the business was 80% plus specialty chemicals, and they were really working their way down that avenue. So the Davis-Standard was merged with a company that was a private company by the name of Black-Clawson. Davis-Standard was 4 to 5 times the size of Black- Clawson at the time. But Black-Clawson did have a private equity sponsor, so the private equity sponsor, together with Crompton, formed a partnership, and actually at that point in time, that select a group of key managers were chosen to invest in the business, and that was really the beginning of Davis-Standard's... ...private organization as it is today is still a private company. In terms of my background, continued with the company, different senior level positions. Ultimately, I was appointed CEO in 2015. By that point in time, Davis-Standard, we had recapped the business and had sold the business then to ONCAP in 2012. So I took over from the CEO that was there when ONCAP bought the business. So it was 2015. We've come off kind of a couple of down years in the market. After coming off some good years in the kind of 10, 11, 12 years, 13 and 14 were a little slower in terms of market activity. Fortunately, with 15, market started to rebound a bit. One of the things we did at that point in time was really look at our strategy with regard to strategic M&A. Together with the private equity group there, we did put a renewed focus on strategic M&A, and that was really an important part of the growth that I saw, that we saw under my leadership there from 2015 to

1. And we actually sold the business, ONCAP sold the business to Gamut during that period at the end of 2021.

But over that 7-year run, we doubled the revenue of the business and just about tripled the EBITDA of the business. And, you know, on the revenue side, the growth was driven roughly 60%, 65% by those strategic acquisitions. And then the balance was really driven by organic initiatives specifically around new product development, targeted new product development. And together with that, you know, it was a stronger business, led to stronger profitability as well as initiatives to increase the aftermarket share of the business. So that was another key growth driver and improve our operational efficiency within both the factory as well as engineering and other parts of the business. So, OT: Okay, JM: Yeah, OT: Great.

JM: And then I was on the board for 2 years and stepped away from the business at the end of 2023.

OT: Can you talk a bit about the M&A strategy and specifically how that is architected? Strategy around product expansion, how you think about top line and cost synergies.

JM: Yeah. So, the industry is—if you look at the industry today versus 50 years ago, not unusual and not unlike many industrial activities—there's been a lot of consolidation. And Davis-Standard in North America has been the largest consolidator of these companies, what used to be many smaller private companies. But our strategy really with regard to M&A—and I believe it still aligns with the company's strategy today—is really to build capabilities along 2 axes, looking at your current product lines and your product portfolio. What can you do to have a stronger product offering,

more competitive market leading position? And then secondarily, what are you doing to build your global capability to service customers wherever they may operate? Because one of the things we've seen with our customer base that aligns with that M&A strategy is our customers in many cases are also seeing consolidation. So we have larger customers we're dealing with, which are more diverse in terms of the geographies they operate in; they're operating in North America, Europe, Asia, and they're looking for partners that can supply technology and service of the same quality with the same response in all those places where they operate. So that's really, as they look for people to really partner with on these large capital purchases, that's really the criteria that they're measuring it against. And so part of our strategy was really to look at what are our core strengths, and generally around the technology and the core engineering that we bring to these applications, and then where are the areas where we are 1 or 2 or 3 in those segments, and what are the available acquisitions that are available, or the relationships we need to develop to be able to bolt on product lines or products that can help us strengthen that position and ultimately be a stronger competitor in the marketplace. And that's really the strategy I believe the company is still doing today. The most recent acquisition was the ETG acquisition, which is a large acquisition.

OT: Sounds like a very consequential deal.

JM: Yeah, no, it's probably the largest acquisition they've done, certainly in the last 10 years. But, you know, it brings a couple of those key pieces to the business. One is it very much strengthens their pipe and tubing business. So with the Davis-Standard brand and the Maillefer brand, they had strong positions, particularly in North America and in Europe in tubing applications. With the addition of ETG through the Battenfeld brand brings them very much stronger capabilities in tubing and other applications as well as then adding the capabilities for medium and large diameter pipe. So this gives them a very strong product portfolio and really the global market leading position in this category in pipe and tubing, which are, you know, there's some good applications there, so still some good growth driven by infrastructure and really ultimately is being driven by the need to not only deal with aging infrastructure in the developed market, but the required infrastructure that's needed in developing markets like in Asia, South America, and Africa, where, you know, they're looking for potable water, for sewage, and a lot of these applications. This is the type of equipment that you need to produce those pipes. And then the other bit of the Battenfeld brand is around the sheet extrusion. So there again, Battenfeld has a very strong presence in the European market, which blends nicely with Davis-Standard's strong position in the North American market for sheet extrusion, which is, again, primarily packaging, though not exclusively packaging, but primarily packaging. So, again, a good growth area. As consumers are looking for convenience, they're looking for ways to maintain freshness and, you know, innovative packaging are really 2 ways to accomplish that. Another key benefit of the ETG acquisition is a large manufacturing facility in Southern China that I think has been part of Battenfeld, excuse me, for I think 2 decades plus now. So just as Davis- Standard had a manufacturing facility in Suzhou, about half the size of Battenfeld's, but this kind of gives them much more capability to service the Asian market and to be a stronger competitor in that market. So overall, OT: I wouldn't say.

JM: What do you see? Go ahead.

OT: Sorry, so I'd like to just take a little bit of a step back from the ETG deal and just discuss extrusion equipment and your view of that core market.

JM: Sure.

OT: Can you talk a little bit about the key drivers to demand in that market and are there any differences when you filter down across various end markets?

JM: Yeah. So, you know, if you look at plastics machinery, just talk about that in general. So when you think about plastics machinery, how do you process plastics? First of all, plastics, if you look at the growth of plastics, polyethylene,

polypropylene, all the polymers, that market basically grows with GDP, right, more or less. And therefore, plastics machinery in aggregate will see that general GDP maybe plus a little bit growth dynamic. Within those, the ways to process plastics, you have extrusion, you have injection molding, you have blow molding. Of those 3, extrusion consumes... Although there's fewer machines, let's say, they're bigger machines and they consume more of the plastic than any other process. So it's a very efficient, it's a continuous process, whereas the others are batch type processes. So a continuous process allows you to do larger throughput and tends to be more efficient. Now, of course, there's also limitations in terms of types of products that can be made, or else it would all be made that way. But extrusion is, you know, a leading process for these high-volume applications. So within extrusion, you know, there's a number of different categories we look at. But a couple of the big categories, as we always thought about them, you have markets that are around packaging, both rigid and flexible packaging is a big consumer of extruded materials. Then you have infrastructure products. These are things that are like pipe, wiring cable, so power cable, fiber optics, there's some applications there, but that's broadly the infrastructure categories. And then you have some categories of consumer products; you have durable, non-durable, so you have white goods, refrigerators, and then you have some medical products which are, you know, really more consumable. But thinking about it, those are some of the big markets. But within there, all those different segments, as you would imagine, can grow at different rates in any given time. One of the areas where the company has seen strong growth in the last 5 years and they're expecting to see continued strong growth is from the Maillefer business, which is specifically around wire and cable with a particular emphasis on power distribution. So Maillefer, again, is the market leader in this category, very strong technology, very deep customer base, many years with all the market leaders in that category, and that's being driven by demand for electricity, which, you know, with the need for more compute, with the need for more electric generation for other things such as vehicles, all things battery-operated, which seem to proliferate every day, that's really an area where there's been significant growth in the last 5 years, which Maillefer has benefited from, and the forecast remains very robust for the next 5 to 7 years in that category. And that's where you're seeing a step jump in demand where you're seeing growth rates that, you know, are better than 2 times GDP growth. And it's forecasted to continue. But again, that's really being driven by what is really, for a long time electricity was kind of just really saw that kind of GDP type growth, but now you're seeing new applications and more demand for it. And that's true both in developed markets as well as new developing markets where the demand's always been a bit stronger as they continue to add capacity as their population grows.

OT: So as you look at the portfolio of products for Davis-Standard, how would you underwrite the growth in relation to GDP? Is it just sort of a blended GDP plus grower? Are there any drivers that you know firmly accelerate that?

JM: Well, I think a couple of things. If you... the company today, they're coming back from... during COVID, the business saw very strong order intake, record level order intake. So we're talking the period 21 into 22. It was many categories, but it was broadly packaging. It was things around broadband. So there's a lot of fiber optic, conduit, there are a bunch of categories around broadband that the company participates in, which was very strong. And then this electrical wire and cable, electrical distribution, really demand for power distribution. So those were really the strongest categories, the strongest markets, 21 and 22. The industry in general, as it saw a softening at the end of 23 into 24, 25, it has definitely rebounded this year, but it's not unusual to see these kinds of cycles within the industry. And there are places people can look. There's industry data that's collected by the participants and they report, they don't report at a real detailed level, but they report high-level industry trends. And in the US, that's the Plastics Industry Association. They compile a monthly report from the industry participants, and then on a quarterly basis, they publish, put out a summary of that data. And then in Europe, it's a group called VDMA, which is a German machinery working group. So within that group are companies that build machinery for all different applications, woodworking, steelworking. But there is specifically a rubber and plastics machinery group. So that group will, again, similarly, they report, I think in that case, still monthly, and quarterly they'll issue these reports. So you can see these trends in the industry and the industry overall saw this significant improvement in 21-22, a bit of a downturn in 23, 24, 25, but the company has backlog that they're still fulfilling to generate revenue because backlogs were at very strong levels at the

end of 22. And, but, the reports are and the data seems to be definitely turning, that customers are now looking to make new investments. And it isn't unusual for customers to go through periods where they make a significant amount of capital investments, then they spend time really implementing, filling the equipment up, building the book of business that's needed to fill the capacity, and then they're in the market for more capacity. So I think that's really what's happening now and the companies are starting to see a stronger market activity. So one of the things that Davis-Standard, we really focused on, started focusing on 15 years ago, was really to OT: And we'll be right back.

JM: To drive stronger performance out of our parts and service team, we call that the aftermarket business. Oftentimes in capital equipment businesses, it's not unusual for all the attention to go to what some people will call the elephant hunters. So the people chasing the big deals. The reality is, all these things are important, but what we heard from customers starting 15, 20 years ago was that they had for many years they had a lot of talent in-house to maintain and kind of rebuild their equipment, but that wasn't something either they wanted to do or they had the capability to do. So they were looking to the OEM to be more of a partner, particularly when it came to more sophisticated work that needed done on the equipment as well as the day-to-day need for maintenance, parts, etc. So at that point in time, Davis-Standard, we put together really separate business teams and operational execution teams to be able to just focus on that aftermarket business. Because the demands there are different. The requirement to do things much quicker when a customer is down, that means the equipment's not running. This equipment is generally central to the revenue generation in the factory and within the business. And so they're disappointing customers and losing revenue. So you have to have a very focused team on the front end, the sales team, and also then when the work needs done, both in the shop and then in the field, your operations and service teams. So that is an area that Davis-Standard focused on building those teams and something as they work through acquisitions, putting many of those lessons learned into the new... newly acquired businesses takes time, doesn't show results immediately, but it takes time. And as you build the capabilities, tell the market about your capabilities, show them you can deliver on those capabilities, you slowly but surely build a stronger business, build a wider customer base. And that's really where aftermarket in many cases was... if you go back in time, it was down around 20% to 25% of the business. Now today it's over 30% and it's something you want to grow into the much higher level but it takes time but it and you don't want to grow it at the expense of the other you want to grow both the capital equipment and the aftermarket business in tandem. And that's really about the parts, which every... this is rotating equipment. In most cases, I mean, the extruder rotates, that's how it produces the molten plastic. And then downline, you have winding equipment and all types of different rotating equipment to process the material. And rotating equipment wears out, it's just a matter of time. As you rotate the equipment, those RPMs add up and you get so many RPMs and then it's time to replace certain components, bearings, different shafts, all kinds of different things need replaced. So that's where it's important that you have that customer relationship and you're available, particularly for some of those more technical change-outs that need to be done. So that's an important, that's a very important growth driver for the company, both from a revenue standpoint as well as profitability, because the aftermarket part of the business is just significantly more profitable than the equipment business.

OT: And at what magnitude is it... I think 10% versus 30%. Yeah.

JM: It's that kind of ratio, yeah. It's definitely twice the gross margin.

OT: Okay, that's what I figured.

JM: In aggregate, yeah.

OT: And as you think about the aftermarket revenue stream, is there a rule of thumb to how you think about the... the installed base, if you do X amount of new equipment or you have X amount of machines out there, there's a predictable amount of aftermarket revenue that you can rely on. Just trying to understand the visibility of the installed

base and any JM: Yeah.

OT: sort of like consumable, predictable revenue stream.

JM: Yeah. So we, you know, we did some work on that over the years and it's really looking at the entire life cycle value of the aftermarket. So most of this equipment is installed and has a generally, it's in production for somewhere between 15 and 20 years on average. And in order to maintain it so that it's productive during that entire time, you have to maintain it. That's kind of base level, but then there are going to be places along there, maybe at the 5-year mark, the 8-year mark, the 10-year mark, where you're going to have to make more significant investments because, again, some of these large rotating things will need more attention, things like I mentioned gearboxes and shafts. And so when you look at, we always looked at over... Typically, over the life cycle of the equipment, you're going to spend 100% to 120% of the cost of the machine over the 20 years it takes you to maintain it and keep it functional. So probably, almost if you think about it. Big expensive things like this. It really isn't that unreasonable when you break it down. But how that really lays out is, for many years, particularly the early years, you're just doing the normal maintenance. It's not consuming a lot, but it does consume regularly these certain parts. But it's maybe 1% to 2% kind of the machine cost. But then you'll get into these years where you have to spend like 20% of the machine cost to make... to really do some necessary kind of upgrades to keep it current. Because electronics change and also the technology evolves, so you're going to need to upgrade certain items. So that's important. But in terms of the one thing that's always kind of, you know, why you work to build a stronger team is they have a standard while they, and we've done a lot of surveying of customers. Customers, when they think about aftermarket, they always prefer, they prefer the OEM, but that doesn't mean the OEM is a slam dunk. Customers are always concerned about quality. They always give the benefit of that to the OEM. They're concerned about availability, meaning who can take care of the job now for me. Those are really the 2 most important criteria. So there are many competitors that are chasing different parts of that, you know, that opportunity, that aftermarket opportunity, some of those competitors are actually, you know, the company's suppliers, particularly on the electronic side. If you think about like for the machine controls, the company uses primarily Allen Bradley and Siemens, who are the 2 biggest industrial automation companies in the world, and the company has great relationships with them, but those companies go straight to the end consumer as well. And they have very sophisticated, large sales teams that are also trying to get that business. So it's always a battle. So I wouldn't. It's tough to come up with that exact rule of thumb ratio that you speak of because of that kind of competitive dynamic. It's probably the capture rate, we always thought of it, we were probably... maybe a third, so there's a lot of opportunity.

OT: Okay. As you think about the demand driver for why customers purchase this equipment, how much of it is a capital project that would be tied to some sort of expansion versus more of just an ordinary replacement?

JM: Yeah.

OT: Where I'm going here is trying to understand the embedded risk of macro recession. You're right. Just the threat of high interest rates and potential pressure on new development.

JM: Yeah, no, good. That's a good point. We never had exact statistics on this, but we did do a couple different exercises where we took sets of data over numbers of years and went back trying to understand the exact question. So if you sell, you know, a new piece of equipment, how much of that capacity is new capacity versus replacement capacity? And in general, the answer we came up with was about new equipment represents 60 to 65% new capacity. So in some cases, they replaced it tearing out a line, putting in a new one. But even when that happens, there's going to be a little bit of new capacity because they're probably buying a more efficient or a larger or more capable unit. And then in other cases, it's just 100% capacity expansion. But in aggregate, it was just under two-thirds new capacity that was put in. That's ultimately the biggest driver. Which means the customer base is growing their business, right?

So they're generating more revenue and they need more capacity to fulfill that demand.

OT: So in that vein, the economic sensitivity of the customer base is presumably a very important read-through for how the business would cycle.

JM: Yeah, I can give you examples of how we did... what went on during the 2000, 2002 recession... the 2007 to 2009 recession. Even, there was a 6-month recession around COVID, March to September of that year, more or less. But I think the 2007 to 2009 recession is representative. And the business was performing well going into 2000, even into

1. We really didn't see the impact of that recession until the summer of 2008. But once it was there, by September,

things dropped very quickly. And that was probably... In terms of, that was probably as steep a drop as we've ever seen in order activity and things were very quiet for 6 months. They were still quiet for another 6 to 8 months after that. But the one saving grace when these things happen is we always have backlog. So at any given time, the company has... On the equipment side, they have 6 months, maybe 8 months of backlog. So when these things happen, when demand just turns, if it turns quickly, from an operations standpoint, you still got work to do. Once an order is in backlog, 99.5% of the time it gets turned into revenue. There's the rare, rare exceptions where it gets canceled. But it's virtually 100% fulfillment. So you've got time to adjust the business, make adjustments to your cost structure and those things. But what we did see then is, so by early 2009, you started this—early, mid-2009, early 2010, we were definitely seeing improvement. And by the end of 2010, it had snapped back almost to the same level where it was back in the beginning of 08. So it dropped very quickly, but came back very quickly. Now, you go through that process, but it was... how did the company do? Company remained profitable during that whole period. Aftermarket doesn't drop off like that. Aftermarket, given how much the recession is, people are... It's still running their equipment. They're not running it maybe at 100% anymore. They're running at 90%. But they're still running the equipment. So that's still generating the need for parts and service. So that part of the business doesn't see... it'll see a little bit of a downtick, but it doesn't seem the same level of change. And part of that is, what I think, what's happened over the last couple of years, the business was... they had that backlog, but the order level kind of lightened quite a bit from previous levels. So they're going through a lesser version of that same cycle. You've got the backlog, you continue to execute on that, aftermarket was doing okay, but overall the total level of activity is lower, but you're starting to see improvement from that. And you build from there. So the important things for the business really during those cycles are, you got to tighten your belt. You got to maintain profitability, and there are ways to flex the labor that the company is adapted to, to maintain the cost. But you want to make sure that you keep the critical infrastructure in the business working so that when the business does return, which it will, and it always does, you have the engineers, you have the salespeople, you have the talented machinists, you have the folks you need that can support... generate, turn on the volume relatively quickly so that you can meet the new demand. And the company has generally been, in these recessions, they're never easy. They're never easy for any business. But I think particularly the last couple, as they've come out, I think the company has generally been better positioned than many of their competitors. And it's been an opportunity to win share.

OT: What does the competitive landscape look like? Who are the next in line in terms of scale of consolidation?

JM: So, competition happens at the product line level. Davis-Standard competes; there are really 6, 7 core product lines. That breadth of product line technology participation is unique to Davis-Standard. Most of their other competitors focus maybe in 2 or 3 or just 1. We will give you an overview of the industry, plastics, extrusion machinery, and we can go from there. There are a couple different categories. I would think about it, there are the guys that do plastic extrusion machinery specifically for packaging. That is people doing films, lamination, or equipment that manufactures film, laminating. So laminating films or films and foils or films, foils, papers, and then sheet extrusion. Thicker materials, but then thermoformed for more rigid packaging applications. Think food service, to-go type things. In that area, Davis-Standard is in North America. They are very strong, particularly in the sheet and some of the lamination applications, not as strong in film. The film is going to be strongest. There are a couple of companies in

Europe. One is called Windmöller & Hölscher. It is a private company, very strong in film, and very strong in packaging in general. They do film, but they also do other things around that are specific to packaging downline of the film production. So you might call it more converting equipment. But they are a key competitor, Windmöller & Hölscher. They are similar in size to Davis-Standard. I think 3,000 employees, close to $1 billion in sales. Then another competitor, so Davis-Standard competes with them primarily in cast film and blown film. Not the strongest categories for Davis-Standard, so they do not compete really in the strong categories. Another company similar to Windmöller & Hölscher, again, German family company called Reifenhäuser, maybe half the size, 60% of the size of Davis-Standard, located in Germany, northern Germany. Again, a lot in the packaging area, but also then some in the pipe area, though they are not... it would be a much lower competitor than Davis-Standard in that area. Over the years, they have kind of focused on packaging and non-wovens as key categories. But again, in terms of size, they are pretty big. Another one would be KraussMaffei, again, a German company, but owned by Sinochem or an affiliate of Sinochem. They are owned by a Chinese chemical conglomerate, but historically German, located in southern part of Germany. But they have operations in different parts all over Germany. And that is where Davis-Standard... that is probably the strongest competitor to Battenfeld, which is the Davis-Standard brand in the pipe area. But that is about it. The pipe area is about 20% to 25% of cross-profile business. There are bigger businesses in injection molding machines and some urethane technology. So those are a couple of the biggest competitors. One other key competitor for Davis- Standard would be on the wire and cable side, would be another private company up in Northern Germany, and they are in the wire and cable area. Davis-Standard produces the power distribution cable, and this company also does the same. They are really the only 2, but Davis-Standard has about 70% share in that area, and this other company does 30% to 35%, some number like that. So the biggest competitors for the company generally are private. They are mostly European. There are some, I would say, medium-sized companies, say, in the $200 million to $400 million size in China, but most of the companies in China do not compete that effectively in developing markets. Where are they selling their equipment is primarily in Asia, in the Middle East, somewhat in developing markets in South America and Africa. But the technology is seen as inferior. It is just not up to the same level. The quality of the equipment is, again, it is improving, but it is not to the same level and the technical support generally tends to be the area where they are most limited.

OT: Okay.

JM: Okay, that's kind of a quick competitive overview. If you want to dig in product line by product line, we can do that. But it's going to come down to, you know, a couple of... you get into, there are specific players regionally that compete and they're like a $40 million, $50 million in sales, but they really just compete in 1 product category in North America. And those are, you know, potentially acquisition opportunities if the company thinks the strategy is right.

OT: Okay. 1 closing question for you. Where do you see the greatest risk for the business?

JM: Yeah, it's a good question. The company has a lot of strengths related to the technology, the history, and they really do have some fundamental, strong, very strong technology in the plastic extrusion area. There are a lot of things that happen on a production line, but you have to get... that's kind of the initial process... you have to get that right. And the people that understand that the best are developing the equipment that's the most productive. Davis- Standard is very strong there. They have a lot of expertise, a lot of history with their engineers and their service teams and their product managers. That's where the application expertise resides. It's really important as you build equipment that's really trying to continue to push the technology and customers appreciate that. And they have a fantastic customer list of market leaders in every category where they compete and where they're 1 or 2 in the market. I think some of the areas for risk are really always going to be on the packaging side; there's risk around use of plastics. But that risk has been there a long time. I've been in the industry almost 40 years and I was very active in our trade association for 20 years and that's been a continual risk that the industry is working to educate and make

changes and evolve and I think they've done that. The consumers look for things that help them, so that has to be part of the equation. But certainly that's a risk. I think most industrial companies, particularly I think in developed markets, as you look to continue to build your business, you need the people and you need capable people. And I know the company is very focused on that in terms of understanding who's on the team, their plans and building capabilities into the team. But certainly the aging of the workforce is, I think, always a risk. But I think, again, that's not unusual. It's an industrial... you see that in the industry across the board. But I think the company is working to tackle that and they have been doing it for a while. I think those from the company, in terms of revenue, right now with kind of how they've... the acquisitions they made, kind of the portfolio... the revenue is relatively evenly split between Europe, North America. And Asia, probably a little less in Asia, a little more in Europe. So that's better versus where it was 20 years ago when it was much more North American, I think, from a risk profile standpoint. Most, 80% of the revenue is really driven by those market-leading categories where they have very strong market positions. So that's important. And they got to continue to work on the aftermarket, which I know is a number one priority and a high focus within the organization to continue to build that. But I don't know if there's a risk that I think their market position is pretty good, unless you just don't execute because if you don't execute, the customer can make a different decision the next time it comes to buy something. And but if you're the incumbent and you're doing a good job... good doesn't mean perfect, but you're doing a good job... and when you make mistakes, you react to them urgently and correct them, then you're going to be in good shape. But you've got to maintain that customer-facing and responsive culture. So those are risks. I think there are risks out there. If you have, obviously, a financial recession, I think that everybody can have a lot of risk from that. But that's something harder to predict and harder to control.

OT: Okay. Jim, we're at the hour, so that's a good place to stop for today. Thank you so much for the time. Enjoyed the conversation and we'll certainly look forward to speaking with you again in the future.

JM: All right, Oliver. Thanks for your time. Appreciate it. Have a good evening.

OT: You too. Thank you, everyone. Have a good night.

JM: Thank you.

DISCLAIMER: The statements or opinions expressed today are those of the Advisor and not Guidepoint, who disclaims all liability for the content provided. The Advisor may not disclose material nonpublic or confidential information or any information that would cause the Advisor to breach any duty or obligations. Guidepoint is not a registered investment advisor and the information provided is not intended to constitute investment advice.