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Chemir Analytical Services is Growing Through Acquisitions That Fit

Posted on: Saturday, 24 June 2006, 00:00 CDT

By Christopher Boyce, St. Louis Post-Dispatch

Jun. 23--Shri Thanedar spends most of his time as chief executive of Maryland Heights-based Chemir Analytical Services thinking about companies other than his own. But he doesn't lack concentration. Thanedar is checking constantly for companies to acquire, including six he's currently eyeballing.

"This is not a growing industry," Thanedar said of the product testing and supply services industry in which Chemir competes to perform tests for pharmaceutical companies.

"Typical growth is about 3 percent to 4 percent per year. Our appetite is much higher -- about 15 percent to 20 percent yearly," Thanedar said.

Through acquisitions, Thanedar has expanded Chemir from three employees and $150,000 in sales when he purchased the company in 1990 to 140 employees at three U.S. locations and $16 million in revenue in 2005.

Thanedar acknowledges that expanding a small business through acquisition is a risky proposition. But he hasn't let that stop him from venturing into the land of mergers and acquisitions.

At Webster University's School of Business and Technology, Benjamin Ola. Akande, the school's dean, said small businesses are finding themselves increasingly involved in mergers, if only because the number of mergers is on the rise.

Statistics from the Wharton School of Business at the University of Pennsylvania show U.S. companies spent more than $3.5 trillion on mergers and acquisitions between 1992 and 2000 -- the most-active eight-year period of mergers in modern history.

The terms merger and acquisition are often used interchangeably, Akande said, although they are not the same. He said the term merger, however, should be dropped because when the involved companies come together, generally only one will have control of the newly formed entity.

Akande said mergers and acquisitions are an attractive way for companies of any size to enhance efficiency and expand their customer base. Deals are being driven by more audacious corporate leadership and the desire of smaller companies to gain strategic advantages in their respective markets.

"It's an effort to defy the corporate life cycle," said Akande. "It gives the companies the chance to be immortal."

Akande cautioned, however, that frivolous mergers can hasten a company's demise.

"You have to clarify what the merger is going to do for you," Akande said. "One of the issues we've seen is a tendency to over-pay because you're so anxious to acquire."

The pitfalls surrounding mergers drives Thanedar to take his time. After closing his first acquisition in 1995, Chemir did not make another addition until 2000. But since 2000, Chemir has made four acquisitions, including its most recent purchase of Gateway Chemical Technology in May.

"I've delegated a lot of things, and I spend the majority of my time looking at other companies," said Thanedar. "I look for companies where our best practices could be beneficial."

Thanedar said he looks for underperforming companies because he likes the challenge of turning them around.

That strategy did not work out, however, with the acquisition of Pennsylvania-based Lycoming Analytical Laboratories. Thanedar said Lycoming was too small for the growth he initially planned, and he ended up merging it with a Florida company Chemir purchased months later.

Fortunately for Thanedar, it was not hard to merge two separate companies under the Chemir umbrella because he looks for companies whose cultures match the management style at Chemir.

That's typical for Thanedar, who doesn't get too wrapped up in the services, revenue or technology that an acquisition may bring. He wants companies that won't bring disruption.

"A lot of times acquisitions fail because they are more likely looking at the volume of the company. But what we do is make sure things fit," he said.

CHEMIR ANALYTICAL SERVICES

2672 Metro Boulevard, Maryland Heights

Phone: 314-291-6620

Web site: www.chemir.com

Chief executive: Shri Thanedar

Employees: 140

2005 Revenue: $16 million

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Copyright (c) 2006, St. Louis Post-Dispatch

Distributed by Knight Ridder/Tribune Business News.

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Source: St. Louis Post-Dispatch

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