June 2, 2008
Aqua acquisition | Portland water treatment firm Hydro International buys a main competitor
By Mindy Favreau
On May 6, Hydro International in Portland acquired one of its biggest competitors in the wastewater treatment industry and expanded its East Coast presence to the West Coast. Hydro, which designs products to control and treat stormwater and wastewater, has for years jockeyed for customers with Portland, Ore.-based Eutek Systems Inc. The two companies were the leading North American providers of non-mechanical systems that remove grit from wastewater before it gets treated, according to Hydro CEO Steve Hides. "Our paths crossed all the time," Hides says. "Looking at the specifications of a project, it was either Eutek or Hydro."
With the acquisition, Hydro is poised to become the leading wastewater and stormwater treatment company in the market. The deal puts Hydro in a position to exploit steady domestic growth ˆ and double-digit international growth ˆ in the stormwater and wastewater treatment markets.
The deal also will expand Hydro's customer base, add Eutek's five grit-removal products to its portfolio and give Hydro a long-desired presence on the West Coast. And joining forces with Eutek will give Hydro an additional edge against other competitors, Hides notes. "Eutek has been pursued by a number of companies in the past, which could have been detrimental to us," says Hides, who has been with Hydro for 28 years, seven of those as CEO. "It was a defense mechanism to do the deal."
Hydro is the U.S. subsidiary of Hydro International PLC, a Clevedon, U.K., firm that employs roughly 130 in the United States and United Kingdom. Hydro is acquiring Eutek for $8.5 million in cash, and paying an additional 5% of Eutek's revenue over the next five years, up to $5 million, to the company's founder, George Wilson. The additional payouts could bring the total price of the deal to as much as $13.5 million. Hydro financed the deal with a combination of cash and debt. Together, the companies expect to post annual revenues of $60 million.
Combining the two former rivals made sense on both sides, says Brian Harrell, Eutek's chief financial officer, who's now finance manager for Hydro. Wilson had just turned 70 and didn't have the financial resources to keep the company growing. With its global connections, Harrell says, Hydro will be able to open Eutek products up to the global market, creating a powerhouse of grit removal technology. "I think in the near future we'll become the number one player in the market," Harrell says.
Solving stormwater
Hydro International was founded in England in 1980, and established its U.S. subsidiary in Scarborough in 1988. Looking to build a full-scale wastewater testing facility, Hydro moved to its current 10,000-square-foot facility in Portland in 1993. The lab has a capacity to pump four million gallons of water a day, which allows Hydro to simulate a range of real-life conditions and show clients how the company's products work.
Hides, who primarily works out of the Portland office, says the company offers alternatives to traditional water treatment systems that require little maintenance, take up less space and are more cost effective. This proved true for the City of Saco, which last year installed a handful of Hydro products at its water treatment plant. Among those products was a Hydro Storm King, a 22-foot-wide concrete tank that uses a filter screen and the water's rotational flow to swirl out sewer discharge and other contaminants to keep them from flowing into the Saco River. The plant also installed a Grit King, which uses the same type of rotational force to separate out grit and sediment before water is pumped to the treatment plant, and two of Hydro's Reg-U-Flo Vortex Valves, which control water flow. The total cost for the project was $450,000, says Howard Carter, the department's deputy director.
Hydro's products are distributed globally from North America to New Zealand, mostly to engineering consulting firms that handle projects for cities, municipal water treatment facilities, and residential and commercial contractors for projects ranging from retail developments to highways. In the Portland area, Hydro has supplied about 60 of its stormwater products for both public and commercial development. Six of Hydro's Downstream Defender eight- to 10-foot-wide vortex separators are installed under the parking lot to separate out dirt, oil and other grime from stormwater runoff at the Patriots' Gillette Stadium in Foxborough, Mass. The price for a Downstream Defender depends on the project, but for a big retail store development, the 10-foot model costs about $48,000. To manufacture the products, Hydro contracts with companies like metal fabricator McCann Fabrication in New Gloucester and Superior Concrete in Auburn.
Hydro plans to retain all of Eutek's 14 employees, adding them to its current U.S. staff of 50. The two companies are currently in the process of merging, which requires such tasks as combining IT systems and financial reporting methods, says Steve Tansley, director of Hydro UK's wastewater division, who's heading up the integration process.
With the acquisition of Eutek, Hydro is positioning itself as a main player in a growing market. Water treatment in the United States is a $100 billion industry that's steadily growing at a rate of 5%-7% a year, and a $500 billion industry internationally that's growing twice as fast, according to Dawn Kristof Champney, president of Water and Wastewater Equipment Manufacturers Association, a nonprofit trade association in Washington, D.C.
The increased regulation of stormwater runoff has been driving market growth in the United States. Starting in the mid-1990s, federal and state governments have been imposing stricter regulations for stormwater treatment, a source of pollution largely overlooked when the Environmental Protection Agency passed the Clean Water Act in 1972. This developing market is ripe for companies like Hydro to "expand into more advanced technologies to meet those new challenges we're facing," says Champney.
Hydro International already has capitalized on this market: Since 2004, the company's annual sales have more than doubled, from about $25 million to $52 million in 2007. With Eutek under its belt, Hydro is positioning itself for future growth. And to sustain that growth, Hydro plans to pursue other acquisitions, both in the United States and overseas.
Hides says the company is considering several opportunities, and that he hopes the company will employ 200 people total in the next two to three years. "Like all businesses, the key is to make sure we've got sustained economic growth," Hides says.
With the acquisition, Hydro is poised to become the leading wastewater and stormwater treatment company in the market. The deal puts Hydro in a position to exploit steady domestic growth ˆ and double-digit international growth ˆ in the stormwater and wastewater treatment markets.
The deal also will expand Hydro's customer base, add Eutek's five grit-removal products to its portfolio and give Hydro a long-desired presence on the West Coast. And joining forces with Eutek will give Hydro an additional edge against other competitors, Hides notes. "Eutek has been pursued by a number of companies in the past, which could have been detrimental to us," says Hides, who has been with Hydro for 28 years, seven of those as CEO. "It was a defense mechanism to do the deal."
Hydro is the U.S. subsidiary of Hydro International PLC, a Clevedon, U.K., firm that employs roughly 130 in the United States and United Kingdom. Hydro is acquiring Eutek for $8.5 million in cash, and paying an additional 5% of Eutek's revenue over the next five years, up to $5 million, to the company's founder, George Wilson. The additional payouts could bring the total price of the deal to as much as $13.5 million. Hydro financed the deal with a combination of cash and debt. Together, the companies expect to post annual revenues of $60 million.
Combining the two former rivals made sense on both sides, says Brian Harrell, Eutek's chief financial officer, who's now finance manager for Hydro. Wilson had just turned 70 and didn't have the financial resources to keep the company growing. With its global connections, Harrell says, Hydro will be able to open Eutek products up to the global market, creating a powerhouse of grit removal technology. "I think in the near future we'll become the number one player in the market," Harrell says.
Solving stormwater
Hydro International was founded in England in 1980, and established its U.S. subsidiary in Scarborough in 1988. Looking to build a full-scale wastewater testing facility, Hydro moved to its current 10,000-square-foot facility in Portland in 1993. The lab has a capacity to pump four million gallons of water a day, which allows Hydro to simulate a range of real-life conditions and show clients how the company's products work.
Hides, who primarily works out of the Portland office, says the company offers alternatives to traditional water treatment systems that require little maintenance, take up less space and are more cost effective. This proved true for the City of Saco, which last year installed a handful of Hydro products at its water treatment plant. Among those products was a Hydro Storm King, a 22-foot-wide concrete tank that uses a filter screen and the water's rotational flow to swirl out sewer discharge and other contaminants to keep them from flowing into the Saco River. The plant also installed a Grit King, which uses the same type of rotational force to separate out grit and sediment before water is pumped to the treatment plant, and two of Hydro's Reg-U-Flo Vortex Valves, which control water flow. The total cost for the project was $450,000, says Howard Carter, the department's deputy director.
Hydro's products are distributed globally from North America to New Zealand, mostly to engineering consulting firms that handle projects for cities, municipal water treatment facilities, and residential and commercial contractors for projects ranging from retail developments to highways. In the Portland area, Hydro has supplied about 60 of its stormwater products for both public and commercial development. Six of Hydro's Downstream Defender eight- to 10-foot-wide vortex separators are installed under the parking lot to separate out dirt, oil and other grime from stormwater runoff at the Patriots' Gillette Stadium in Foxborough, Mass. The price for a Downstream Defender depends on the project, but for a big retail store development, the 10-foot model costs about $48,000. To manufacture the products, Hydro contracts with companies like metal fabricator McCann Fabrication in New Gloucester and Superior Concrete in Auburn.
Hydro plans to retain all of Eutek's 14 employees, adding them to its current U.S. staff of 50. The two companies are currently in the process of merging, which requires such tasks as combining IT systems and financial reporting methods, says Steve Tansley, director of Hydro UK's wastewater division, who's heading up the integration process.
With the acquisition of Eutek, Hydro is positioning itself as a main player in a growing market. Water treatment in the United States is a $100 billion industry that's steadily growing at a rate of 5%-7% a year, and a $500 billion industry internationally that's growing twice as fast, according to Dawn Kristof Champney, president of Water and Wastewater Equipment Manufacturers Association, a nonprofit trade association in Washington, D.C.
The increased regulation of stormwater runoff has been driving market growth in the United States. Starting in the mid-1990s, federal and state governments have been imposing stricter regulations for stormwater treatment, a source of pollution largely overlooked when the Environmental Protection Agency passed the Clean Water Act in 1972. This developing market is ripe for companies like Hydro to "expand into more advanced technologies to meet those new challenges we're facing," says Champney.
Hydro International already has capitalized on this market: Since 2004, the company's annual sales have more than doubled, from about $25 million to $52 million in 2007. With Eutek under its belt, Hydro is positioning itself for future growth. And to sustain that growth, Hydro plans to pursue other acquisitions, both in the United States and overseas.
Hides says the company is considering several opportunities, and that he hopes the company will employ 200 people total in the next two to three years. "Like all businesses, the key is to make sure we've got sustained economic growth," Hides says.
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