CHESTERFIELD TOWNSHIP, MICH. — On a mission to more than triple sales in the next five years, Prism Plastics Inc. is seeking a bolt-on acquisition to enter the growing medical industry.
Prism, a Chesterfield Township-based plastic injection molder, manufactures plastic components for automotive safety parts such as seatbelts and fuel system components. But the medical industry offers stable opportunities that could combat the ebb and flow of automotive demand, said Gerry Phillips, vice president and co-founder.
"We've tried in the past to break into the medical industry using a nonacquisition strategy with no success," Phillips said. "The auto industry is cyclical, so when it's down, many auto molders rush out to bid in other industries, but as soon as auto picks back up again they go away. This doesn't sit well with medical customers."
Prism tried for years to bid on medical work. After no success, it hired advisory firm Stout Risius Ross Inc. in Southfield, Mich., to find acquisition targets.
"The best way to show them we're committed is to make a statement by acquiring a medical molder," Phillips said.
Prism is seeking a medical molder with sales between $10 million and $20 million, Phillips said, and expects a deal to be completed in the next six months.
Phillips said medical is expected to make up one-third of Prism's sales mix by 2020. Prism plans to more than triple sales to $100 million in 2020 from $30 million in 2014.
The money is there, if an expansion into the medical industry is successful.
Because of aging populations and technology advancements, the U.S. medical device industry is nearly a $60 billion industry in 2015.
The global market for plastic in the medical industry is expected to reach $34.9 billion by 2016, with U.S. suppliers processing more than 4.4 billion pounds of plastic this year, Harry Hamme, formerly of Becton, Dickinson and Co., told Plastics News.
Chuck Hadden, president and CEO of the Michigan Manufacturers Association, said those large numbers are causing Michigan companies to jump at the chance to supply medical.
According to the association's 2015 Manufacturing Survey, 29 percent of Michigan manufacturers are already supplying the medical industry.
"In the last decade, manufacturers learned a valuable lesson on the importance of diversifying their customer base," Hadden said in an emailed statement. "(Medical) is not the largest sector manufacturers supply to, but one that will continue to grow as our population ages, making it a viable choice for manufacturers to look to expand their customer base."
Southfield-based automotive supplier International Automotive Components Group, the largest automotive injection molder in North America, supplies the medical industry with molded equipment through a subsidiary created in 2012 called IAC Creative LLC.
David Ladd, executive director of marketing and communications at IAC, said if a company has extensive automotive molding and materials expertise, several industries open up beyond automotive.
IAC Creative also supplies plastic injection-molded parts and products to the recreational vehicle and consumer appliance industries, but those products make up only a very small part of its overall $3.1 billion in sales, Ladd said.
Prism, which employs 74, has been expanding since its acquisition last year by Connecticut private equity firm Altus Capital Partners II LP. Phillips and other co-founders Rod Bricker and the late Jerry Williams retained an ownership stake in the deal. Terms were not disclosed.
In May, Prism announced it planned to invest $3.5 million to add new equipment at its plants in Chesterfield Township and Harlingen, Texas. Prism invested $2 million in additional capacity at the two plants in 2013, a move expected to boost production by 20 percent.
Those plants, along with its plant in Port Huron, supply parts to several tier-one auto suppliers including Takata Corp., Nexteer Automotive Corp. and TI Automotive Inc.
Phillips said no medical work will be done at its existing plants. It also plans to open a fourth automotive plant at an undetermined location.
"We're enjoying a great growth rate and we're in great shape," Phillips said. "We definitely don't need to be in medical, but this is a desire because we believe we can do great things in that space even though a lot of our competitors have tried to diversify here and failed."