CIBC EIF: Touring Ben Machine
We had the pleasure of visiting EIF’s Ben Machine facility in Vaughan, Ontario. With us from
the company was Michael Iacovelli, CEO of Ben Machine; Darwin Sparrow, COO; and Pam
Plaster, VP Investor Development. We came away from the tour with not just a better
understanding of the products Ben Machine manufactures, but also an appreciation for how
EIF’s culture fosters an environment of entrepreneurship, despite Ben Machine being part of
a larger organization.
• Fostering An Entrepreneurial Spirit: We believe one of the differentiators at EIF, and
what makes the company successful in its acquisitions, is that for the most part, the
management of the companies acquired stay on with the company and continue to run
the operations. EIF acquired Ben Machine in 2015, and nine years later, Michael Iacovelli
is still the CEO of the company. We have often wondered if someone like Mr. Iacovelli,
who possesses a strong entrepreneurial spirit, would want to remain in his position at the
company after having sold an equity stake to a large corporation. Mr. Iacovelli clearly
continues to have a strong passion for his business and has a solid relationship with
management. Mr. Iacovelli walked through how EIF has helped him grow his business,
noting that if he goes to management with a financing request, as long as it meets
internal hurdle return rates, EIF makes that financing available to him. It was very clear
there is a high level of trust between Mr. Iacovelli and management, and there is a
common goal of growth.
• Niche Market With Strong Moat: Given EIF’s portfolio approach, not all of its company’s
always get significant air time. Given the acquisition of Ben Machine occurred nearly nine
years ago, most investors are now focused on EIF’s more recent acquisitions. With that
said, it was a great opportunity to get to tour the Ben Machine facility, and gain a deeper
appreciation for the skills and R&D that go into the creation and manufacturing of the
product. Ben Machine provides end-to-end manufacturing and engineering solutions for
military and defence industries. The company is an expert in prevision CNC machining
with on-site capabilities in sheet metal fabrication, certified welding, finishing and
assembly. The company focuses on highly complex products, which would be difficult for
others to replicate, and this helps create a strong moat.
• Primed For Growth: After increasing the size of its credit facility on May 6, EIF’s total
available liquidity sits at $1.1B. EIF continues to suggest there are a number of
opportunities in its M&A pipeline, though it skews more to the manufacturing side of the
business rather than airlines and aerospace. Given the number of verticals in which EIF
currently operates, we suspect that the company will be able to extract synergies from its
the next acquisition, not just as it relates to head office procedures but also because it
operates in tangential or even the same industry. For example, several of EIF’s industrial
companies require similar inputs, whether it be steel or aluminum, and we suspect there
is an opportunity to achieve some cost savings when purchasing. We would also note
that given the level of available liquidity and EIF’s previous commentary, we would not be
surprised to see a larger transaction, similar to that of Northern Mat.