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Mark IV Industries, Inc.

Mark IV Industries, Inc.

One Towne Centre
501 John James Audubon Parkway
Post Office Box 810
Amherst, New York 14226-0810
U.S.A.
(716) 689-4972
Fax: (716) 689-6098
Web site: http://www.mark-iv.com

Public Company
Incorporated
:1970 as Mark IV Homes, Inc.
Employees : 16,000
Sales :$1.95 billion (1999)
Stock Exchanges : New York
Ticker Symbol : IV
NAIC :32622 Rubber & Plastics Hoses & Belting Manufacturing; 326199 All Other Plastics Product Manufacturing; 334113 Computer Terminal Manufacturing; 333415 Air-Conditioning & Warm Air Heating Equipment & Commercial & Industrial Refrigeration Equipment Manufacturing; 336321 Vehicular Lighting Equipment Manufacturing; 335129 Other Lighting Equipment Manufacturing; 336211 Motor Vehicle Body Manufacturing; 336413 Other Aircraft Parts & Auxiliary Equipment Manufacturing; 334513 Instruments & Related Product Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables; 334515 Instrument Manufacturing for Measuring & Testing Electricity & Electrical Signals; 33995 Sign Manufacturing

Mark IV Industries, Inc. is a manufacturing conglomerate with two main operating units. Mark IV Automotive makes automotive systems and components, including power transmission systems, air intake systems, fuel systems, and fluid-handling systems. The automotive unit is also involved in the automotive aftermarket, producing belts, hoses, and accessories. Mark IV Industrial manufactures power transmission, fluid power, and fluid transfer products for various industrial applications; provides mass transit and traffic management systems; and makes specialty filtration products. Mark IVs greatest asset, however, may be chairman and CEO Salvatore H. Alfieros propensity for finding and acquiring small technical or industrial companies that are undervalued but are leaders in specialized or niche markets. Mark IV owns more than 70 plants in the United States and abroad.

Early Years

Alfiero, with an undergraduate degree in aerospace engineering from Rensselaer Polytechnical Institute and an MBA from Harvard, and Clement R. Arrison (Mark IVs longtime president), a graduate of the University of Michigan with a degree in electrical engineering, met in 1967 when they both worked for Radatron, a Buffalo company manufacturing automatic radar detectors.

After two years, they invested in Glar-Ban International, a small company in Cheektowaga, New York, that manufactured nonglare instrumentation panels for aircraft. Both Alfiero and Arrison took leadership positions with the company. At the same time, Alfiero and a partner started Mark IV Homes, Inc., a mobile-home manufacturer in Pennsylvania. They were planning to call the company Cardinal Homes but they needed an alternate name in case their first choice was taken. Alfieros associate happened to notice a cigar box on the desk; the name on the box was Mark IV. When they found out that the name Cardinal was, indeed, already in use, Mark IV Homes, Inc. was born.

In 1970 Glar-Ban bought Radatron, Alfieros and Arrisons former employer, for $400,000. Glar-Ban continued to buy small companies for the next few years: in 1971, T. James Clarke Box & Label Corp., a drug and healthcare packaging manufacturer in Jamestown, New York; in 1972, E.N. Rowell Co., another box and packaging manufacturer in Batavia, New York; in 1974, Metal Awning Components Inc., in Clawson, Michigan; and in 1975, Nuclear Radiation Developments (NRD), a manufacturer of smoke detection and static elimination equipment in Grand Island, New York.

Mark IV Homes grew steadily from 1969 to 1973, building six plants and acquiring Roycroft Industries, Inc., a mobile home manufacturer in Chesaning, Michigan. Then a recession hit and the companys sales dropped from $29 million in 1973 to $19 million the next year. Interest rates were too high for potential buyers to finance housing purchases, and to make matters even worse, consumers were also turning away from mobile and manufactured homes. Mark IV showed a loss of almost $2 million in 1974 and posted losses for the next two years as well. Alfiero knew he had to get out of the mobile home business.

Mark IV Industries Emerged in 1976

In 1976 Alfiero bought out his Mark IV Homes partner. Alfiero and Arrison merged Glar-Ban and Mark IV, moved their headquarters to Williamsville, near Buffalo, and changed the name of the company to Mark IV Industries, Inc. In 1977 Mark IV, now the owner of several small, diverse manufacturing companies, showed a profit of $787,000, its first profit in four years, and sales increased from $18 million to $30 million. Still, it took several years for the company to find its direction. Alfiero and Arrison bought a few more small companies, but as Alfiero told the New York Times, we were a company looking for what we wanted to be.

In the early 1980s, they knew they wanted to become a miniconglomerate and play the acquisitions game. They sold unprofitable or marginal enterprises, including Rowell, Radatron, and their remaining mobile home plants. They bought polystyrene foam producer Toyad Corporation of Latrobe, Pennsylvania, for more than $5 million and Pacemaker Plastics, Inc. for a quarter of a million dollars.

The two chief officers felt confident about their company because they had a solid base and a healthy balance sheet, but they still did not have a firm sense of where they were going until 1983, when they bought Protective Closures, the nations top manufacturer of plastic caps, seals, and plugs. Arrison told Western New York magazine, Over the years, we have become more sure of the areas where we do well and the areas we should avoid. In the beginning, we would try most anything. Today, we are much more selective in the industries where well participate and the types of companies well let go.

Acquisition of Protective Closures did not come easily. Mark IV finally acquired it for $10 million only after a bidding war with another company. But Protective was a clear moneymaker. With the addition of Protective Closures Mark IVs sales shot up from $21.5 million in 1983 to almost $39 million in 1984, and the company earned close to $2 million, nearly doubling its profits in a year. E. Maclin Roby, Mark IV executive vice-president and former chair of Gulton Industries, told the New York Times that the purchase of Protective Closures was a pivotal event. He called it the cash machine that allowed them to go off on a wider acquisition program. Not only was the purchase of Protective Closures a monetary success, but Mark IV finally found its direction: it would buy small undervalued companies that were already the leaders in their own specialized markets.

Alfiero and Arrison called this first phase of the new Mark IV its build and prune phase. The company was using debt to buy manufacturing companies in three core areas, and acquired companies had to be leaders in their niche markets. If some operations of the acquired company did not fit the product or profitability objectives of Mark IV, they were sold, enabling Mark IV to buy other companies or buy down its debt.

Following this build and prune strategy, in 1985 Mark IV bought LFE Corporation of Clinton, Massachusetts, a manufacturer of hydraulic, process control, and environmental control products. It also happened to be almost twice the size of Mark IV. Mark IV borrowed $37 million to buy LFE, and this acquisition also paid off in a big way. Mark IVs annual sales tripled to $120 million with the purchase of its first diversified company. In 1986 Mark IV purchased Guitón Industries Inc., a New Jersey company making electronics products for defense, audio, graphic display, and industrial uses.

Both LFE and Gulton perfectly fit Mark IVs criteria for acquisition. As Alfiero outlined in the New York Times, Mark IVs strategy was to target companies with a strong market position, a wide array of proprietary products, and less than 25 percent of sales to aerospace or military industries. Perhaps most importantly, company insiders could not be in control of a substantial share of the companys stock.

Acquisition of both LFE and Gulton started as hostile takeovers since neither company probably would have taken Mark IVs acquisition quest seriously because of its relatively small size. But after Mark IV began to purchase a substantial number of shares, it got the attention it wanted. Before long, hostile takeovers turned into friendly acquisitions.

Company Perspectives

Mark IV Industries, Inc. is a leading manufacturer of engineered systems and components primarily for power transmission, fluid transfer and filtration applications. Our products are sold to industrial and automotive customers around the world through our two business segments Mark IV Industrial and Mark IV Automotive. Within these businesses, we strive to exceed the expectations of our customers by providing them with the highest quality products and services.

Our objectives are to increase the companys cash flow from operations, continuously improve earnings, and enhance shareholder value. Other goals include balancing revenues between our domestic and international operations, growing our businesses internally and through acquisition, and strengthening the balance sheet.

We will strive to reduce the level of invested capital, improve our returns, and to channel our increased cash flow in a way which will improve shareholder value.

Mark IV allowed a great deal of autonomy to the divisions it bought. Although management remained decentralized and division managers continued to run their own companies without day-to-day interference from Mark IV, the Mark IV corporate staff grew quickly, and in 1986 the company moved from its cramped offices in the Buffalo suburb of Williamsville to the nearby town of Amherst.

Mark IV did not have to worry about not being taken seriously after buying LFE and Gulton. According to Financial World, Mark IV was the fastest-growing company in the United States in 1986. Mark IV continued to follow its prune and build strategy, buying Conrac Corp., an electronics displays manufacturer; Eagle Signal Controls, a traffic signal manufacturer; and Cetec and Electronic Counters and Controls, both audio equipment manufacturers. In five years, Mark IVs assets had skyrocketed from $19 million to $612 million. Investors who had paid less than $2,000 each in 1969 owned stock worth more than $2 million in 1987.

Acquired Armtek in 1988

In the fall of 1988 the company paid $625 million for Armtek of Jamestown, New York, a manufacturer of automotive and industrial products, in the biggest acquisition in Mark IVs history. Alfiero told Forbes magazine, The biggest thing we had going for us was that nobody thought we could pull it off.

With this purchase of another company twice its size, Mark IVs debt was more than $1 billion, and Alfiero and Arrison sought to reduce that debt quickly. Within a year, Mark IV sold two of Armteks divisionsCopolymer, a chemicals producer, and Blackstone, a manufacturer of original equipment heat exchange systems for cars. Using those net proceeds, Mark IV paid off money borrowed to finance the Armtek purchase and ended up paying only $37 million for Dayco Products, which had been responsible for half of Armteks sales and profits. Dayco was a definite moneymaker. With sales of $425 million, it was the nations leading supplier of original equipment automobile accessory drive systems and the second leading supplier of aftermarket accessory drive systems.

Alfiero also began buying Mark IVs junk bonds at a heavily discounted rate when the government began pushing companies to put them on the market. Alfiero eliminated another $250 million in debt this way.

In 1991 Mark IV purchased F-P Electronics, a Canadian manufacturer of electromagnet information display devices; Anchor Swan, maker of garden hoses and flexible hoses for cars; Vapor, the worlds largest maker of door systems for trains and buses; and two foreign companies, Dynacord of Germany and Klark-Teknik of the United Kingdom, both adding to Mark IVs audio line.

The companys largest core business in 1992 was Power Transfer and Fluid Handling. Mark IVs Dayco was the leading manufacturer of industrial belts and hoses used in home appliances, diesel engines, snowmobiles, and gardening, and a leading supplier of coolant hoses, power steering hoses, fuel hoses, transmission oil cooler hoses, and belts to the U.S. Big Three automakers. This core business also benefited in the 1990s from increased public concern about the environment since Dayco manufactured gasoline dispensing hoses, including the vapor recovery hose used at gasoline pumps to return gas fumes. This hose was also introduced in Europe in response to the European Clean Air Act.

In 1992 the Mass Transit and Traffic Control division worked with AT&T to develop and distribute an automatic electronic toll collection system that would allow drivers to pay their tolls with their AT&T Smart Card without stopping at toll booths. Mark IV also supplied traffic lights, electrical controls, interior lighting, and passenger information systems for buses, trains, and airplanes. The Americans with Disabilities Act also brought new opportunities to Mark IV, which had developed information display systems with enhanced audio and video display. Mark IV also looked forward to increased sales related to more government funding of mass transit systems.

Mark IVs third core area, professional audio equipment, produced recording studio equipment, systems for live performances, and products for permanently installed sound systems. Its products included amplifiers, microphones, mixing consoles, signal processors, and loudspeakers. Consolidation of the audio industry in the early 1990s was a boon to Mark IV because it could acquire companies that were well known and respected. Mark IVs audio equipment was sold under its division names, Electro-Voice, Altec, Vega, Dynacord, Gauss, Klark Teknik, and University Sound. Mark IV sound systems were used in the 1991 Monsters of Rock tour in England, Europe, and Russia, as well as at Euro Disneyland, which had the largest computer-controlled sound system in the world when it opened in 1992.

Mark IV retained several companies, particularly instrumentation companies, that did not strictly fit into its core areas but were leaders in niche markets in the aerospace, defense, and plastics industries. It also kept one of its earliest acquisitions, Clarke Container, a maker of child-resistant prescription bottles.

Shifted to Slower Growth in Recessionary Early 1990s

Mark IV had spent $1.25 billion from 1985 to 1991 buying 40 companies, an acquisition spree that increased company revenues from $38 million in fiscal 1985 to more than $1 billion in fiscal 1992. This phenomenal growth also landed Mark IV on the Fortune 500. When the economic climate shifted in the early 1990s into recession, the company shifted as well, focusing on debt reduction, operational improvement, and much more selective acquisition.

During the recession, Mark IV sought companies that could bolster its core businesses rather than establish core businesses. A prime example of this came in June 1993 when Mark IV acquired the European and North American assets of Pirelli S.p.A.s power transmission belting business for about $105 million. The business fit well with the Dayco unit; it also significantly increased Mark IVs presence in Europe, as the company also aimed for international growth. Daycos European operations were further bolstered in September 1994 through the purchase of Hevas Tube Systems AB, a Swedish maker of automotive rubber tubing and tube assemblies. Also in 1994 Mark IV purchased Mexico-based Citla, a producer of industrial and automotive tubes and tube assemblies.

The early 1990s also saw Mark IV prune some of its noncore units. In June 1993 the company sold four unitsLFE Instruments, Graphic Instruments, Eagle Industrial Products, and the U.K.-based Mark IV Instruments Ltd.to Washington, D.C.-based Danaher Corporation for $35 million. The divested units were manufacturers of microprocessor and computer-based instruments and controls. Mark IVs traffic management unit, Mark IV IVHS Inc. (for Intelligent Vehicle Highway System), received a significant boost in early 1994 when it won a potentially huge contract for the electronic collection of tolls. Within a few years, IVHS had developed a toll collection system called E-ZPass for an interagency group of 11 transportation authorities in New York, New Jersey, Pennsylvania, Delaware, and Maryland. Through E-ZPass, vehicles could be equipped with electronic devices called tags that the system could read electronically as a vehicle passed through a toll area, with the toll then charged to the motorists account.

In November 1994 Mark IV completed a $286.3 million acquisition of Purolator Products Inc., a leading manufacturer of automotive and industrial filtration products. This was the second largest acquisition in company history and added to the companys existing product lines in the automotive aftermarket, original equipment, and industrial markets. During fiscal 1996 Mark IV paid $24.4 million for FitzSimons Manufacturing Company, a manufacturer of fuel system components for the North American automobile and truck industries. The company acquired the Imperial Eastman division of Pullman Co. in March 1996 for about $78 million. Imperial Eastman specialized in thermoplastic hydraulic and pneumatic hose assemblies, couplings, adapters, and fittings.

Major Restructuring Began in 1996

Also in 1996 Mark IV began a major reorganization and restructuring. The company reorganized itself into two market-defined operating units: Mark IV Industrial and Mark IV Automotive. Mark IV also took a $112.5 million restructuring charge in fiscal 1997 for the closing of all or parts of 12 manufacturing and distribution facilities in the United States and Europe, and a workforce reduction of about 1,000 employees, or six percent. The company also began divesting a number of noncore units: Vapor, sold in September 1996 to Westinghouse Air Brake Company for $66.4 million; Interstate Highway Sign, sold in October 1996 to a Baton Rouge-based privately held company for about $12 million; Automatic Signal/Eagle Signal, sold to Siemens Energy & Automation Inc., a unit of Germanys Siemens AG, in January 1997 for $16.6 million; the Mark IV professional audio unit, sold to an affiliate of Greenwich Street Capital Partners, Inc. in February 1997 for $156.4 million; Guitón Data Systems, sold to BFGoodrich Co. in March 1997 for about $23 million; and LFE Industrial Systems, sold to U.K.-based Eurotherm PLC also in March 1997 for $12.5 million. When added with other sales, these divestitures generated gross proceeds of about $313 million, some of which was used to fund acquisitions to bolster the companys automotive and industrial units. In October 1997 Mark IV spent about $60 million for LPI Systèmes Moteurs S.A., a French maker of plastic air admission systems, including air intake manifolds and cooling modules, for automotive applications.

In December 1998 Mark IV announced that it planned to reposition its automotive aftermarket business, which accounted for about 20 percent of overall revenue. This business had been hurt by changes in the market, most notably improvements in the quality and performance of automotive OEM components and systems, which lessened the demand for replacement parts. The repositioning effort aimed at consolidating distribution facilities; cutting low-margin, slow-selling product lines; reducing inventory levels; rationalizing the customer base; and reducing the workforce. An aftertax charge for this repositioning of $38.7 million was taken during fiscal 1999, leading to a reduction in net income from $98.6 million in fiscal 1998 to $47.6 million in 1999. Net sales increased from $1.84 billion in 1998 to $1.95 billion in 1999.

During 1999 Mark IV continued to seek ways to strengthen its two core units through divestments and acquisitions. In February 1999 the company sold its Purolator automotive filter business to Arvin Industries, Inc. for $276 million, a move intended to allow Mark IV Automotive to concentrate on power transmission and air intake systems, along with fluid-handling and fuel systems. The sale did not include Purolators specialty filters operation, which remained part of Mark IV Industrial. In March 1999 Mark IV sold Eaglemotive Corporation, a maker of automotive fan clutches and oil coolers, to Standard Motor Products, Inc. for about $13.4 million. One month later, Mark IV Industries expanded in Europe through the $148 million purchase of Italy-based Lombardini FIM S.p.A., a leading European manufacturer of small diesel engines with manufacturing plants in Italy, France, and Spain and distribution throughout Europe and North America.

Principal Subsidiaries

Dayco Products, Inc.; Purolator Filter Products; Facet International, Inc.; Purolator Products Air Filtration Company; Mark IV Holdings, S.A. (Belgium); Mark IV PLC (U.K.); Pietranera S.r.L. (Italy); F-P Technologies Holding Corp.; Gulton-Statham Transducers, Inc.; F-P Displays, Inc.; Mark IV Holding AG (Switzerland); Mark IV France S.A.S.; Armtek International Holding Company, Inc.; Mark IV Industries GmbH (Germany); Eagle Funding Corporation; Clarke Container Company, Inc.; Glar-Ban Incorporated; Mark IV Holdings Inc.; Aerospace Sub, Inc.; Mark IV Industries Ireland; Mark IV IVHS, Inc.; NRD, LLC; Lum-Eag Holdings (Ireland); Mark IV Automotive do Brasil Ltda. (Brazil); Dayco Argentina; Lombardini FIM S.p.A.

Principal Operating Units

Mark IV Automotive; Mark IV Industrial.

Further Reading

Baker, M. Sharon, Alfiero: Mark IV on Course for More Growth, Debt Reduction, Business First of Buffalo, July 13, 1992, p. 11.

_____, Call It Whatever You Want, but Mark IV Is Always Changing, Business First of Buffalo, May 11, 1992, p. 20.

Davis, Bruce, Mark IV to Buy Pirelli Belt Unit, European Rubber Journal, June 1993, pp. 12 +.

English, Dale C, Profile: Sal H. Alfiero, Clement R. Arrison, Western New York, August 1989.

Hartley, Tom, Mark IV Collects Huge Toll Road Contract, Business First of Buffalo, March 28, 1994, p. 15.

_____, Purolator Products Is Mark IVs 2nd Largest Acquisition, Business First of Buffalo, October 10, 1994, p. 5.

Magnet, Myron, This Gang Finally Shot Straight, Fortune, January 10, 1994, pp. 104 +.

Mehlman, William, Asset Juggling Skills Keep Mark IV on High Curve, Insiders Chronicle, January 29, 1990.

Norman, James R., Quick Reflexes, Forbes, March 2, 1992.

Norton, Erle, Mark IV to Cut Work Force 6%, Take a Special Charge, Post Loss for Quarter, Wall Street Journal, October 2,1996, p. A4.

Robinson, Karen, Mark IV Looks to Expand Core Businesses to Europe, Business First of Buffalo, August 23, 1993, p. 7.

Wiener, Daniel P., Mark IV: The Making of a Miniconglomerate, New York Times, August 9, 1987.

Williams, Fred O., Mark IV of Amherst, N.Y., to Sell Part of Purolator Auto Filter Business, Buffalo News, February 9, 1999.

Zremski, Jerry, Mark IV Industries Is Growing into Big Conglomerate, Buffalo News, June 15, 1986.

Wendy Stein

updated by David E. Salamie

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Mark IV Industries, Inc.

Mark IV Industries, Inc.

P.O. Box 810
One Towne Centre
501 John James Audubon Parkway
Amherst, New York 14226-0810
U.S.A.
(716) 689-4972
Fax: (716) 689-6098

Public Company
Incorporated: 1970 as Mark IV Homes, Inc.
Employees: 11,900
Sales: $1.15 billion
Stock Exchanges: New York
SICs: 3714 Motor Vehicle Parts & Accessories; 3052 Rubber & Plastics Hose & Belting; 3651 Household Audio & Video Equipment

Mark IV Industries, Inc., is a conglomerate of small manufacturing companies with operations in three major areas: professional audio equipment, power transfer and fluid handling, and mass transit and traffic control. But its greatest asset may be CEO Salvatore H. Alfieross propensity for finding and acquiring small technical or industrial companies that are undervalued but are leaders in specialized or niche markets. Mark IV owns more than 60 plants in the United States and abroad.

Alfiero and president Clement R. Arrison have been responsible for the spectacular development of Mark IV and have remained its principal shareholders since the company began. For the most part Alfiero is involved in finances and growth while Arrison is more involved in operations, but they consider themselves a team, with each able to function well in both areas. The 1980s were a particularly successful time for Mark IV. Between 1985 and 1991 the company bought more than 40 properties for a total of $1.25 billion dollars, and sales exploded from $38.6 million to almost $1.2 billion. Insiders Chronicle called it one of the flashiest corporate growth performers of the 1980s.

Alfiero, with an undergraduate degree in aerospace engineering from Rensselaer Polytechnical Institute and an MBA from Harvard, and Arrison, a graduate of the University of Michigan with a degree in electrical engineering, met in 1967 when they both worked for Radatron, a Buffalo company manufacturing automatic radar detectors.

After two years, they invested in Glar-Ban International, a small company in Cheektowaga, New York, that manufactured non-glare instrumentation panels for aircraft. Both Alfiero and Arrison took leadership positions with the company. At the same time, Alfiero and a partner started Mark IV Homes, Inc., a mobile-home manufacturer in Pennsylvania. They were planning to call the company Cardinal Homes but they needed an alternate name in case their first choice was taken. Alfieros associate happened to notice a cigar box on the desk; the name on the box was Mark IV. When they found out that the name Cardinal was, indeed, already in use, Mark IV Homes, Inc., was born.

In 1970 Glar-Ban bought Radatron, Alfieros and Arrisons former employer, for $400,000. Glar-Ban continued to buy small companies for the next few years: in 1971, T. James Clarke Box & Label Corp., a drug and health-care packaging manufacturer in Jamestown, New York; in 1972, E. N. Rowell Co., another box and packaging manufacturer in Batavia, New York; in 1974, Metal Awning Components Inc., in Clawson, Michigan; and in 1975, Nuclear Radiation Developments (NRD), a manufacturer of smoke detection and static elimination equipment in Grand Island, New York.

Mark IV Homes grew steadily from 1969 to 1973, building six plants and acquiring Roycroft Industries, Inc., a mobile-home manufacturer in Chesaning, Michigan. Then a recession hit and the companys sales dropped from $29 million in 1973 to $19 million the next year. Interest rates were too high for potential buyers to finance housing purchases, and to make matters even worse, consumers were also turning away from mobile and manufactured homes. Mark IV showed a loss of almost $2 million in 1974 and posted losses for the next two years as well. Alfiero knew he had to get out of the mobile home business.

In 1976 Alfiero bought out his Mark IV Homes partner. Alfiero and Arrison merged Glar-Ban and Mark IV, moved their headquarters to Williamsville, near Buffalo, and changed the name of the company to Mark IV Industries, Inc. In 1977 Mark IV, now the owner of several small, diverse manufacturing companies, showed a profit of $787,000, its first profit in four years, and sales increased from $18 million to $30 million. Still, it took several years for the company to find its direction. Alfiero and Arrison bought a few more small companies, but as Alfiero told the New York Times, we were a company looking for what we wanted to be.

In the early 1980s, they knew they wanted to become a miniconglomerate and play the acquisitions game. They sold unprofitable or marginal enterprises, including Rowell, Radatron, and their remaining mobile home plants. They bought polystyrene foam producer Toyad Corp. of Latrobe, Pennsylvania, for more than $5 million and Pacemaker Plastics, Inc., for a quarter of a million dollars.

The two chief officers felt confident about their company because they had a solid base and a healthy balance sheet, but they still did not have a firm sense of where they were going until 1983, when they bought Protective Closures, the nations top manufacturer of plastic caps, seals, and plugs. Arrison told Western New York magazine, Over the years, we have become more sure of the areas where we do well and the areas we should avoid. In the beginning, we would try most anything. Today, we are much more selective in the industries where well participate and the types of companies well let go.

Acquisition of Protective Closures did not come easily. Mark IV finally acquired it for $10 million only after a bidding war with another company. But Protective was a clear moneymaker. With the addition of Protective Closures Mark IV s sales shot up from $21.5 million in 1983 to almost $39 million in 1984, and the company earned close to $2 million, nearly doubling its profits in a year. Mark IV executive vice-president and former chair of Gulton Industries E. Maclin Roby told the New York Times that purchase of Protective Closures was a pivotal event. He called it the cash machine that allowed them to go off on a wider acquisition program. Not only was purchase of Protective Closures a monetary success, but Mark IV finally found its direction: it would buy small undervalued companies that were already the leaders in their own specialized markets.

Alfiero and Arrison called this first phase of the new Mark IV its build and prune phase. The company was using debt to buy manufacturing companies in three core areas, and acquired companies had to be leaders in their niche markets. If some operations of the acquired company did not fit the product or profitability objectives of Mark IV, they were sold, enabling Mark IV to buy other companies or buy down its debt.

Following this build and prune strategy, in 1985 Mark IV bought LFE Corp. of Clinton, Massachusetts, a manufacturer of hydraulic, process control, and environmental control products. It also happened to be almost twice the size of Mark IV. Mark IV borrowed $37 million to buy LFE, and this acquisition also paid off in a big way. Mark IV s annual sales tripled to $120 million with its purchase of its first diversified company. In 1986 Mark IV purchased Gulton Industries Inc., a New Jersey company making electronics products for defense, audio, graphic display, and industrial uses.

Both LFE and Gulton perfectly fit Mark IV s criteria for acquisition. As Alfiero outlined in the New York Times, Mark IV s strategy was to target companies with a strong market position, a wide array of proprietary products, and less than 25 percent of its sales to aerospace or military industries. Perhaps most important, company insiders could not be in control of a substantial share of the companys stock.

Acquisition of both LFE and Gulton started as hostile takeovers since neither company probably would have taken Mark IV s acquisition quest seriously because of its relatively small size. But after Mark IV began to purchase a substantial number of shares, it got the attention it wanted. Before long hostile takeovers turned into friendly acquisitions.

Mark IV allowed a great deal of autonomy to the divisions it bought. Although management remained decentralized and division managers continued to run their own companies without day-to-day interference from Mark IV, the Mark IV corporate staff grew quickly, and in 1986, the company moved from its cramped offices in the Buffalo suburb of Williamsville to the nearby town of Amherst.

Mark IV did not have to worry about not being taken seriously after buying LFE and Guitón. According to Financial World, Mark IV was the fastest growing company in the United States in 1986. Mark IV continued to follow its prune and build strategy, buying Conrac Corp., an electronics displays manufacturer; Eagle Signal Controls, a traffic signal manufacturer; and Cetec and Electronic Counters and Controls, both audio equipment manufacturers. In five years, Mark IV s assets had skyrocketed from $19 million to $612 million. Investors who had paid less than $2,000 each in 1969 owned stock worth more than $2 million in 1987.

In the fall of 1988 the company paid $625 million for Armtek of Jamestown, New York, a manufacturer of automotive and industrial products, in the biggest acquisition in Mark IV s history. Alfiero told Forbes magazine, The biggest thing we had going for us was that nobody thought we could pull it off.

With this purchase of another company twice its size, Mark IV s debt was more than $1 billion, and Alfiero and Arrison sought to reduce that debt quickly. Within a year, Mark IV sold two of Armteks divisionsCopolymer, a chemicals producer, and Blackstone, a manufacturer of original equipment heat exchange systems for cars. Using those net proceeds, Mark IV paid off money borrowed to finance the Armtek purchase and ended up paying only $37 million for the Dayco Products, which had been responsible for half of Armteks sales and profits. Dayco was a definite moneymaker. With sales of $425 million, it was the nations leading supplier of original equipment automobile accessory drive systems and the second leading supplier of aftermarket accessory drive systems.

Alfiero also began buying Mark IV s junk bonds at a heavily discounted rate when the government began pushing companies to put them on the market. Alfiero eliminated another $250 million in debt this way.

In 1991 Mark IV purchased F-P Electronics, a Canadian manufacturer of electromagnet information display devices; Anchor Swan, maker of garden hoses and flexible hoses for cars; Vapor, the worlds largest maker of door systems for trains and buses; and two foreign companies, Dynacord of Germany and Klark-Teknik of the United Kingdom, both adding to Mark IV s audio line.

The companys largest core business in 1992 was Power Transfer and Fluid Handling. Mark IV s Dayco was the leading manufacturer of industrial belts and hoses used in home appliances, diesel engines, snowmobiles, and gardening, and a leading supplier of coolant hoses, power steering hoses, fuel hoses, transmission oil cooler hoses, and belts to the U.S. Big Three automakers. This core business also benefited in the 1990s from increased public concern about the environment since Dayco manufactured gasoline dispensing hoses, including the vapor recovery hose used at gasoline pumps to return gas fumes. This hose was also introduced in Europe in response to the European Clean Air Act.

In 1992 the Mass Transit and Traffic Control division worked with AT&T to develop and distribute an automatic electronic toll collection system that would allow drivers to pay their tolls with their AT&T Smart Card without stopping at toll booths. Mark IV also supplied traffic lights, electrical controls, interior lighting, and passenger information systems for buses, trains, and airplanes. The Americans with Disabilities Act also brought new opportunities to Mark IV, which had developed information display systems with enhanced audio and video display. Mark IV also looked forward to increased sales related to more government funding of mass transit systems.

Mark IVs third core area, professional audio equipment, produced recording studio equipment, systems for live performances, and products for permanently installed sound systems. Its products included amplifiers, microphones, mixing consoles, signal processors, and loudspeakers. Consolidation of the audio industry in the early 1990s was a boon to Mark IV because it could acquire companies that were well known and respected. Mark IV s audio equipment was sold under its division names, Electro-Voice, Altec, Vega, Dynacord, Gauss, Klark Teknik, and University Sound. Mark IV sound systems were used in the 1991 Monsters of Rock tour in England, Europe, and Russia, as well as at Euro Disneyland, which had the largest computer-controlled sound system in the world when it opened in 1992.

Mark IV retained several companies, particularly instrumentation companies, that did not strictly fit into its core areas but were leaders in niche markets in the aerospace, defense, and plastics industries. It also kept one of its earliest acquisitions, Clarke Container, a maker of child-resistant prescription bottles.

While the 1980s were a period of acquisition and growth, with Mark IVs products holding market-leading positions in the United States and the world, the recession in the early 1990s called for a different growth strategy. Mark IV focused on debt reduction, improved operations and continued selective acquisition, changing its acquisition strategy from purchase of public companies that would establish core businesses to purchase of private companies that would bolster Mark IV s core businesses. Because of its very diversified product lines and markets, Mark IV Industries was much better equipped to weather recession than its predecessor Mark IV Homes.

Alfiero and Arrison anticipated that the last half of the 1990s would bring a return to more aggressive growth, especially in the international arena, and that by the year 2000, half of its revenues would come from markets outside the United States.

Principal Subsidiaries

Altec Lansing Corporation; Anchor Swan, Inc.; Clarke Container Company, Inc.; Dayco Europe AB (Sweden); Dayco Products, Inc.; DDA (England); Dynacord Electronic und Geretebau GmbH & Co.KG (Germany, 80%); Eagle Signal Controls and Automatic Signal; Electro-Voice, Incorporated; FCD Corp.; Femco; F-P Electronics (Canada); Gauss and Electro Sound; Glar-Ban Incorporated; Graphic Instruments; Guitón Data Systems; Interstate Highway Sign; Kirkhof/Goodrich; Klark Teknik PLC (England); LFE Industrial Systems Corporation; LFE Instruments; LLE (Germany); Luminator; Lustreprint Incorporated; Mark IV Audio AG (Switzerland); Mark IV Audio, Inc.; Mark IV Instruments Limited (England); Mark IV IVHS (Canada); Mark IV Transportation Products Corp.; Mokon; NRD, Inc.; Protective Closures Co., Inc.; Servonic; Statham; University Sound, Inc.; Vapor; Vapor Canada Inc.; Vega. The company also has other subsidiaries with Mark IV, Dayco, Lunkoflex, or Klark-Teknik in titles.

Further Reading

Zremski, Jerry, Mark IV Industries Is Growing into Big Conglomerate, Buffalo News, June 15, 1986; Wiener, Daniel P., Mark IV: The Making of a Minicon-glomerate, New York Times, August 9, 1987; English, Dale C., Profile: Sal H. Alfiero, Clement R. Arrison, Western New York, August 1989; Mehlman, William, Asset Juggling Skills Keep Mark IV on High Curve, Insiders Chronicle, January 29, 1990; Norman, James R., Quick Reflexes, Forbes, March 2, 1992; Annual Report, 1992, Mark IV Industries, Inc.

Wendy Stein

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