In May of 2021 it was announced that the Eaton Vehicle Group facility in Hastings, Nebraska, USA would by closing by July of 2022 as you can see in this press release; “Cara Klaer, senior manager of communications for Eaton’s vehicle group, said in an email May 19 that members of Eaton’s management team met with employees at the Hastings facility to announce plans to consolidate its gear manufacturing operations. “Production of differential gears will be transferred to another plant in North America as Eaton’s Vehicle Group continues to adjust its footprint to best serve our customers,” Klaer wrote. “This consolidation will allow for operational efficiencies and increased utilization by capitalizing on existing gear machining and heat-treating scale in San Luis Potosi, Mexico.”
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In Germany we find furnace builder Artur Nolzen Industrieofenbau, a furnace manufacture with a history which goes back over 100 years English – Nolzen Industrieofenbau Very unfortunately the company was recently declared insolvent which means that the company will remain in business with wages being paid until an investor is found.
It would appear that the company had fixed contracts but with the recent spike in material pricing the firm was struggling to turn a profit on existing orders. While this translation from German to English is rather “cumbersome” it does present the details including the fact that the company has built over 10,000 systems in their history-a very impressive milestone.
“The provisional insolvency administrator of Wuppertal-based Artur Nolzen Industrieofenbau, lawyer and specialist in insolvency and reorganization law Marco Kuhlmann of KKN Rechtsanwälte, has informed the company’s nearly 40 employees as well as customers and suppliers that the business operations of the specialist for heat treatment plants will continue without restrictions. The aim of the proceedings is, in particular, to adapt the order structure of the family-owned company, which was founded in 1919 and most recently had annual sales of around eight million euros, to the current economic conditions.
“The order situation is good, and the know-how of the employees is highly valued by customers,” explains Kuhlmann, the provisional insolvency administrator. “The conditions for projects that had already been agreed before the Corona crisis contributed in particular to the impending insolvency. With the instruments of the insolvency code, we can readjust such projects and try to adapt the contract structure of this family-owned company to the current economic conditions for an adequate future.”
Kuhlmann is confident that he will be able to adequately take into account the consequences of persistently high energy prices, material costs or the rising interest rate level in the upcoming corporate planning. Kuhlmann has initially pre-financed wages and salaries for the employees for the next three months. During these months, a structured process will be implemented to find an investor who will participate in a profitable future for Artur Nolzen Industrieofenbau.
The managing director of the specialist for heat treatment plants had filed for insolvency proceedings on February 23, 2023. On the same day, the competent local court in Wuppertal had appointed attorney Marco Kuhlmann as provisional insolvency administrator of Artur Nolzen Industrieofenbau GmbH & Co. KG.
About Artur Nolzen Industrieofenbau; Artur Nolzen Industrieofenbau designs, manufactures and programs both fully automated furnace systems and chamber furnaces in the temperature range up to 1,250 degrees Celsius that are individually coordinated with the customer. Currently, 10,000 plants of the experienced and established Artur Nolzen Industrieofenbau are in operation worldwide, especially in the automotive, wind energy and metal processing industries.”
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We are excited to be speaking today with Mr. Ryan Murphy Co Founder of KAL Capital Markets of Long Beach, CA, USA a firm which advises entrepreneurs and private equity groups on liquidity events, recapitalizations and capital raises.
Ryan this is the first time we have interviewed an individual with such extensive knowledge when it comes to the valuation and sale of commercial heat treaters, I am excited to ask you a few questions. Lets start off with some details about your own background as well as some details about the firm you co founded, KAL Capital Markets.
While you have obviously been involved in mergers and acquisitions for a number of different industries our real focus is on metal finishing, surface treatments and heat treating. How many of the projects that you have been involved with over the years would fit into these categories?
We have a lot of overlap with you because the world of surface treatments has been a very important part of our practice for over a decade. We have been heavily involved in metal finishing transactions having advised on nearly a dozen of those types of businesses including many of the companies that ultimately became Valence Surface Technologies. On the thermal spray side, we represented market leaders including Southwest United (sold to PCC) and Hitemco (sold to Lincotek). Heat treating has been an adjacency that has become more active for our practice recently with the sale of the Hot Isostatic Pressing provider, Kittyhawk.
Are you able to share with us any company names?
Nope. We are only able to discuss transactions that are closed. Confidentiality is critical to us.
How do you determine the value of a company?
Valuation is always more of an art than a science. There are a variety of subjective factors that influence what a market price would be. Ultimately, what we do is create a competitive market for a business that will remove all subjectivity and allow a business owner to understand exactly what his business is worth and who would buy it.
I am sure that besides a multiple of EBITDA there are a number of other factors that determine the value of a firm. What would be the top 3 or 4 factors that need to be considered when putting a value on a company?
EBITDA is always going to matter, but I agree there are a few other high-level topics that drive the multiple. The most important to me is how differentiated a service the company is providing. Is it highly complex, with high-barriers to entry? Or do the customers have a wide-range of choices? The answer to that question generally gets you to important follow-up conversations around margin profile and future growth potential. Additionally, specifically in the world of surface treatments available capacity is important. If a business requires substantial investment to grow, buyers will discount the opportunity materially.
Over the years “The Monty Heat Treat News” has had some involvement with putting buyers and sellers of commercial heat treats together and several times the seller has brought up a point which I find hard to answer, perhaps Ryan you have a suggestion. A seller will say yes I agree with your valuation of the company today but how do we account for future growth? As an example the seller feels next year will be a banner year and believes he should be compensated for that even though historically the numbers don’t reflect this-suggestions?
It’s a tough question. This really gets to the topic of timing. We often find ourselves making recommendations on when is the right time to start a dialogue with buyers and effectively make sure that a seller gets compensated for future growth. Sellers get compensated for future growth via multiple of current EBITDA. A business that has highly probable growth streams with limited capital requirements should garner a higher multiple. A business that will be flat or low-growth gets a lower multiple.
I would say that the majority of sales in the commercial heat treat industry involve heat treats selling to other heat treaters, having said that though it is certainly not uncommon for a private equity firm to buy a commercial heat treat. Who is willing to pay more?
This dynamic has evolved significantly over the past decade. Historically private equity was viewed as focused on distressed or underperforming businesses and looked to cut-costs as way to generate returns. Today, private equity is much more diverse with a significant portion of the industry looking to buy healthy, growing businesses. Additionally, there has been a tremendous flood of capital into the private equity world, forcing these groups to be more aggressive from a valuation perspective.
While the commercial heat treat industry is a large one in terms of dollars it does not have an especially high profile in the overall manufacturing sector. Do many of the buyers that you work with specifically ask for an acquisition in this industry?
Aside from a handful of well-known strategic buyers, the majority of interested buyers are likely to be private equity groups. These folks generally are open a range of opportunities so wouldn’t ask us for a particular piece of the A&D supply-chain. That said, there has been an increased awareness that the Tier III or surface treatment providers are often one of the more attractive places to invest. There are a few factors that drive that including the service or tolling nature, low working capital requirements and robust barriers to entry driven by the upfront capital requirements or approvals (both Nadcap and OEM).
Are you seeing more or less interest from potential buyers in the metal finishing/heat treating industry?
Definitely more. The success of the Valence Surface Technologies platform raised the entire industry’s profile.
Now this is a very loaded question Ryan. Based upon rising interest rates and the threat of a recession in 2023 is this a good time for the owner of a heat treat to consider selling? It’s a loaded question because the flip side of this question would be is this a good time to buy a heat treat?
We haven’t seen any weakness in M&A activity or valuation for our clients. That said, I think many of the businesses that we work with have been insulated from a lot of the recession-risk because there has been a really nice recovery in commercial aerospace and continued growth in many defense-focused platforms.
Ryan I appreciate your time and look forward to keeping in touch with you over the years. Thank you, Gord
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SBS Corp., of Sarasota, Florida, USA is pleased to announce that they are preparing to ship 12 sand and scale removal systems to a foundry in Egypt. The systems will be used to remove casting sands and metal slag from water tanks at a continuous flow rate of 1,200 GPM each.
About SBS Corp; SBS Corporation is a United States based company in Sarasota, Florida, that has been providing the world with engineered products for fluid cooling, heating, filtering and controlling since 1974.
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In Spartanburg, South Carolina, USA “The Monty Heat Treat News” recently had the opportunity to visit “Furnacare” a division of TAV and TAV Engineering of Italy. TAV is one of the largest vacuum furnace builders in the world while TAV Engineering offers service, support and aftermarket assistance.
TAV is an Italian, family owned business who made the decision a number of years ago to market their products in North America through Furnacare. With almost 1,000 furnaces installed around the world and roughly 225 employees TAV is a well known firm globally-in North America they expect to have installed almost 50 systems making them a known and growing vacuum furnace builder. It is worth noting that the company has a relatively narrow focus-vacuum, sintering and debinding furnaces are their bread and butter.
The Furnacare location in Spartanburg is approximately 10,000 square feet and plans have this being utilized for sales as well as spare parts, new hot zones and service work. In this recent photo we see Mr. Jan Massholder, Managing Director and Mr. Damon Bizuka. In September of this year we will be presenting an in depth interview with Jan which we look forward to.
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Very unfortunately one of the larger German commercial heat treaters, HTU Härtetechnik GmbH https://www.htu-haertetechnik.
This facility features a number of different furnaces including continuous furnaces and batch nitriding equipment. We walked away from this plant being very impressed by the cleanliness of the facility as well as the fact that all of the furnaces were new and top of the line.
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Recently “The Monty Heat Treat News” profiled two Aalberts surface technologies HIP | braze | heat treatment locations in the Greenville, SC, US area, including the Pelham Road and Fairforest (formerly Ionic Technologies) facilities. Today we move on to a third location in the area, Aalberts Surface Technologies on Garlington Road.
Before we do let’s provide some background. Based in the Netherlands, we at “The Monty” have always considered Aalberts to be one of the largest commercial heat treaters in the world, particularly in their own backyard-Europe. Starting a number of years ago the company made a very determined effort to duplicate this success in North America. The result is that Aalberts is now the second largest commercial heat treater in North America. Part of this effort includes their 3 locations in the Greenville, SC region. The full list of largest commercial heat treaters in North America can be found by clicking the following link: https://themonty.com/articles/the-monty-heat-treat-news-50-largest-north-american-commercial-heat-treats-2022/.
The Garlington plant has been in existence since 2000 and is the largest of the 3 plants in the region. Over the past several years the plant has seen a very substantial investment, particularly when it comes to a rapidly growing technology, Hot Isostatic Pressing-“HIPing” for short. This plant now has two presses in place and in operation, it is rather an open secret that a third system will be brought online in the future.
The rest of the plant focuses on two technologies, vacuum hardening and vacuum brazing- both heavily involved in the power generation and aerospace sector. As you can see in these photos the two departments have a number of very recent vintage vacuum hardening and vacuum brazing units. As a footnote to this story we should point out that Aalberts surface technologies also has legacy Accurate Brazing facilities in Goffstown, NH and Manchester, NH.
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Donald Jones, Ricky Pallotta, Ken Hendrix, Sam Postich
An international organization in the field of industrial automation has ordered a SECO/WARWICK heat treatment system with the goal of establishing a captive hardening plant within their machine park. This comprehensive technological line for hardening applications will consist of two Vector® vacuum furnaces, an atmosphere furnace, and a washer.
This is another SECO/WARWICK installation enabling partners to expand their production capacity with an in-house hardening plant. This is another partner that has trusted the Group’s experience in the comprehensive execution of in-house hardening plants. Clients have discovered that adding a captive hardening heat treatment manufacturing system is an ideal solution because it gives companies independence from relying on external service providers. This investment is also a guarantee of timeliness as well as high-quality of heat treatment processes. The furnaces on order will be used for hardening and vacuum carburizing the elements used in motor reducer production. These parts are used in the production process for automation applications in industries such as automotive, aviation, food and printing.
An in-house hardening plant means independence
The line of furnaces on order for vacuum carburizing will be equipped with the signature SECO/WARWICK FineCarb® technology and HPGQ high-pressure gas quenching. The system will include two Vector compact vacuum furnaces, which are the model for all of the solutions of this type worldwide. Their unwavering reputation is demonstrated by the fact that these furnaces work in over 70 countries, implementing heat treatment processes for the most important industries. In combination with a washer and an additional tempering furnace, they provide comprehensive heat treatment, starting with the wash cycle, through carburizing, hardening, and tempering. The furnace’s compact size will ensure the appropriate flexibility and efficiency required by the Partner, due to the wide range of machined details in complex work such as gears, shafts, and pinions.
“In these times of constant problems with maintaining the supply chain, having captive heat treatment within a machine park provides our partners with a huge competitive advantage and independence. Within a relatively small area, we can create a heat treatment system that will meet the Partner’s needs. Such an investment of this type pays off very quickly, as evidenced by the growing orders for our partnership in building in-house hardening plants,” says Maciej Korecki, Vice President of the Vacuum Furnaces Segment at SECO/WARWICK Group.
A small hardening plant for big needs
The situation in global markets after the Covid-19 pandemic causes a constant problem with strategic material acquisition and tool processing in production companies. The price for the freedom of hardening plant ownership from high transportation costs and delivery delays is not that high when compared to the alternative. A small internal hardening plant consisting of two Vector vacuum furnaces, an atmosphere furnace and a washer ensures complete independence from commercial service providers.
Vector – the ideal design is unique in the industry
The vacuum furnaces on order are solutions with compact dimensions which will meet the customer’s requirements for hardening and carburizing parts, specifically gears, pinions, and shafts. It is a standard, proven design that stands out for its reliability. The characteristic features of these furnaces are a round heating chamber with excellent temperature uniformity, +/-5oC, convection heating and isothermal hardening. Vectors guarantee the execution of precise, high-quality carburizing processes. As a standard, they are equipped with an efficient and ergonomic pumping system, as well as an effective cooling system. All this makes these furnaces one of the most popular vacuum solutions in the world.
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Effective February 8, 2023 Standard Vacuum Pump Services (SVPS) of Holbrook, New York, USA was acquired by Trillium US Inc. (Trillium) of Clackamas, Oregon, USA.
“About Trillium; Trillium specializes in providing world-class vacuum pump repair, new and refurbished pumping systems, as well as accessories, spare parts and consumables. With 3 nationwide locations, an in-house machine shop, and ready-to-ship inventory, customers love our short lead times and competitive costs. Trillium’s vacuum offerings include sale and service of dry, rotary piston, blower, rotary vane, cryo and turbo pumps. We operate three US service centers and offer field service globally. Trillium also services and supplies chillers, heat exchangers and gas abatement systems.
About SVPS; Established in 1991, Standard Vacuum Pumps Services is a full-service vacuum pump repair company operating in New York. Standard Vacuum’s capabilities include, but are not limited to, rotary vane, rotary piston, mechanical booster, diffusion, cryo and turbo pumps.
Over the years Trillium has made several acquisitions in the vacuum pump industry including the acquisition of Oxford Instruments – Austin Division in 2015.”
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AHT President Mike Woods commented, “I look forward to John utilizing his strong manufacturing background and metallurgical skills. His flexibility to wear many hats will be an excellent attribute in his new role.” Previous to AHT, Ludeman held leadership positions in metallurgy, quality and heat treat for UTC Aerospace Systems and was a process metallurgist at The Boeing Company, Eaton, and Preco Turbine Services.
Ludeman is a voting member of the NADCAP Heat Treat Task Group and the Aerospace Metals Engineering Committee (AMEC). Ludeman is also an active member in the community, coaching girls’ youth softball in the Cedar Valley for several years. A graduate of South Dakota School of Mines & Technology, Ludeman holds a bachelor of science and a master’s degree in metallurgical. He has an additional master’s degree in quality systems management from the National Graduate School of Quality Management.
About Advanced Heat Treat Corp. Advanced Heat Treat Corp. (AHT) is a recognized leader in providing heat treat services and superior metallurgical solutions to companies across the globe. Established in 1981, AHT is committed to exceeding customer expectations with “UltraGlowing” results. Their UltraGlow® family of processes includes plasma ion nitriding, ferritic nitrocarburizing (FNC), gas nitriding, UltraOx®, through hardening, carburizing, carbonitriding, induction hardening and many more. For more information about AHT, please visit www.ahtcorp.com.”
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