Davlyn Group appoints Mauricio Zavatti as Chief Executive Officer

Manufacturing Executive Brings Extensive Leadership Experience and Expertise in Sales, Marketing, Operations, and Engineering


Spring City, PA (October 02, 2019) The Davlyn Group, a global leader in technical textiles, has announced that Mauricio Zavatti has joined the company as Chief Executive Officer. Mauricio brings a unique combination of industrial, international, and leadership experience, following progressively senior roles at Danaher Corporation, Tyco International, and Belden Inc.

“We couldn’t be more excited to welcome Mauricio to the Davlyn family,” commented Josh Kowitt, Managing Partner, Emko Capital. “He is a visionary leader with the credentials and experience to take Davlyn to the next level. He is standing on the shoulders of four great individuals – Tom Weil, Paul Griggs, Joel Lukoff, and Gary Flasher – who started and built Davlyn along with the rest of the Davlyn team. The future is bright under Mauricio’s leadership.”

Mauricio’s proven track record will mesh well with the ambitious plans of The Davlyn Group to become a true global player in high temperature textiles and heat management solutions.

“I look forward to leading the amazing teams at Davlyn Manufacturing and Darco Southern,” said Zavatti. “It is energizing to be CEO of a company with a reputation for best-in-class quality and customer service. Combined with innovative products and services, a global customer base, and talented employees, we are well-positioned for our next phase of growth.”

Joel Lukoff, who has been instrumental in growing Davlyn over the past 20+ years, has become Executive Chairman and will continue to be active with the Group’s activities as a Board Member.

Mauricio holds a BS in Industrial Engineering from Lehigh University and an MBA from Wharton.

About The Davlyn Group 

The Davlyn Group is a leading U.S.-based manufacturer of technical textile products for the industrial, commercial, and residential markets. Through its Davlyn Manufacturing and Darco Southern divisions, the Company’s products and engineering services are used by thousands of customers in over 40 countries to help keep heat in its place, improve safety, and increase productivity. Our excellence in innovation, quality, value engineering, and on-time performance has earned us a multitude of recognition awards from some of the world’s largest appliance and industrial equipment manufacturers. More information is available at www.thedavlyngroup.com.


Media Contact:

Jeff Zola
Vice President, Marketing
Ph: 610-948-5050

Three tech opportunities every manufacturing business can implement now

Customers today expect higher quality products, designed in less time, at lower cost. This puts significant pressure on small manufacturing companies, many of whom struggle to survive in an age of conglomerates and consolidation. Luckily, technology that was once only available to global powerhouses can now be leveraged by smaller players to level the playing field. Below are 3 pieces of technology that can be used to improve product quality, speed design iterations, and lower costs when introducing new products.


1.       Computer Aided Design (CAD) Software

Gone are the days of drafting tables and physical blueprints. CAD software allows designs to be built up, piece by piece, on a computer before being turned into blueprints for production. While this technology isn’t new (it’s been around since the 1960s) it has taken gigantic leaps forward in the past decade.

Starting with the basics, CAD software allows individual components (think nuts, bolts, castings, sheet-metal, etc.) to be modelled in 3 dimensions with complete precision. Individual components can then be combined into an assembly, allowing you to screen for potential design issues such as parts not fitting together or being impossible to assemble as designed. Some software will even help you visualize manufacturing tolerances; imagine being able to see that some fraction of manufactured parts won’t fit together and addressing the issue before you’ve ever even made it to the assembly line!

CAD software also lets you output and update blueprints easily. If a significant change is needed, you can swap out individual parts or sub-assemblies with updated versions and generate a new blueprint in minutes instead of spending hours hunched over a drafting table. Together, these benefits let you save time and money, and provide higher quality products to your customers.

2.       Digital stress testing

On top of being useful by itself, CAD also allows you to use several auxiliary technologies to supercharge your design process. For example, once you have a CAD model you can use it to stress test your design, identify potential failure mechanisms and their root causes, and decide how to fix them. Again, all of this can be done without ever building a prototype or spending a dime on manufacturing through the magic of Finite Element Analysis (FEA).


FEA takes a big problem with no mathematical solution and breaks it into a lot of tiny approximations that DO have solutions, which can then tell you the stresses, strains, heat transfer, and deformation in an object or assembly while it’s being used in a particular way. This is actually even more useful than it may seem, because while it helps minimize risk of failure and improve product quality, it also lets you remove any extra material or complexity thus reducing costs and increasing margins. Even better, while this technology used to require a super-computer and a team of PhDs to use, technological advances have made it possible to run these complex simulations on your laptop.

Running this testing isn’t as hard as you might think either. Technology has advanced drastically in the last decade, not only in terms of hardware but also software. There are several software packages for FEA, including a few open-source options, that have automated testing to various degrees. There are also other packages that do similar things for fluids (CFD), and electronics. Adopting this technology can not only further speed your product development process, but increase quality, and decrease costs, all with very little upfront investment.

3.       3D Printing


3D printing allows CAD designs to be turned into reality, allowing for faster prototyping, fitment, and potentially trial use of a new product before moving into a more standard prototype for final testing. Unlike with traditional prototypes, 3D printed designs can be made in minutes or hours instead of days or weeks. They also require little-to-no labor and significantly fewer tools.

As above, technology for 3D printing is also advancing rapidly, with higher quality parts being printed and more durable materials being used for printing. It is now possible to 3D print metals, opening up the possibility of manufacturing low-volume parts with 3D printers on an as-needed basis, effectively eliminating warehousing costs.

As technology continues to advance, cost of entry will continue to drop and use cases will expand. Companies that leverage technology effectively have an increasingly large advantage over those that do not. However, barriers to entry also decrease over time, with CAD and FEA having extremely low cost of adoption. Making a conscious effort to utilize technology effectively has the power to improve returns, but failing to do so can cause your company to be left behind.

Company Culture: Creating a core competency out of your firm’s intellectual capital


A P&L can only shed so much light on a company’s costs and areas for potential growth. It may seem common nature to evaluate financials in order to identify key areas for cutting costs and growing the bottom line; however, the largest area for potential development may actually be sitting in the desks next to you. In line with the old school business adage ‘people are the greatest asset,’ recent studies have demonstrated that corporate culture and its effect on a firm’s intellectual capital can have a great impact on profitability. Below are 5 key ways that demonstrate how focusing on a positive, encouraging, and team-oriented culture can help increase net income.

1) Accountability Increases Productivity

When employees feel like management has given them more ownership over their work, they feel more accountable for their actions and take more pride in their work product. This not only leads to higher quality work, but also helps to improve organizational citizenship.

2) Saving Costs by Reducing Turnover

Employee turnover is an extremely expensive firm cost; Studies show that every time a business replaces an employee, it can cost as much as 6 to 9 month of that employees salary. That racks up to a $20,000 to $30,000 price tag for an employee salaried at $40,000.

Firms with high employee turnover may be seeing great detriment to their bottom line. Studies show that culture is one of the top three reasons why people quit their job, thus demonstrating the correlation between culture and turnover costs. Working to improve company culture and employee happiness can help to reduce employee turnover and thus increase the bottom line.

3) Independence Requires Less Management

A strong company culture supports employees and encourages them to be driven, self-sustaining, and productive. When your employees are happy and accountable for their actions, they require less management, which can significantly cut down on managerial level wage expenses.

4) Cohesive Team Collaboration

Team bonding experiences can be extremely beneficial to increasing profitability. It is often assumed that friendships in the workplace can get in the way of productivity; however, a teamwork culture can help create a collaborative work environment where there is increased effectiveness in employee communication.

A cohesive culture also helps employees see the bigger picture. It drives employees to work with team goals in mind, in turn increasing overall efficiency. When company employees operate independently, they may be more focused on their own goals, their own vacation days and their own way to stand out to management. An employee mindset that doesn’t solely focus on individual needs will allow for more concentration on goals regarding the entirety of the company.

5) Employee Engagement Boosts Performance

19% of the US workforce is actively disengaged at work and it costs $300 billion a year in decreased employee performance. The term “actively disengaged” describes employees who are disconnected and unenthused by their work. Not only are they less productive when they are at work, but they are also absent from work more than their engaged peers. Disengaged employees have an average of 4 more missed days of work per year than engaged employees. When there are a number of disengaged employees at a company, the amount of extra missed days can be detrimental to the bottom line.

There are a number of other intangible ways that culture can impact the bottom line. In a general sense, happy employees are more productive, feel more accountable, feel more attached to their work, miss less days of work, and take more pride in their work product. Employees are a firm’s greatest assets; putting time and effort into creating a company culture that empowers, enlightens, and enables employees can increase profitability for the bottom line and provide the company with a unique core competency.

Emko Capital announces new investment

Emko Capital is pleased to announce the addition of two firms, Davlyn Manufacturing Co. and Darco Southern, to its investment and management portfolio.

Founded in 1980, Davlyn Manufacturing Co. is a premier U.S.-based manufacturer of high-temperature textile products, specializing in high-volume knitting, braiding and coating. It is a thermal solutions leader and owns numerous technology patents for its industrial and commercial solutions, with specialization in custom fabrication with thermal textiles. Its facilities are located in Spring City, Pennsylvania.

Darco Southern is a US-based manufacturer of high-temperature textile products. With a history of innovation, Darco has become a thermal solutions leader across commercial and industrial markets. Today, Darco operates a modern 35,000 sq. ft. facility in Independence, VA with knitting, cutting, specialty coating, and kitting and custom sewing & fabrication capabilities.

We are excited to partner with Orix Mezzanine & Private Equity and Webster Bank who provided financing for this transaction.

About us:
Emko Capital is family-run investment firm investing in and actively managing privately held industrial and manufacturing businesses. Founding and managing partners Josh Kowitt and Dean Emmerton have over 30 years combined experience in industrials, infrastructure, aerospace and related industries. You can learn more about Emko at www.emkocapital.com.

Our investment criteria:
+Aerospace and industrial manufacturing and services
+Focus on engineering and innovation
+Non-cyclical industries
+Family owned business seeking succession plan

Artificial Intelligence and its Pivotal Effect


Written by Chelsea Virga

The Terminator. Robocop. While society is usually exposed to artificial intelligence as the basis for cinematic plotlines, innovations in modern technology are driving robotic engineering to far more practical everyday applications. According to McKinsey, technology firms such as Google and Baidu spent around $20-30 billion in 2017 investing in the research and development or acquisition of firms related to artificial intelligence. This investment is primarily for machine-learning technology, which will enable software to self-improve without manually programmed upgrades. Automation of logistics involved with manufacturing, shipping and delivery will be an innovative resolution to the complex and often daunting process of supply chain management. Below are the main aspects in which artificial intelligence (AI) will play a particularly impactful role.

Streamlining Compliance and Administrative Responsibilities

While firms often benefit from growing due to economies of scales, they are often hindered by the additional bureaucratic and legal responsibilities accompanied by greater capital outlay and output delivery. Businesses must usually devote around 6,500 hours to processing paperwork, replies and fixing incorrect purchase orders to suppliers.  Machine learning technology (ML) has recently reached the capacity to self-sufficiently send legal documents to suppliers, as well as process and document purchasing orders; this boosts management’s capacity to tackle more priority company tasks.

Efficient Inventory Forecasting

With sufficient storage of historical data from past transactions and company operations, AI has the capability to hold enough supply and demand data to forecast optimal inventory quantities. Best and worst-case scenario analysis can be conducted to anticipate the least favorable outcomes. It can address risks stemming from trends like consistently cyclical sales or increasing prices factors of production. During 2016, 570,000 additional workers were hired during the holiday season to the uptick in demand. Seasonal firms like costume or flower shops exposed to inconsistent sales can utilize such technology to reduce risks from such cash flow volatility.

Active Monitoring of Resources

In terms of manufacturing, AI can detect when capital needs to be maintained, upgraded, or replaced. AI has also been utilized in monitoring resources in more non-conventional applications such as the agricultural industry. A Georgia rural farm owner uses “real-time cattle analytics” to track miniscule livestock movements that can indicate health issues, dietary needs, or reproductive action. This is undoubtedly a more calculated and scientific practice than the traditional intimate and intuition-based relationship pictured between farmer and his farm animals. The technology provides predictive insights that can prevent the worsening of health conditions and deliver estimates for quantity of milk production.

Respective Risks

It is important to address both the positive as well as the negative long-term effects artificial intelligence will have on the current industrials sector. Other than generating improved productivity and increased potential output, such automation may have a detrimental impact in its reduction in employment opportunities for humans. McKinsey research has already estimated job losses as the result of the introduction of AI technology to be at 5%.  Another key risk will be increased corporate exposure to security breaches and hacking risks, which is uncharted territory for many of the industries that will use this computerization to aid their supply chain. It is also crucial to note that while AI mechanization has been developing rapidly, meaningful application of this technology can only occur under meticulous execution. Relevant and inclusive firm data, network-wide and scalable operations, as well as complex decision making algorithms are all critical components to implementation.

Artificial intelligence will create a pivotal impact on industrialization, with such increased usage of automated technology bringing along its own unexplored benefits and drawbacks. Google CEO Sundar Pichai recently stated the artificial intelligence revolution is “more profound than electricity or fire;” In conclusion, our future generations may just look at our era’s disposition towards manual decision-making processes and human management in the same light we imagine our predecessors scribbling by candlelight.

The Robo-Vehicle Revolution: Where is it driving society's future?

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Written by Chelsea Virga

It has often been said “if you want something right, do it yourself.” However, this old adage may not continue to ring true in a time where consumer interest has spurred self-driving cars to become increasingly prevalent in the transportation sector. Industry experts classify vehicle automation on a scale of 5 levels. Currently, industry technology has allowed for automobiles to be manufactured on either level 3 (conditional automation in which the driver must remain vigilant in control) or level 4 (highly functional automation under most, but not all, conditions).

There are a multitude of players in the self-driving space right now, and each firm is fiercely exerting efforts to become the first major successful market entrant. Echoing the sentiment “bigger is better,” recent industry developments in the self-driving field have been focused on commercial trucking and semi-vehicles, rather than solely passenger utilized automobiles. About a week ago, Tesla declared a prototype on all-electric semi-vehicles to haul cargo. Days later, Waymo, subsidiary of Google/Alphabet, launched its pilot self-driving commercial trucking program.  GM still maintains that its firm’s unique core competency is its ability to exclusively manufacture, sell, and also offer driverless ride-sharing services. Each firm is fully gearing up in attempt to win the race to become the first dominant entrant into the self-operating transportation industry.

Such a revolution will not only directly affect the manufacturing and service jobs in the automotive industry, but will also inevitably disrupt more detached facets of the community. Such innovative technology will benefit society in aspects such as safety and the environment; however, it is important to note the revolution will reduce demand for a plethora of service jobs and expose society to novel risks. Let’s explore the multitude of ways in which our society will be impacted by these new vehicles...


The transformation of the automotive industry will do wonders to deliver improved safety.  The cause of around 90% of automotive accidents can be attributed to human error. Sensor technology and high-speed algorithmic traffic detection systems will decrease such devastating wreckage statistics. In turn, there will be decreased need for police service and regulatory forces for drunk driving, speeding, and parking violations.

However, the elimination of these issues may only allow for alternate conflicts to pop up in their place. Increased reliance on technology will expand the transportation industry’s exposure to hacking and distribution of data to unsecure sources. Historically, insurance firms have polished models for quantifying risk involved with automotive accidents and related fatalities, but will now have a steep learning curve to conquer in addressing the cyber security issues that will be faced as automotive systems and technology increasingly intertwine. According to Gresham College IT Professor Marty Thomas, “pricing the risk of hacking is a complete mystery,” but still a serious concern as exploitation by criminals could affect thousands of cars in a single day and put insurers out of business.”


The transformation in the automotive and trucking industry is expected to include a transition from fuel-powered to electric-powered vehicles. While this may be a short-term detriment to the federal government in terms of a reduction from fuel tax revenues, such a green switch will champion a victory for the environment. However, the reduction in society’s use of fossil fuels will be followed by an increased demand for electric batteries and in turn mining for elements such as cobalt. The global lithium-ion battery market is expected to double to $75 billion dollars in the next seven years. Furthermore, innovation in the self-driving space will make the days of traditional parking garages mostly obsolete. The U.S. currently has about 144 billion square feet of total parking, and as this space is converted into other uses there will be less man-made concrete pavement and more room for natural greenery.


In general, the transition into electronic vehicles will result in increased productivity through all sectors. Less time spent focused on controlling transportation will allow for increased employee productivity to and from work destinations. More recreational time in the car is also expected to create substantial inflows in revenue for media companies due to increased advertising consumption; a report by McKinsey and Company determined each additional minute the masses spent on the Internet could generate $5.6 billion annually.


In terms of the transportation sector, there will be reduced demand for service jobs, such as taxi drivers and U-Haul drivers, followed by increased need for employees in software coding, engineering, and manufacturing. Tesla has already released a semi-electric truck with autopilot features set to deliver meaningful cost savings for supply chain management, seeing as around 33% of costs in the $7 billion dollar US trucking industry is drivers’ wages. After just the next ten years, it is estimated electronics will account for a whopping 50% of automobile manufacturing costs, rather than just the 33% it sits around today.

This will ultimately reduce input costs and increase profitability for all companies utilizing logistics and supply chain management, but particularly impact automobile manufacturers and ride-sharing firms. GM President Don Ammann has stated each vehicle currently makes around $30,000 in lifetime profits; a firm entry into driver-less vehicles and ridesharing could allow for this figure to increase to hundreds of thousands of dollars.  While ride-sharing has been prevalent in a society for years now, GM CFO Stevens notes the automation of such vehicles will increase margins substantially, eventually eliminating 40% of current ride-sharing service costs.

It will be extremely interesting to observe the plethora implications self-driving vehicles will have on our society.  What are your feelings on the robo-car revolution? Are you resistant to accept such new unconventional technology or are along for the innovative ride?

Powering the U.S. on a Clean Electrical Grid: A Cost-Effective Energy Future


By Nick Greene 

 “The future is green energy, sustainability, renewable energy.” Former Governor Arnold Schwarzenegger made this claim during an interview in 2012, after calling out U.S. Congressional leadership for a failure to make a detailed plan for an American energy future. Years later, political discord still looms over U.S. energy policy, with foreign solar panels now subject to a tariff, and Schwarzenegger’s home state of California embroiled in a fight with the federal government over the drilling of offshore oil wells along it’s coast.

So where exactly does renewable energy stand now? Will that future Schwarzenegger predicted become reality?

After digging into some numbers, I couldn’t help but be surprised by how far the United States has progressed with renewable energy. In November of 2017, renewable energy sources accounted for 17.6% of electricity generation, consisting of hydroelectric (6.43%), wind (7.56%), biomass (1.71%), geothermal (0.43%), and solar (1.47%). With higher seasonal hydroelectric output in early 2017, that renewable electrical generation number reached as high as 19.35%. In 2012, renewables delivered a much lower 12.4% of total electrical generation.

In five years, 5% of the electricity generation of the United States has been captured by renewables, with the growth attributable to solar (0.11% to 1.47%) and wind (3.55% to 7.56%).  Solar PV installation jobs have even been deemed the fastest growing occupation, with wind turbine service technician jobs taking second place. This expansion of clean energy is predicted to extend into the foreseeable future, with large initiatives continuing to make the news. For instance, Governor Phil Murphy of New Jersey recently signed an executive order to fully implement the Offshore Wind Economic Development Act (OWEDA) to deliver several gigawatts of power from offshore wind along the Jersey coast. Beyond calls for environmental stewardship, this growth is driven by the new financial allure of wind and solar.

What are the costs for renewables?

Although several factors currently limit adoption of solar and wind, in many cases, these options are cheaper than conventional energy sources for new electrical generation projects - even without subsidies. Although integration issues and battery storage are not fully accounted for in the recent Lazard study, utility scale solar PV is cheaper than coal, and is comparable in cost to gas combined cycle projects, as is wind energy. Further, renewable sources limit energy producer exposure to variability in fuel prices. Although not viable in all cases, renewables have proven to be more economical under the right conditions, especially when subsidies are utilized.

These low costs explain the large number of new wind and solar projects across the United States and will lead to a higher share of electrical generation from renewables as new energy production capacity is created moving forward.

How can companies outside of the energy sector benefit from the growth of wind and solar?

For small businesses and manufacturers, smaller scale projects may be a potential source of cost savings. Rooftop Commercial and Industrial Solar PV installations are estimated at $66 to $150 per MWH with subsidies ($85 to $194 without subsidies). Although highly variable by state, the average cost of electricity in the U.S. was $0.1043 per kWh ($104 per MWh) in 2016. Certain businesses may be able to save on electrical bills through renewable energy projects, especially in states with higher electricity costs such as Hawaii ($0.2464/kWh), California ($0.1507/kWh), and New York ($0.1445/kWh). In an increasingly environment-conscious society, branding a business as green can also lead to more customer support and boost top-line revenue.

Middle Market Companies: The value behind medium sized firms


The goldilocks principle can be accurately applied to middle market companies: not too big, not too small, but just the right size for achieving unique corporate synergies. These firms are large enough to afford technological investment to achieve operational efficiencies, yet are also small enough to retain a collaborative corporate culture filled with passion for entrepreneurship.  

The middle market encompasses over 200,000 firms in the U.S. market, each with between $10 million to $1 billion in average revenue. These firms provide approximately one-third of private-sector jobs in the US and contribute around one-third of private sector GDP. This demonstrates the immense power of middle market businesses and their integral role in the US economy. Middle market firms are essential to the robustness of the job market.

Middle market firms are reporting the highest and most improved year-on-year company performance since the 2008 recession. Currently, the 4.1% unemployment rate is at a 17-year low. US manufacturing has had the strongest addition in jobs since 2014. The stock market run up has continuously reached new heights. In line with the general public consensus, a record high 86% of middle market firm executives are highly confident in the economic environment. Such statistics demonstrate the heavily intertwined relationship between the health of middle market firms and the domestic economy.

In terms of historical data, three quarters of middle market firms had increases in revenue during 2017; 66% expect this climb in revenue to continue during 2018. With possible increases in disposable funding, 69% of middle market companies note these extra revenue dollars will likely be put to capital investment, such as new plants, equipment and technological upgrades. In terms of overall allocation, funds will also be exercised into investing, capital expenditures and information technology. Additional revenue will also cause a surge in human resource expenditures; currently, the annual employment number for middle market firms is expected to grow over the course of next year at a rate of 5.2%. 

43% of middle market businesses are expected to hire in 2018. Middle market companies compete for talent with larger, more well-known firms. A tightening labor market increases the need for firms to offer competitive compensation packages. This will ultimately impact prices and profits for mid market companies through additional wage, benefit, and healthcare expenses. Due to these complexities, over half of middle market leaders state talent is their company’s number-one long-term challenge. Additional investment in retention, training and development will be required to maintain a high-performance talent pools and culture in mid market firms.

Middle market companies are crucial to the vibrancy of the domestic economy. Strategic competencies must be emphasized to allow a competitive edge over leaner start-ups and larger corporate counterparts.  Middle market firms must channel their unique size in order to execute efficiencies and add value in ways that will allow them to prosper.

Written By Chelsea Virga

What Emko Looks For in a Family Business


Family-run businesses may have a reputation for being small compared to their corporate counterparts; however, seeing as family firms compose 80-90% of all North American business ventures, family-owned businesses can be a big area for strategic investment. In terms of internal culture, a study of 114 family companies and 1,200 other large corporations determined family-run businesses as significantly better performers in cultivating worker motivation and effective leadership. As a family-run investment fund, Emko Capital is particularly interested in partnering with family businesses in a way that adds value and respects each founding family’s legacy. Below are some of the aspects that can make a family business especially conducive to successful growth in a strategic partnership.

Transitional Selling

Emko is particularly interested in family-run firms selling for the right reasons, such as nearing a transitional point. The average age of control in a family company is 60.2 years; therefore owners nearing retirement or looking for a day-to day transition can become increasingly interested in exiting, especially if there is a lack of a succession plan in terms of future firm leadership. This provides the perfect opportunity for a strategic partnership to contribute value with the added insight of previous management’s experience operating the firm.

Financial Stability

In order to obtain financing and leverage at an ideal rate, minimal firm risk in aspects such as cash flow volatility and customer concentration is ideal. Stable or growing revenues and consistent input prices in company operations help maintain recurring profits. It is also important to have an addressable and satisfied customer base; too large of customer concentration can pose additional instability and make it so deals must be structured creatively to mitigate the risk of a large customer leaving. Multiple years of financial data is crucial to deliver a proper valuation, which is why it is important the firm be in existence for more than 5-7 years. Such multiyear period financial information can reflect the longevity of the business through different periods of economic cyclicality. An additional bonus is if such financial data is clean and utilizes GAAP or is reviewed by accountants.

Growth Potential

While every industry has its own relevant metrics and industry standards for quantifying its profitability and growth, Emko is especially attracted to firms where it can utilize industry expertise and operational efficiencies to add value. We search for growth levers built on the foundation of the firm that we can use to propel the company to further success.  While a strong market position in industry is appealing, it is not always necessary if there is sturdy financials andstrong fundamental support for the firm’s product or services.

Unique Core Competency

Each business has its own distinct value proposition. The unique “X-factor” behind the firm can range from patented proprietary technology, strong market share, innovative logistics know-how, consumer passion for the product, or a collaborative work environment filled with employee cohesiveness. While some “wow” factors are more quantifiable than others, Emko must learn to identify this specific core competency special to the firm and harness it into the larger picture of the firm’s success.


The final aspect is denoted through a question mark as often times there is an intangible quality that can propel a strategic partnership to the next level. Passion for the project, engagement to each other’s concerns and trust in delivering accurate information are all essential fundamentals for a professional relationship. There is no standard recipe to developing a collaborative professional bond but establishing an authentic and open forum for constructive feedback can be transformative to successfully growing a business.

Putting It All Together

Each family held business has its own unique culture and organizational structure. During the strategic partnership, it is important to take the time to gain an understanding of these distinctive firm qualities and utilize them to the company’s advantage. Working with the owners to create a transition plan over time is a way to keep an organized and progressing timeline, as well as minimize unnecessary change to current employees. The goal of an effective strategic partnership is to improve strategic capabilities and operating efficiencies at the firm while also maintaining low levels of risk and sustaining a supportive corporate culture.  

Are you a family-run firm looking to explore some options? Emko is filled with repeat entrepreneurs, so each business is approached with the utmost respect. Reach out and let’s decide together if we’d make good partners.   


By Chelsea Virga

Impact of new tax reform on the manufacturing sector



By Chelsea Virga

Benjamin Franklin said there were only two things certain in life: death and taxes.  However, with such massive alterations to tax policy this year, the ladder has become increasingly unknown.

The dense complexities of tax code can make the details daunting to comprehend, but there is definitely a few core components worth taking notice of.

  • The legislation is foremost calling for a cut in the corporate tax rate from 35% to 21%; this is the greatest one-time corporate rate reduction in all of American history.
  • Another key element is a transition into a “territorial” tax system where US companies will be not taxed on foreign earnings abroad; this is coupled with a one-time repatriation tax for assets and cash held by U.S. firms overseas. Such an adjustment is being made with the intent to eliminate loopholes corporations currently use to dodge tax payments. 
  • An additional feature is a full and immediate write-off for capital investment in plant assets and equipment for the next five years.
  • Furthermore, another integral aspect is the border adjustability revision that will terminate US firm deductions on imported raw materials or products. US products exported abroad would be exempt from this adjustment.
  •  In sum, the purpose of such revisions are to advantageously position domestic firms against their foreign competition. 

Trump has championed the republican-led tax overhaul, declaring that tax cuts will act as “rocket fuel,’ and will further propel the already heightened economic environment. The new legislation will have a substantial impact on operations in every industry, but will particularly influence those with large capital expenditures and investment in fixed equipment. The manufacturing environment will be vastly affected, as it will be now be more crucial than ever to strategically identify the locations of new plants and designate the sources of raw materials. Firm executives that best research the most efficient ways to locate, produce, and overall operate will reap the most benefits from such legislative adjustments. As manufacturing companies get to spend less of their funds towards their tax obligation, more can be utilized as additional investment in in R&D, capital expenditures, resource development, as well as retained in parts of the business that will further advance operational capabilities.

Despite its recent implementation, firms are already reaping the benefits of the “rocket fuel” and handing some of the monetary value off to its employees. Wal-mart raised salaries salaries from $9 to 11. FedEx has beefed up current employee pension plans. Capital intensive firms like Alaskan Airlines, Jet Blue, Southwest and American are trickling down the billions in savings through $1,000 bonuses for employees. Verizon Communications Inc. is delivering compensation in the form of stock grants valued around $2,600. According to National Association of Manufacturers, a survey gauging insight from the CEOs of 14,0000 manufacturing reveals optimism for the industry is at its highpoints in 20 years.

It is not to say that these changes to fiscal policy will not be accompanied by its risks. The reform may draw advantages to companies locating plant facilities domestically but will also cost them in terms of moving employees, configuring logistics and other possible expenses that accompany US production. It is important to keep in mind that the need for firms to alter supply chain structure could adversely affect companies through increased duties like the VAT tax or expose them to additional vulnerability through changes in foreign exchange rates.

These are some of the reasons the legislation has been opposed by a plethora of critics. Former Treasury Secretary and Obama administration economic advisor Larry Summers expressed that the temporary nature of these rewards don’t align with the permanence of the legislation, which is set to expire in eight years. He has attributed the additional employee compensation to a tightening job market, stating “if the firms really believe this had to do with corporate tax cuts, why aren't they committing to bonuses forever?" Federal Reserve Bank of New York William Dudley has challenged the bill for an alternative reason. The stock market has continued to surge past record highs and unemployment has dropped to a narrow 4.1%. Dudley believes “the economy doesn’t really need” this boost so the legislation is squeezing for growth at a time where there is minimal room for improvement.

The goal for such drastic reform in the tax space is to allow for firms to build up savings that can drive investment. Despite the legislation’s controversial nature, such a positive transformation in the US’s economy is an objective that if achieved successfully would benefit many.

"Crypto-facturing": The future as Blockchain and Supplychain Intertwine


By Chelsea Virga

First, there was Bitcoin. Then, Ethereum. Soon, Ripple.

The great influx of investment into the cryptocurrency space seems to have saturated all mainstream media with headlines either highlighting the great profit potential of these assets or warning of the eminent collapse of the “Bitcoin Bubble.”

However, people are becoming increasingly aware that cryptocurrency is not solely a short-term instrument for speculative investments, but more so a virtual network built upon Blockchain technology that will vastly impact the functionality of our world. JPMorgan Chase & Co. CEO Jamie Dimon recently stated he “regrets” his initial very public and very critical comments on Bitcoin due to his realization that “the block chain is very real.”

The block chain is a public ledger that records digital data or events in a way that is publicly accessible to inspection by all but cannot be manipulated or tampered with. In this way, Blockchain technology can be utilized for more than just traditional currency purposes like payment processing (such as in the case of Bitcoin.) Rather than assigning a monetary value to each coin, physical goods can be linked through cryptography on the virtual ledger; this in turn can expedite a more transparent and efficient logistics process between suppliers and vendors. Such technology will have an extremely transformative impact on the future of the manufacturing, logistics, retail, and transportation industries.

In the case of manufacturing, Blockchain technology is allowing for physical goods to be assigned identification numbers, codes, or tags that can validate each product’s authenticity and location. These digital footprints can be tracked and recorded onto the ledger as it is assembled, delivered, and ultimately received. The creation of value is particularly great in cases when the goods being transported are sensitive and costly. In the transportation space, such a ledger gives transparency on the replacement, configuration, and status of unique and proprietary equipment parts. At the 2017 Paris Air Show, Accenture’s head of Aerospace and Defense asserted the value of Blockchain, saying it can reveal a “single point of truth of what has happened to [an] engine.”He noted he believes Blockchain will become increasingly prevalent in the next couple years.

This is not the first time that technological innovation has attempted to be applied to the manufacturing eco-system. Currently, anti-counterfeiting technology has been mostly exclusive to QR and Barcodes, which have become mostly obsolete in its safeguards to counterfeiting and pirating. The International Chamber of Commerce (ICC) noted the need for progress in this space seeing that counterfeit operations are expected to “drain US $4.2 trillion from the global economy by 2022.”This demonstrates the immense opportunity the Blockchain ledger has to contribute value in the manufacturing sector’s operational capabilities.

VeChain (VEN) is a Chinese firm in the crypto space at the forefront of block chain in the supply chain industry. Its primary aim is to reduce counterfeiting actions by coupling RFID technology linked on luxury goods with an identification (also called HASH) number used to track the product and record all flow of information in an efficient and transparent way. NFC tags can even be utilized instead of RFID chips in order to track temperature for relevant products. All data added is updated chronologically and accessible to multiple participants at the same time, adding additional clarification for where the item in the supply chain operations. These aspects are stored on the decentralized ledger to ensure authenticity of product, efficiency of operational logistics and any other important data that must be communicated between manufacturer, vendor and consumer. VeChain is still a crypto currency as VEN virtual coins are utilized as incentive for individuals called “nodes” who validate the network transactions and maintain the status of the physical goods online.

While not all 90’s tech companies survived the dotcom bubble, the internet isn’t becoming obsolete in our society any time soon; similarly, as Bitcoin might continue to depreciate there is still much uncovered value in other firms in the cryptocurrency space. As Blockchain’s decentralized ledger technology continuously innovates, there is no estimation on how much value it can provide to real-life applications in manufacturing, as well as a plethora of other industries. 

Are you bullish or bearish on the crypto space? Comment your opinions on Blockchain and its potential.

REEOBs (Real estate-enabled operating businesses): A look at self storage, FBOs, and marinas

By Josh Kowitt

At Emko Capital we are focused on industrials, manufacturing, and aerospace / aviation. Most of the businesses we look at investing in fall into two main categories: (1) A manufacturing business that makes something, whether it be a part of an airplane or a machine to measure the hardness of metal, or (2) A service business that fixes, distributes, or generally keeps running (maybe via software) part of the industrial / manufacturing economy. These are great business, and companies at the size we consider (typically $10–50m in revenue, the “lower middle market”) are the life blood of the American economy and in fact encompass over 1/3 of all US employment!

I have noticed a third category of business that is an interesting hybrid — I’m calling this the real estate-enabled operating business (REEOB). These are businesses that have fixed locations (e.g., real estate), are open and available to serve almost anyone with the relevant need (fueling, storage, parking, etc), and most importantly, have a operating / service business that can drive value and draw-in customers. I realize this is not a novel concept by any means — and frankly any infrastructure-like business has these types of traits whether it be gas stations, parking lots, or even the much-hyped coworking spaces (surely they provide a service beyond the real estate). Self storage facilities are all the rage today. FBOs were the rage 10 years ago, but still do well pumping fuel, servicing, and hangaring private jets. There is another REEOB, marinas, that may share some of the positive qualities of both self storage and FBOs and has been ignored by most institutional investors.

So what are typically qualities of REEOBs?

+Diversified customer base — think of a self storage facility or marina, you have hundreds of different customers, you are not at risk of any single large customer

+Recession resistance / steady demand — when the economy is good, you have extra stuff to store, when the economy is bad, you downsize your house and need storage. Same with marinas, you can’t just sink your boat! You also see consistently high occupancy rates at self storage and marinas (80%+ and many well over 90%).

+Limited supply additions — FBOs and Marinas are hard to get built. They require gov’t approvals. This helps keep occupancy rates high and creates effective barriers. Self storage is easier to build (it’s just commercial real estate).

+Value-added services — at many FBOs, you can get your airplane fixed, you can charter it out to defray the cost, you can even have someone manage your pilots (or teach you how to fly). Likewise, at marinas, boats are stored and fixed, sailors are fed at dockside restaurants, and supplies are sold at a ship store. Some marinas even have bed and breakfasts.

+EBITDA margin — These can vary significantly depending on occupancy or airport location, but are typically strong and consistent

+Valuation — Varies significantly. See chart below. Appears to be correlated with EBITDA margin which is not a surprise

+Fragmented market — Marinas are highly fragmented with 3 consolidators owning 2% of all marinas, Self storage and FBOs are more consolidated but still fragmented.

Let’s look at how each FBOs, self storage facilities, and marinas stack up against these factors:




+I think there are investment opportunities in all 3 of these REEOBs, however, the least “picked over” market is Marinas. This is likely because of the typical seasonality and operational complexity associated with what many see as a real estate investment (but in fact has a significant operating component). Given this, there could be opportunity in the space.

+For FBOs, the strategy needs to be more than consolidation. What about MRO? What about charter or aircraft management? Again, the typical consolidate and drive both efficiency and quality is done (thank you Signature and Atlantic)

+For self storage, there is still plenty of consolidation left to do given the size of the market and the number of mom/pop players. What makes the market difficult today, though, is that most facilities are full and thus owners are hesitant to sell for a reasonable price. To be clear, of the three, self storage is the simplest and highest margin.


+Given these businesses are real estate-centric, they are limited in their demand upside based on a geographic catchment area (e.g., you don’t fly to a different airport to get fuel). There may be ways to mitigate this with more regional-focused offerings like great service or authorized OEM service-center relationships (e.g., you are the only place to get XYZ boat or plane brand fixed). Of course the downside of this “ceiling” creates an effective local barrier to entry, particularly for FBOs and Marinas where permitting and governmental approvals can be difficult.

+Scale benefits may be limited, especially for self storage and marinas where there are few corporate customers who value a “network” of locations. On the cost side, there is certainly back office scale, but nothing like a single large manufacturing plant!

I would love to hear your thoughts. Are there other REEOBs that are interesting? What does disruption look like in this space?