Jonas Butautis, CEO of Magnetic MRO in Estonia, talks about tripling revenue five months after an acquisition.
1. Why did Magnetic MRO decide to launch EngineStands24.com, an e-store platform for engine stands and tooling, later this month?
Butautis: As a relatively new entrant into the global MRO marketplace, we always look for areas that are underserviced by incumbent players, or where customer dissatisfaction demands finding other ways of doing things. The engine stands market is one of these areas. We see that the market is fragmented, underserviced by incumbents, and run mainly by small-scale entrepreneurs who can afford to purchase a few engines stands for lease. From the customer perspective, this means a long, tedious search process for the right stand, at the right location, for the right price.
So we saw the opportunity to fill this niche through the centralized, one-click, single-source Enginestands24.com e-store.
2. What is the market potential for that? How many stands do you hope to sell?
Butautis: With the number of annual engine removals, shop visits and storages, we estimate there is a market for hundreds of engine stands annually. Magnetic MRO’s goal is to capture a large share of it.
3. Magnetic acquired MAC Interiors in February and you said “Our plan is to develop MAC Interiors into a one-stop independent interiors center for airlines, asset owners and OEMs.” What progress have you made toward that goal?
Butautis: Within five months of the acquisition, we tripled the monthly revenue of MAC Interiors, streamlined production processes, launched ISO certification, added team members, etc. There have been many of the usual postacquisition issues such as management processes, cultural alignment and communication. However, we managed to bring the business back to profitability from the second month of operation postacquisition, which is a great achievement for the MAC Interiors team.
In parallel, MAC Interiors has been busy actively selling longer-term interior production and modification projects with extremely encouraging first results. New projects were signed with Tier A airlines, OEMs, and midsize players. Our sales pipeline is very strong, with a number of potential game-changing scenarios that could see MAC Interiors grow faster than even its mother company, Magnetic MRO.
As interior upgrades and modifications continue to outpace the growth of other MRO services, we believe MAC Interiors will be the strategic vehicle for Magnetic MRO to be a player in this exciting and unique marketplace.
4. That acquisition also expanded your MRO into the U.K. What are your goals there?
Butautis: In summary: people, customers, logistics. The U.K. market is a great source for the type of highly skilled engineering people who are needed to support Magnetic MRO’s growth story from a regional Nordic player into a global MRO player. It is also a home market for our current and future customers, so it is always good to be local and next door. The last point, logistics, is about London as the main logistics hub for servicing global components, engines, engine stands, etc. You can hardly beat London Gatwick or Heathrow [airports] with any alternative European location for components logistics.
Even after the Brexit vote, we believe the above cornerstone reasons will continue to support our presence and potential expansion within the U.K. market.
5. Are you planning other acquisitions this year? If so, what areas are you looking into?
Butautis: We are always open to M&A activities that add value to Magnetic MRO and help us accelerate execution of our company strategy. We are considering a few specific directions; however they will be announced only if and when they turn into tangible outcomes.
Whatever the M&A activity, Magnetic MRO core competence is our focused, disciplined, organic growth, which can be transferred to whatever target companies or projects we encounter.