The Inside Story On Vairex Air Systems Getting Acquired
Ski Millburn
Managing Member & CEO at VAIREX air systems
Boulder, CO
As many of you at IBC know, I’m a Founder and CEO of VAIREX, a rapidly growing small manufacturing company in Boulder that sells a critical component to the global fuel cell industry.
The pandemic stressed us to the max as the massive shift from retail and restaurants to “online everything” drove adoption of fuel cell powered forklifts in large distribution centers to undreamt of levels. After historically growing at a solid 30-40% per year, our revenues almost doubled between 2019 and 2020, and are on track to do it again in 2021.
By early last Fall, it became clear that without a major injection of capital or other resources, the pace was unsustainable. We made a plan, hired a dealrunner, built the presentations, and sent out the first dozen Teasers before Christmas, just test marketing the pitch before the planned push right after New Year’s.
To our surprise, we got three offers to acquire VAIREX, all over our minimum target price. One from a big German manufacturer, one from an US private equity fund, and one from a Japanese customer. Of the three, the German offer made the most strategic sense, offered the best future opportunities for us personally, and offered the most money to our investors.
A great deal of work later, over the 4th of July weekend, VAIREX traded our independence for scale and capability by being acquired by the Eberspächer Group, a $6 B/yr German auto parts manufacturer with operations in 29 countries, and roughly 9,892 more employees than VAIREX. Press Release here.
Entrepreneurs often find themselves stuck in Hotel California, where “You can check out, but you can never leave.” In other words, you can work until you die (check out) but you can never exit (leave), which is to actually get your hands on that pot of gold at the end of the rainbow.
In this case, the founders made money, all of our investors made money, the buyer is going to make money, and Colorado got a big feather in its cap, along with a big inward capital flow from Germany.
Win-win-win-WIN.
But that’s not the best part of this story.
The General Manager of the division at Eberspächer that led the acquisition of VAIREX is Massimo Venturi, an old friend and fellow fuel cell fanatic. For the two of us, this deal is a dream come true.
About 30 years ago, I got a call from a guy at Fiat Research, who wanted to build a fuel cell car and needed a cathode air compressor. At the time, VAIREX was a little bit famous in the fuel cell industry for having landed a multi-million-dollar grant from the DOE to study these things for future fuel cell cars. Nothing we were doing had any relationship to real product. We were working on basic physics and development of parameters and relationships to support fuel cell system modeling.
And here was this junior engineer at Fiat named Massimo who wanted to build a fuel cell car “right now,” a decade or two before General Motors or Mercedes or Toyota or anybody could imagine it. This was so audacious that I got on the plane and flew to Turin to see if he had any idea of what he was doing. As it turned out, he did.
Long story short, VAIREX built the worst cathode air compressor in history out of a Ford smog pump cobbled together with a motor and speed control from an electric golf cart. It was loud, it was inefficient, and it might have even been dangerous, but it had one saving grace. It worked.
Fiat put the whole mess in the back seat of a battery electric Fiat 500 and used the fuel cell to recharge the batteries while it was running. They put a license plate on it, and ended up driving it 40,000 kilometers, a record that would not be broken for a long time.
After that Massimo and I became fast friends, and remained so as he moved from Italy to Germany to join a German-Canadian fuel cell joint venture, and eventually rose to head of automotive fuel cell development at Daimler-Benz. We’d see each other at least once a year someplace or another. And we always said, somehow, some day, some way, we would work together.
But then one day, he said he’d wanted my advice as to whether he should take a job offer. On the one hand, it was a nice promotion, more money, and the right move in the career of a guy on the way up. On the other hand, Eberspächer was not involved in fuel cells in any way, and didn’t show any inclination to be. It would be the end of our dream of someday working together, and his lifelong commitment to the technology.
I told him that he should take it. Fuel cells were on a long wave, and I had a strong feeling he’d get another bite at the apple someday.
A month or so before the VAIREX Teaser showed up in his email, the owners of Eberspächer decided to move the company towards the Hydrogen and Fuel Cell economy and tasked Massimo with coming up with a plan.
And rest, as they say, will be history.
