Z-Axis Inc. - Phelps, NY
When Michael Allen contemplated the future of Z-AXIS Inc., its outlook appeared grim. Parent owner Video Display Corp., a publicly traded company based in Georgia, was selling Z-AXIS, and Allen saw two possible outcomes for his employer of 25 years. Neither prospect boded well for the electronics company and its 60 employees, many of whom had worked at Z-Axis for decades.
"The largest likelihood would have been that we were acquired by a company that had synergy with us, the companies would combine and they would shut us down," said Allen, an electrical engineer who was named president of Z-AXIS in 2006. "The second likely situation would have us acquired by someone else, and we would be run as just another division."
Allen had inquired about buying Z-AXIS over the years, but the timing was never right. Now, with Video Display's majority owner selling off his companies, Allen and his wife, Robin, made the bid for Z-AXIS.
"The alternative would have been disastrous to my employees, who were devoted to our customers, had been here a long time and really cared about what we were doing," said Allen, who was recently honored with the 2014 SBA Small Business Person of Year Award for New York.
The $10 million deal came together with the help of more than $5 million in loans through The 504 Company and the SBA's 7(a) program. The 7(a) loan, which totaled $3.85 million, was used to purchase the business and working capital. The $931,600 504 loan, along with a $1.65 million First Niagara Bank loan, helped the Allens buy the property and equipment. Additional funding came from the Ontario County IDA, Cephas Capital, a seller note and the Allens.
Z-AXIS designs, tests and manufactures circuit boards and other power supplies at its 30,000-square-foot plant in Phelps, a town in Ontario County located 35 miles east of Rochester. Half of its business comes from $1 billion companies – predominantly in the medical sector – that are located throughout North America. The other half is contract work, with 95 percent performed for New York State businesses.
Pennie Smith, vice president of The 504 Company, met Allen after receiving a referral from the Ontario County IDA. Allen was concerned that an out-of-state buyer interested in buying Z-AXIS would eventually move operations out of New York, leaving 60 people without work.
"His passion for the company and his dedication to employees were very evident. I knew this was a project we wanted to be a part of. Although Mike had limited personal funds, the project came together with the support of the Ontario County IDA, seller debt and venture capital funds," Smith said.
Allen has hired 15 more employees since buying the company in January of this year, and he expects to grow the company's revenue 50 percent in 2015.
First Niagara Bank recognized Allen's talents to lead Z-AXIS during a period of change, and his ability to identify new markets and develop new products to meet the needs of those markets, said Paul Hohensee, vice president of business banking for First Niagara. "As a result of Michael's efforts, Z-AXIS reversed its fortunes, restored profitability, and increased employment at the company by 23 percent between 2010 and 2013."