MGS president Andy Gehman with a Trailer-Mounted Shelter Support (TMSS). The system includes shelter, generator, ECU, air compressor, and multiple tools for set-up and tear down. It is usually used by the Marine Corps.

MGS Inc’s acquisition of Maxey Companies

Sept. 5, 2015
Acquisition allowing better service to West Coast customers, expanded manufacturing of long-lifecycle, highly engineered products

If it wasn’t a match made in heaven, then it definitely was a match made in the haven of the National Association of Trailer Manufacturers board of directors.

While Carl Maxey was serving as NATM president from 2005-2007, Andy Gehman was vice president. After Gehman took over in 2007, Maxey remained on the board as past president. They forged a friendship based on mutual respect and trust.

They had no idea it would lead to something much greater than that, but last October, Gehman’s MGS Inc of Denver, Pennsylvania, acquired Maxey Companies, based in Fort Collins, Colorado.

“Quite frankly if it wouldn’t have been for Carl and the fact I know, like, and trust him, we wouldn’t be there,” Gehman says. “It’s all about that. You can’t go into business with somebody and not be willing to say, ‘Hey, here are the keys.’ We found that we were capable of saying that to each other, and it worked. He has a great family, and we like him and trust him. They’re great people. And that, in my mind, is the only thing that’s going to make it work.”

Says Maxey, “For a small, closely held family business—which is what Maxey was and what MGS was—when you take a look at bringing companies together, it’s like anything else in life. You can do an awful lot of things for money, but that makes for the wrong kind of relationship. He’s one of my best friends. He’s not my wife, but we spend a lot of time together, and you’d better have a solid relationship. For us, it will be motivated by more than just business. It will be doing the right things for the right reasons. That’s how we came to know each other.”

MGS Inc manufactures specialty equipment trailers for industries ranging from power and public utilities to military, OEM, and trailer products.  The company has 100,000 square feet of space under roof—including a 50,000-square-foot manufacturing facility built in 2000.  The facility is constructed on 10 acres in the fertile farmland of the Amish Country in southeastern Pennsylvania.

Maxey has a truck equipment operation in addition to a manufacturing company that produces light-duty trailers for commercial and agricultural applications, and has 45 employees and 30,000 square feet of manufacturing and truck-equipment distribution space on 20 acres.

As Gehman was growing his MGS location, he started looking for others that could enhance what MGS does. His growth strategy included regional manufacturing facilities, believing the only way to serve the company’s customers was to have plants at different geographical locations to reduce shipping costs.

Around 2009, MGS started using Maxey as a subcontractor to build cable trailers and gas pipe trailers for some of MGS’ utility and gas/electric customers on the West Coast. That worked well, and Gehman started thinking bigger.

“How do we serve the West Coast?” he asks. “Yeah, we have customers in California, but nobody wants to have manufacturing business in California. Real estate and labor—and everything, really—is too expensive. So I started looking at other states. Labor comes and goes by the oil industry, and Colorado seemed to be the perfect location for us. The cost was going to be right, and the workforce was good. And, of course, here was my buddy, Carl Maxey. It just worked.”

Almost a year later, it’s still working. And quite well.

“We looked at the first year as an integration year,” Gehman says. “By the end of the year, it’s got to be ‘we.’ We have to get this software turned on, which we did January 1. All of a sudden, we’ve got 40 new people, and then three months later you say, ‘Everything you do is going to be different.’ Now there are work practices that change. We said that by the end of the year, we’ll be able to turn on our other divisions to go talk to customer groups in that region and say, ‘Hey, look, for those divisions that are regional, we can talk to customer groups out there about using the Maxey facility. We can do things for you out there and we can begin to look at transportation costs and maybe do some things that save you money.’

“So it gives us a whole new narrative with these larger companies and gives us an opportunity they never thought of or we may have never thought we might offer them—more than welding parts, painting, and making trailers. It’s going, ‘How can we help you?’ Even with Maxey’s existing customers, we’re saying, ‘We know you bought these things and thought of Maxey Companies as this, but now its MGS and we’re this. Are there things we can do for you that you never thought of when it was Maxey Companies?’ And the answer is, ‘Yes.’ Now, their customer list wasn’t as large as ours, but some of them are saying, ‘Hey, we would really like you to look into these things.’ ”

MGS has been able to shift some production to Maxey’s plant, which gives it more capacity in Pennsylvania. MGS is using that to make more products for its Military Products Division.

“That’s not an easy market to enter, but we’re making some traction and believe it will expand in the next year or two,” Gehman says. “So we’re going to need capacity for that activity.

“Our company is different from trailer companies. We make a lot of things. We make diesel fuel tanks because most of our customers put things on it that have diesel engines. So we probably make as many diesel fuel tanks as trailers. We make enclosures for them and lots of things. In some instances, we don’t line up to be a trailer company. But it is where we start. A lot of times we spend more time on the equipment on the top than the trailer underneath.”

How it’s divided

A look at the company’s five divisions:

Military Products.

It builds custom trailers that are used in the protection of the United States. Whether the requirement is to move people, equipment or weapons systems, MGS’ customers need cost-effective transportation solutions from a company that is committed to confidentiality and cutting-edge manufacturing technology. MGS’ customized military and defense solutions always have a strong focus on operator safety in the most demanding environments. As a strategic decision, MGS adopted a Quality Management System (QMS) in 1999 that is certified with ISO: 9001.

Public Utilities.

All of MGS’ products are able to be customized to satisfy specific work practices and lifecycle requirements. MGS offers full product development methodology, which includes design consultation and development, prototyping, production inspections along with logistics, on-site training, and full documentation.

“We sell to gas and electric companies,” Gehman says. “Those people would truly be the end user. They need to do their job in the field, so they have a big truck and trailer they’re taking almost everywhere every day, and they have to haul utility poles, electric cables, gas pipe, and all of their tools out to wherever they’re going to do their work. Based on their work practices, their tools need to be developed mainly just for them.”

Open and Enclosed Utility Trailers.

MGS provides a complete range of choices for landscapers, contractors, gardeners, home-improvement specialists, concessionaires, and outdoor sportsmen and hobbyists. The MGS Trailer Store is a wholly owned unit of MGS Inc, which is a factory-authorized distributor of Wells Cargo enclosed trailers, Big Tex open trailers, MH Eby aluminum utility trailers, both open and enclosed trailers from the Carry-On Trailer Corporation and Car Mate, and Mission aluminum open and enclosed trailers.

OEM Products.

It provides solutions for OEMs in industries such as firefighting, power washing, air compressors, and back-up power. It is able to supply standardized products across the country while simultaneously reducing shipping costs. The division works with customers every step of the way to create an innovative solution to mobilize their products. The process starts with a conversation to

fully explore their needs and requirements. The next step is the development of concepts and drawings along with building, testing and approval of a prototype. Each project continues through production and is completed with customized product manuals. MGS operates as a transparent partner in the manufacturing process. Long-time alliances can only be achieved with a complete confidentiality assurance that all proprietary information will always be contained within MGS’ files and never shared with others.

“We work with their engineering departments to design and test products and develop products for them, and our expertise is critical because a lot of big OEMs are very risk-averse,” Gehman says. “Most were doing some or most of it themselves, or they control, design and subcontract. They design and build the equipment on top, so their expertise is not in the trailer part, which is generally where we fit.”

Power Products.

This division builds trailers and fuel tanks for the standby power generation industry. MGS’ products are purchased by generator distributors and rental fleets to meet the needs of electrical contractors, facilities managers, construction companies, and others needing standby power. MGS builds tag-along trailers to 30,000-pound-plus capacity as well as custom gooseneck and fifth-wheel trailers. It offers a series of under-deck mounted trailer fuel tanks, as well as mobile double-wall base tanks for larger applications. The stationary generator base tanks are UL-142 listed and can range in footprints of 2x4 feet up to 8x30 feet, with capacities of 25 gallons up to 5000 gallons.

“We sell to generator distributors, so we might have an OEM who makes generators and that distributor could buy products from the manufacturer or they could buy a one-off special thing from us direct,” Gehman says. “Basically, you can’t treat a distributor as you would an OEM. This guy’s buying one and needs it now. It’s not a standard product.”

Meeting the custom market

Although MGS supplies a full line of standard products, its real strength lies in identifying product needs and creating a specific solution. Its engineering and project management systems are designed to develop, evaluate, share, and test concepts before any steel is cut.

 “If you’re making a standard product, you look at, ‘How can we do it the most efficiently?’ ” he says. “If I’m making this one thing and it’s going to take 70 or 100 hours to manufacture, how are we going to plan that without mistakes or investing the kind of time we would for something that you’re going to constantly run? So it’s knowing what to do when for each type of manufacturing mode. That tends to be the challenge.

“Our mission is to provide the best total solution for our customers. So that means you actually have to try to understand their problem and can’t try to pigeonhole it into, ‘Well, here’s what we do.’ So that must mean you have to have this wide range of capabilities and flexibilities to say, ‘For this customer the best thing is this.’ It is considerably harder to do, and that’s why we like it.

“I like to say this to folks who join this company or are thinking of it: ‘If you don’t like problems, this is not the place for you to be. Number one, you’ve got enough of your own. But our customers give us all of theirs. That’s what they value us for: ‘Here’s this big pile. Go fix it for us.’ If you are not in the everyday problem-solving mode and you think, ‘Boy, this job will be better when I just get rid of my problems’—and there are people like that—then this isn’t the job for you.

“That’s what we do for folks. We were able to point out, ‘Here are things where we can be helpful. It’s not about just welding the piece of metal. It’s, ‘Can you do the design? Can you test? Can you do an FEA (finite element analysis) on your fancy 3D modeling?’ Our software investment is monstrous.”

MGS has chosen to domestically outsource special or overflow production to full-service metal fabricators that can seamlessly provide needed services while dramatically reducing cost and delivery times.

“We do much of our manufacturing in-house, but found that domestically outsourcing some services to a one-stop supplier saves us about 15% to 20% and cuts up to a week off delivery time,” says Paul Gould, scheduling and materials manager.

He says one-stop, domestic outsourcing is much more efficient than outsourcing to multiple or sub-tiered vendors—all with separate lead times and profit markups, as well as processes and costs from receiving and inspection to documentation, billing, and shipping.

“Where we don’t have the equipment, training, or staff due to high cost or varying demand, we strategically outsource to a one-stop domestic partner,” says Gould. “We could’ve spent over $500,000 on tubing laser, specialty and machining equipment. But our volume didn’t justify it, and it could take years to become proficient at using it.”

Gould was also reluctant to outsource to multiple, sub-tiered vendors, where there is more opportunity for mistakes or delays to cause further delays, leading to potential late delivery, finger pointing, or quality issues.

Recognizing the need to optimize the supply chain, MGS uses Summit Steel and Manufacturing, a metal component fabrication provider located in Reading, about 18 miles northeast of MGS. Instead of working with layers of vendors, Gould chose to streamline MGS’ supply chain by working with Summit.

“Based on our sales cycle, Summit Steel seamlessly rounds out our services and helps with order overflow, particularly during peak seasonal demand,” says Gould, who uses Summit for tube laser cuts, notches, and detail on all four sides of product; for burning heavy flat sheet; and occasionally for 2D and 3D laser cutting, CNC turning and milling, and machining services.

“Receiving these services all under one roof streamlines our process and helps us hit our delivery deadlines and price points,” Gould says.

While MGS usually needs its parts turned around within two weeks, their full-service metal fabricator typically delivers the parts within one week to 10 days, but is capable of faster delivery.

“On one public utilities job, we required specialty laser tubing cut with a one-day turnaround,” says Gould. “Summit turned it around for us in one day, which enabled us to hit our delivery deadline.”

The history and the future

MGS has come a long way since 1962, when it was founded by Andy’s father, Roland Gehman.

Back then, there wasn’t a master plan. Roland, previously an agricultural engineer for what was then New Holland Farm Machinery, just enjoyed tinkering with mechanical things and inventing products, which led to a patent on a street sweeper. 

“He did not enjoy the business part of it,” Andy says. “He liked making cool stuff. Period. Over anything else. If somebody said, ‘Hey, can you make me … ? The answer was always, ‘Yes.’ It didn’t matter if the company was taping money to the darned thing. He’s still that way. And he’s 80 years old.”

In the 1970s, MGS started making trailers, and specialized in utility trailers. Around 1995, when Roland began the leadership transition to Andy, the company gradually transitioned into long-lifecycle, highly engineered products. Andy worked at the company while attending Penn State University’s Great Valley campus on Saturdays, ultimately receiving his MBA in 2000.

“I wasn’t in the make-cool-stuff mode,” Andy says. “I wanted to make a business that was going to grow. I went to school for business and wanted to have a business strategy for growing. While I was getting my MBA, I related everything in my classes to this company—developing plans and doing it.”

With Maxey in the fold, Gehman is now turning his sights south. MGS currently has a working arrangement with Enercon Engineering in Barnesville, Georgia, that is similar to what it previously had with Maxey. He anticipates acquiring a company somewhere in Georgia or the Carolinas in the next five years.

“We have customers down there who have this radius for their transportation requirements,” Gehman says. “It might happen in the next three to five years. It might happen sooner. It might take longer. It depends on the opportunity that comes along with it. We need the ability to touch different customer groups. Our ability to service all of our customer groups out of a southern location is currently limited.”

Whichever company it turns out to be, the arrangement will be about much more than money.