When it comes to making acquisitions, Deepak Chopra is a master.
As the leader of OSI Systems, a Hawthorne-based manufacturing company, Chopra has handled 19 acquisitions in the past 10 years, some of which pulled the company into unfamiliar territory. Founded in 1987 as an optoelectronics manufacturing company, OSI Systems today is also involved in manufacturing products for the security and health care industries.
With so many companies in such varied fields, it’s a wonder Chopra is able to keep everything under control. But through a system of carefully selected acquisitions and a laid-back — but not lax — attitude toward management, he’s found a way to keep overall profits up, employee turnover down and the people around him ready for the next great challenge.
Chopra shares his thoughts on acquisitions, his leadership style and building a strong management team.
Fundamentally, the first thing that we look at, [a company] must have a synergistic fit into what we are, and we are in these three areas: security, medical device manufacturing and selling, and optoelectronics. We’re not going to go do something at a chemical company or a software company. The second thing is, it must have a manufacturing angle. We will not go look at a medical company in which there is service but no manufacturing, because ultimately, we are a manufacturing company.
Once those two tests are passed, we look at the company management, because we’re not rich in management. We look toward the acquisition to bring that top management with it. We’ve never done an acquisition where management did not get rewarded, and that’s why we don’t have too much turnover.
Globally, we don’t care where it is. We’ll go look at a company anywhere — half the company acquisitions we’ve done have been outside the U.S. The world is your market, not the United States. Whether they are profitable or not, we do our own due diligence and analysis, and if we can make them profitable, we will go do it.
Ideally, [we want the] entrepreneurs that started the company, because they are the best people. Otherwise, [we look for] well-rounded management. And they better have thick skin, because small companies are very tough. They need to have a track record of staying with the business, and they have to have a track record of taking risks.
And there’s got to be entrepreneurship. There’s got to be. Because in this business, they’re not the GEs and Lockheeds. When we buy a business, we expect that business to have a voice, and whatever they do is a big portion of our going-forward strategy, so we want people we can work with.
Most companies, when they buy a business — especially if that business is in a different field – they try to teach the company to do it their way. We definitely don’t want to make that mistake, and we’ve tried very hard to make sure that we learn what they do. And then where we can contribute to make it better, more effective, we do that. We don’t just automatically assume that they don’t know that they’re doing, and since we bought the company, we should tell them what to do.
When we buy a company, not only do we have an opportunity to reap the benefits of synergies in similar marketing and quality control and engineering and top-line revenue growth, and in the back office of finance, we have one other additional benefit that other companies don’t have – insourcing. We are a manufacturing company. So every time we go buy an acquisition, whenever they are sending outside to buy, they are giving that margin to someone else.
If we can bring that manufacturing into one of our other companies, we keep that margin. That is the extra benefit that we have, and that is the strategy behind being in three businesses. Think of it like an inverted pyramid.
On the bottom is our semiconductor optoelectronic manufacturing, and then we grow toward both sectors in security and health care, which at one time were both customers for us.
Challenges are always [there with acquisitions], because you buy a company and you have to assimilate it. At the end of the day, all companies, all technologies are people. If you cannot assimilate the people into your organization, and you cannot see and capitalize on the synergies, you will never make it.
I’m fundamentally an engineer. I think like an engineer, I act like an engineer, I dress up like an engineer, and the people around me are also in the same kind of mode. I’m a very informal leader. I don’t talk too much about bureaucracy or formalities. And frankly, I’m just one of the boys.
I thrive on challenges. I thrive on giving challenges to the people around me. We have a lot of informal group meetings and discussions. Ultimately, I don’t want people to be yes men around me, and I don’t think they are.
I always practice one motto that I have — a mediocre decision at the right time is a better decision than an ideal decision at the wrong time. So make some mediocre decisions — time is running away. You can always correct it. Be ready to accept some failures, say, ‘You know, I made a mistake,’ and then change it.
I can’t stand people who basically say, ‘I told you so’ and just sit on the sidelines until things go wrong. They’ve got to just jump in and say, ‘OK, I made a mistake, let’s change it.’ This is an evolving, learning experience. We all need to learn from each other.
How to reach: OSI Systems Inc., (310) 978-0516, www.osi-systems.com
