Mexico enabled us to go from a regional player to a truly global competitor at a time when similar companies were shutting down.
Overview
Bowles Fluidics transformed from a small Maryland operation into a thriving 1,000-person facility in Mexico, winning OEM customers and attracting a high-stakes private equity acquisition. Bold steps led to extraordinary growth.
“Exits are the best part of being an entrepreneur or investor. It’s when we get financially rewarded for all of the creativity, hard work, investment and risk we put into our companies.”
Basil Peters, Early Exits: Exit Strategies for Entrepreneurs and Angel Investors
In 2014, Bowles Fluidics was acquired by Morgenthaler Private Equity and merged with DLH Industries. Bowles had been a leader in automotive fluid management and systems components for over 50 years. The merger was the culmination of an incredible eight-year period of unsurpassed expansion and new customer growth for Maryland-based Bowles Fluidics. The privately held company had not only weathered the challenging 2008 downturn that devastated much of the automotive industry, it thrived during a time when customers were demanding extreme price cuts at every turn, as the entire economy was struggling.
And while the growth Bowles realized drove Morgenthaler’s interest in the 2014 merger, it was a decision the company’s leadership team had made way back in 2006 that laid the groundwork for the transaction. That was the signature point when Bowles decided to setup operations in Mexico. The rest of the pieces fell into place from there.
The Changing Labor Landscape
For decades, Bowles Fluidics thrived as a mid-sized engineering-first company serving the transportation industry. Operating solely from its US headquarters in Columbia, Maryland, the company had everything under one roof: R&D, engineering, and full manufacturing capabilities.
However, as the industry evolved, two major challenges emerged:
1. The Competitive Labor Market
The US labor market became increasingly difficult to navigate. Bowles had long relied on loyal, long-term workers—often first and second generations of the same families. Over time, it became harder to maintain full staffing levels, with wages becoming increasingly competitive and showing no signs of stabilizing.
2. Growing Client Demands
Customers began demanding more customized, intricate solutions that required:
Additionally, some clients requested Bowles to manufacture more systems in-house.
Recognizing these challenges, the leadership team realized the company could take on a greater manufacturing role and add more value to customers while increasing margins. However, to take on that expanded capacity, Bowles needed to find a reliable labor source.
Where in the World: China or Mexico
Initially, the idea of moving any part of its operations to Mexico seemed far-fetched. When Entrada Group first approached Bowles Fluidics in 2004, the leadership was adamant about keeping everything in-house within the US. However, as the industry challenges became more apparent, the idea of manufacturing in Mexico started to make sense.
By 2006, Bowles Fluidics considered options, including production in China. However, concerns about long supply chains, intellectual property protection and rising labor costs led them to reconsider Mexico and they reached out to Entrada Group.
The decision to partner with Entrada Group was crucial. Bowles Fluidics needed a solution that allowed it to maintain control over its patented technology while achieving cost efficiency and remaining close to customers. Entrada Group’s plug-and-play manufacturing support platform and manufacturing campus in Zacatecas, Mexico offered Bowles the labor, infrastructure, import/export track record and “Mexico expertise” it would need, while enabling Bowles full responsibility and oversight of production and quality.
The Power of Mexico Operations
The transition to Mexico started modestly, with Bowles Fluidics initially setting up an assembly operation in Zacatecas with just 35 employees. This approach allowed them to test the waters without fully committing to a large-scale operation. The initial success led to rapid growth; within a few years, Bowles Fluidics expanded significantly, employing over 1,000 people as the company added sophisticated production processes and engineering capabilities.
As Bowles Fluidics realized the growing capabilities in Mexico, as well as the scalability and flexibility of Entrada’s support platform, it began integrating adjacent processes in phases. Initially focused on assembly, Bowles gradually introduced:
These enhancements significantly boosted margins and increased the company’s overall valuation.
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How Mexico Enabled Bowles to Thrive
The global financial crisis of 2008 was challenging for manufacturers worldwide, but it became a pivotal growth moment for Bowles Fluidics. The company was able to weather the storm in 2008 largely due to a major competitive advantage a lot of other suppliers couldn’t match.
While many competitors struggled, Bowles recovered quickly and further ramped up its operations in Mexico. One key factor in the rapid growth was their ability to quote on and win new business for customers from their facility in Mexico, not in the U.S. This growth, at a time when many competitors were struggling, made Bowles stand out to customers Dand potential investors alike.
A Testament to Strategic Growth
Bowles Fluidics stayed on this upward trajectory for the next half-dozen years, culminating in the merger with DLH Industries to create dlhBowles. The acquisition was not just about financial gain; it was a validation of the strategic decisions Bowles Fluidics leadership team had made over the previous decade, with Mexico and the Entrada Group contributing to the successful partnership.
Without a doubt, Mexico and Entrada were an enabler for Bowles Fluidics, which achieved a lot more than just lower labor costs. Bowles successfully created a resilient, scalable operation that could weather economic storms and adapt to the evolving demands of its industry. The strategic move enhanced the company’s valuation and made it an attractive acquisition target, securing the legacy of the business for years to come.
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