April 13, 2009      

Summary: Since 1961, the bulk of PaR Systems’ business has been in the defense sector. So why did the company spin off a separate defense division? The company can now coordinate the research and development, sales, bid-competition and lobbying that all its groups both traditional and more recent acquisitions — use to land deals from the U.S. Department of Defense, whose sales cycle is notoriously long, complex and prone to unexpected interruptions. The company’s decision to create a separate defense division and to extend its reach via a series of targeted acquisitions is already increasing its revenue and visibility.

PaR Systems, headquartered in Shoreview, Minn., is no stranger to the defense industry. The privately held company, wmanhich employs nearly 300 people in six states, has supplied robots and other specialized hardware for government, military, aerospace and defense applications since it was spun off from General Mills in 1961.

Early Expertise in Defense Robotics

PaR, which stands for Programmed and Remote, was formed by a group of General Mills engineers to specialize in remote manipulators and storage devices for the nuclear fuel industry.

The company increased its focus on, and business in, robotics during the defense buildup during the Regan era of the 1980s. It focused first on the aerospace market, with robotic systems designed for drilling, waterjet cutting and material handling.

Over the last 25 years, PaR received contracts to supply all of the aircraft elevators and more than half the weapons elevators on U.S. Navy ships. It also holds the distinction of constructing two of the largest operating robots in the world, along with one of the world’s tallest automated cranes, which is used by NASA to inspect the rocket motors on the space shuttle. Its other clients include NASA, 3M, Airbus, Boeing Co and General Mills.

Acquisitons Expand Customer Base

Since 2004, PaR has made a concerted effort to expand its defense business with a series of targeted acquisitions — most notably heavy lifting equipment manufacturers Jered, LLC of Brunswick, Ga. in 2005 and Unidynamics of Conroe, Texas in 2006. In addition to their separate manufacturing specialties, the two companies extended PaR’s history and presence as a defense contractor. Jered has been building heavy lifting, steering and loading gear for the U.S. Navy since the company was founded 1946, including such critical systems as shipboard aircraft and weapons elevators.

Unidynamics, founded in 1925 as a match company, evolved into a munitions maker and eventually manufacturer of munitions-handling cranes and other heavy lifting systems for people and cargo. It also builds watertight doors, loading systems and other infrastruc ture systems for the U.S. military.

The two acquisitions contribute not only manufacturing capabilities, but also contacts and successful performance records as suppliers of defense equipment to the government. This is crucial because it is notoriously difficult for firms without defense-industry experi ence to land and successfully complete highly specialized U.S. military contracts.

Building a Single-Purpose Organization

By forming a dedicated defense division, PaR is focusing its efforts and consolidating its capabilities within a more coherent entity. Jered president Rick Edge will head the new division. Ian Haley, former general manager of Rolls Royce’s Syncrolift business unit, will take over the presidency of Jered. Tom Donovan will provide top-management continuity in Jered itself by remaining in his role as chief operating officer.

In a statement announcing the new division, PaR chief executive Mark Wrightsman said the company would focus on growth by combining PaR’s robotics technology with Jered’s expertise in shipboard systems. He told a local newspaper the new division would also help the company expand beyond its traditional market in shipboard systems to include contracts with the Deptartment of Homeland Security, non-U.S. defense customers and other opportunities within the robotics market.

PaR’s specific intent is to expand its current product portfolio and deploy state-of-the art sensor technologies for potential use in combat and surveillance operations to detect threats in advance and more readily than humans. Micro robots and robot swarms could prove extremely useful in surveillance and search-and-rescue missions in much the same manner as unmanned autonomous robots can provide substantial support to combat troops in the air, on the ground and in the oceans and help to reduce human casualties, according to PaR announcements.

PaR’s strategy of developing specialized robotics applications has helped the com pany achieve 15 consecutive years of revenue growth. The company, which has increased its headcount almost 20 percent during the past year to about 330, expects revenues for fiscal 2009, which ended March 31, to be about $100 million, a third more than the $75 million it landed in 2008.

We at Robotics Business Review believe the use of remote-operated systems and autonomous or semi-autonomous robots will increase significantly in defense applications during the next two to three years. DoD contracts and strategic projections support that view, as do positive after-action reports about robotic systems such as iRobot’s PackRobot, as well as the continuing development of unmanned ground and air vehicles within the U.S. military’s Future Combat Systems projects.

Vendors including PaR will continue to fine-tune their existing technologies and produce applications and systems that support reconnaissance and combat operations. These could potentially include applications ranging from artificial intelligence (AI) controlled vehicles and weapons, to wearable devices like exoskeletons.

Even without successful development of those technologies, continued growth in the application of systems in which PaR is already successfully should ensure positive growth for the company during the next few years.

Creating a division specifically to take advantage of that market and address the needs of those customers is an intelligent tactical choice that should add momentum to the company’s successful overall strategic direction.

— Laura DiDio