Fast 5: Why Topcast Expanded In China Through AML Aviation Technologies Acquisition

Topcast CEO Steven Pearson discusses the company's recent acquisition of Shanghai-based AML Aviation Technologies and how having a presence in China will help the business.

Topcast recently acquired AML Aviation Technologies. Why did it look to buy a company in China?

OEM approved component MRO has been an important part of our business for many years and China is also a very important part of our business in general - it's probably our strongest region. Typically, especially in smaller component-type MRO situations, there's challenges around logistics, import-export taxes and cost. We found there is still a strong desire for OEM-level and quality repairs in China, but it is difficult to economically justify moving work inside and outside of the country. This created a competitive disadvantage with some of the other players in China. We actively searched the market for the right acquisition target. The Shanghai business works for us for a myriad of reasons: it's a hub in China, we have strong ties with China Eastern Airlines and it's the location of our main customer support office. Their capabilities really aligned with the supplier base that we have today which gives us a very strong base to build upon and support our customer base in China.

Will the acquisition focus solely on Chinese business then?

Our primary target is to support the Chinese market. The capabilities we have in Hong Kong allow us to support the wider Asia-Pacific region. But the presence in Shanghai allows us to focus on customers in China.

How will the process of integrating AML Aviation Technologies into Topcast play out?

With any integration, you part it out into key priorities from day one. The AML business is a successful one so the goal is not to disrupt anything. There will be a high level of integration in areas such as finance. In the near-term, we plan to really promote the synergies that we have. Topcast has a very extensive sales team in China, and have the quality benefits of being OEM-approved for many of the suppliers we work with in Hong Kong. One question will be how can we bring some of the best practices over? It's about maximizing what AML has today and then over a longer period of time, we want to have a seamless integration. At other points in my career I've seen first hand that it's not good to rush it [company integrations] and do this in the right way.

Upon announcing the acquisition, Topcast stated there are plans to build an additional warehouse in Shanghai. What is the timeline for this?

We've had a small warehouse presence in Shanghai, but that was more to offer local support in addition to our warehouse facilities in Shenzhen. We'd like to look at consolidating in Shanghai as much as we can, rather than expanding further in Shenzhen or in other cities. We know that we'll eventually need a bigger footprint due to our MRO expansion and put more materials in-country from a distribution perspective. From a timing point of view, we'd like to do this sooner rather than later, although there's no exact date. However, it is a near-term goal. 

Taking into account the COVID-19 business, how do you feel Topcast fared over the past 18 months or so?

We were able to weather the storm relatively well. Certainly we did see an impact for the business; while China rebounded, we do have a significant presence outside of the there in Asia-Pacific where unfortunately, the market has not been as resilient. We've redeployed resources to support China more effectively and support growth in that region. We have interests in Latin America, the Middle East and Europe - where we had an opportunity to grow as we weren't maximized and this helped to offset some of the downturn in Asia-Pacific. Like most companies in the industry, we aren't experiencing record years, yet we were able to grow from a manpower perspective and keep hold of our staff while adding some more people too. We see an opportunity to be ready for the recovery rather than cut and pull back. Having a strong capital allowed us to achieve what we wanted to do from an infrastructure perspective, so that was a silver lining. We had the opportunity to upgrade our ERP system and aligned the existing system across our operations worldwide. An improved analytics system was deployed that allows us to have a better view of real-time data to drive everything from our CRM to our operational KPIs and metrics. Overall, we're pretty bullish about our next 12 months.

James Pozzi

As Aviation Week's MRO Editor EMEA, James Pozzi covers the latest industry news from the European region and beyond. He also writes in-depth features on the commercial aftermarket for Inside MRO.