FCI’s Origins and Connection to Framatome
The once globally fourth-largest connector manufacturer, FCI, has a different narrative to tell. In the fiscal year 2021, Framatome, the French nuclear energy company, reported revenues of €3.3 billion and has deep-rooted connections with China’s nuclear energy development.
Prior to 2017, it was known as Areva, a name more familiar to many in China. As early as 1988, Framatome incubated the FCI connector, with the first letter derived from its parent company.
The spark of innovation for connectors emerged in the densely connected environment of nuclear power plants, where the necessity for connectivity is omnipresent. Wherever there is electricity, whether high or low voltage, the impetus to establish connector companies arises.
The Role of Schneider Electric in FCI’s Formation
In fact, FCI’s inception is also linked to another well-established French manufacturer, Schneider Electric.In 1988, amidst a tumultuous acquisition battle for the automation control company TE, Schneider Electric initially seemed poised to acquire TE, only to find itself in a position of needing assistance.
Framatome, appearing as a white knight, secured the agreement to acquire TE, but shareholder dissent ensued, particularly from the later-renowned Alcatel-Alstom.
Ultimately, Schneider Electric emerged victorious, entering the field of automation control. In the wake of this setback and recognizing the saturation in power generation, Framatome decided to concentrate its diversification strategy entirely on the connector industry.
Framatome’s Strategic Expansion in the Connector Industry
Prior to this, Framatome had already acquired a portion of Souriau connectors, and using this small seed as a catalyst, it fully took control of Souriau and subsequently acquired two other connector companies, Burndy and Jupiter.The following year, it established the subsidiary FCI, continuing its expansion.
Through a series of acquisitions—including Schmid, D+R, and CP, as well as Oen connectors—FCI integrated various brands and technologies, adopting nickel plating solutions to replace gold, thereby creating cost-effective connectivity solutions that excelled in signal integrity, performance, and power management.
FCI’s Acquisition of DuPont’s Connector Systems
In 1998, ambitious to expand its connector business, FCI acquired DuPont’s connector systems. DuPont had long been a prominent provider of connectors, and its evolution from materials to connectors seemed a natural progression.
Similarly, Molex began as a provider of plastic materials before transitioning into the connector industry. In 1993, DuPont’s connector division was acquired by an investment firm, rebranded as Berg Electronics, and quickly went public, only to be consumed by FCI shortly thereafter.
By the year 2000, DuPont’s presence, which had dominated the top rankings for years, had vanished from the top ten list, thanks to the machinations of capital investment.
The Connector Market’s Investment Dynamics
The strategies employed in the connector investment realm bear a striking resemblance to the methods used by fast-food chains like KFC in raising and selling chickens quickly for profit.
In terms of investment, the connector market operates similarly to a poultry farm, with rapid growth and turnover. This pattern of capital expansion is significant; throughout the 1990s, Europe was largely in a downward economic spiral, and Chinese nuclear power orders were unstable, making life challenging for Framatome.
However, the burgeoning computer, networking, and telecommunications sectors that began to rise in the mid-1990s propelled FCI into prominence, establishing it as Europe’s largest and the world’s third-largest connector supplier.
Bain Capital’s Acquisition of FCI
As the 21st century approached, Framatome’s nuclear capabilities were ignited by the immense demand from China’s second wave of nuclear power projects, rendering diversification no longer a necessary strategy.
In November 2005, the FCI Group was acquired by Bain Capital, one of the most renowned private equity firms in America. This acquisition marked the classic entrance of capital into industrial operations, suggesting that the former entity would inevitably become a pawn in the hands of capital investors.
Many industrial mergers and acquisitions bear the hallmark of such investment experts, with Bain being a quintessential player. Their approach typically involves breaking down multi-faceted businesses and selling each component separately, effectively transforming one into many.
Bain Capital’s Broader Impact and Strategies
China’s most familiar moment with Bain Capital likely occurred in 2008 when it partnered with Huawei to acquire the struggling network manufacturer 3COM, which had already been severely impacted by Cisco.
Unfortunately, due to strong governmental opposition, this deal fell through, and 3COM was ultimately purchased by HP for $2.7 billion, eventually becoming a prominent server brand under Unisplendour. Bain Capital’s task was straightforward: to reassemble the various brands it acquired and present them anew. This scenario is all too familiar.