“Like the California housing market, the EMS industry goes through a consolidation frenzy every few years. And, like the housing market, by the time people are writing about the trend, valuations have peaked and are on the way down.”

So wrote Circuits Assembly columnist Sue Mucha in the September 2007 issue. She may well be right. However, what we are also seeing is a small run on EMS companies, perhaps motivated by those lower valuations.

To wit: In the past fews weeks a pair of publicly held EMS firms have announced insider buyouts. Suntron, the defense specialist, is being taken private by Thayer-Blum Funding, the equity firm that already holds 90% of the company’s stock. And HEI, a small, closely held EMS company in Minneapolis, is deregistering from the Nasdaq in order to save certain expenses.

In both cases, the companies are certain to save millions on Sarbanes-Oxley compliance and other paperwork. As a tradeoff, they risk not being able to access the capital the public markets can bring (although Thayer-Blum, which has a long history of investments in this sector, including the now defunct EFTC and Key Electronics certainly has the means to scrape together a few bucks).

Both firms were trading at or near 52-week lows when the announcements came down. The question now is, as valuations slide, Who else will be snatched up on the cheap?

Comments? See below, or email me at mbuetow [at] upmediagroup.com.