Translation: Original published in Finnish on 9/18/2025 at 7:56 am EEST.

Yesterday, we visited Scanfil's factory in Sieradz, Poland. In addition to showcasing the Sieradz facility and providing an update on the group strategy, Scanfil also presented its M&A strategy at the investor meeting. The company’s presentation materials are available here.

Sieradz factory is probably the largest in the company's European portfolio

The Sieradz electronics factory was founded in 1999 and became part of Scanfil in 2015 through the PartnerTech acquisition. After several expansions, the Sieradz factory now has a floor area of 18,000 square meters, 4 SMT lines, and approximately 1,000 employees. The factory's customers are primarily mature clients from three of the company's more traditional segments (e.g., Industrial, Energy & Cleantech, Medtech & Life Science). Poland's strengths as a manufacturing country, as well as the strengths of the Sieradz factory, are linked to its central location relative to major European markets and its moderate labor costs on a European scale. Scanfil has not disclosed its factory-specific figures, but according to our estimates, the Sieradz factory is the company's largest in Europe in terms of revenue. We also believe that the factory's profitability has remained at the higher end of Scanfil's spectrum, at least over time, thanks to the aforementioned strengths. The Sieradz factory is also located in a special economic zone, and investing in it has provided the company with tax benefits also visible in its external reporting. Therefore, we believe that the Sieradz factory is a key element in Scanfil's production machinery.

Expansion investment in Sieradz factory on hold for now  

Scanfil had planned to expand the Sieradz factory by 10,000 square meters, but the approximately 20 MEUR construction investment was postponed last year due to the slowdown in exceptionally high demand caused by the pandemic and its immediate aftermath. Scanfil has also gained and can still gain significant additional capacity at the factory through other means (e.g., layout changes, shift arrangements), so we consider the postponement decision well justified. We do not believe that Scanfil will make any construction investments this year or even the next, but we expect the factory's current facilities to suffice until the end of the decade. According to our estimates, construction investments may need to be brought forward if Scanfil is particularly successful in acquiring new customers for the Sieradz factory. Although the company appeared to be in discussions regarding this matter, we do not consider it particularly likely given the general slowness and difficulty of acquiring new customers in this industry.  

Acquisition strategy based on simple cornerstones

Scanfil unveiled its acquisition strategy, which has resulted in three deals over the past year (two of which are still awaiting regulatory approval). The company is seeking targets that complement its current business geographically, operate with a similar production offering, and are financially sound. The strategic rationale behind the acquisitions is to acquire new customers, expand the production portfolio, and likely achieve moderate synergies from supply chain management. The company searches for potential acquisition targets independently as well as generally reviews targets offered by advisors, which we believe is typical for the industry. The acquisitions recently announced by the company include targets identified in both ways. Scanfil's threshold appears to be its own valuation level based on actualized earnings, while the company uses tools such as additional purchase prices and minority holdings quite flexibly to mitigate risks related to future expectations. In our opinion, the acquisition strategy did not contain any significant surprises. We view the company's success in completing the transactions as a somewhat positive sign, as we believe competition for such targets is fierce, with many Nordic peers also seeking inorganic growth from similar targets. On the other hand, the value creation of the acquisitions made during the past year can only be assessed more accurately in 1–2 years. In our view, self-discovered targets may offer better starting points for value creation, as it is easier to build bilateral relationships and thus a better negotiating position there. Conversely, in auctions organized by sellers and advisors, the initial valuation tends to be higher, at least on average, making it more difficult to create value. However, we believe that a more important factor than the initial valuation in creating value from an acquisition is the target company's organic growth and profitability after the transaction has been completed.