A metal fabricator’s end markets drive its business strategy, a fact that industry investors are using to build platform companies, rolling up several larger metal fabricators into an even larger organization. The thinking goes that certain end markets need significant capacity that could benefit from a metal fabricator with the ability to scale.
These markets also usually require certifications well beyond ISO 9001, including the certification of specific processes and people (certified welders and the like). Because they have higher barriers to entry, such fabricators usually have significant geographic reach; they’re not limited to customers within a 250- or 500-mile radius. Their services are difficult to replicate, too, since not just anybody can get the job done right.
“Hot” end markets like medical and communication technologies (think data centers) have spurred the creation of several larger companies in metal fabrication during the past few years. One such fabricator—Keel, a 700-employee organization based in Ladson, S.C.—formed in early 2024 with funding from Arlington Capital Partners (ACP). Today, Keel is hoping to scale up to meet the country’s defense manufacturing needs.
The U.S. Navy is expanding its fleet, both submarines and aircraft carriers. That work, obviously, has high barriers to entry, requiring complex processes and certifications at various levels—attributes that could benefit not only defense-related work but also various sectors demanding heavy fabrication, machining, and high-end welding technology.
“The Navy wants to build three submarines a year and then keep the aircraft carrier on its normal five-year cycle. We saw a unique opportunity to build a trusted partner for large shipyards as they take on this enormous challenge.”
That was Keel CEO Brian Carter, who spoke with The Fabricator to discuss what led to the company’s creation, its overarching strategy, and, perhaps most important, how the formation of Keel is changing the metal fabrication career path.
Some History
A defense-focused private equity group, ACP had known about Navy-related fabrication opportunities for years, so when Pegasus Steel came on the market, investors jumped at the opportunity. ACP acquired Pegasus in June 2023.
Founded in 2007 in Charleston, S.C., Pegasus had built a niche producing critical components for the U.S. Nuclear Navy’s Ford Class carrier and Columbia/Virginia Class programs, along with other fracture-critical industrial and infrastructure projects, one being a recent refurbishment of the Statue of Liberty.
For years, Pegasus worked closely with Metal Trades, a Hollywood, S.C., heavy fabricator south of Charleston, right on the Wadmalaw, a barge-accessible tidal river. Metal Trades was founded in 1962 and, as of last year, just completed the construction of an 80,000-sq.-ft. waterfront manufacturing space.
“Pegasus was delivering truck-able units to both its customers and to Metal Trades,” Carter explained. “Metal Trades would fully assemble sections of submarines and aircraft carriers, and then send those on to the Nuclear Navy shipyards, Newport News Shipbuilding, and General Dynamics Electric Boat. That made Metal Trades a natural potential platform member, and we were able to execute that deal in late December [of 2023].”
At around the same time, Merrill Technologies Group came on the market. Based in Saginaw, Mich., the diverse custom fabricator serves the shipbuilding sector, but it also has significant market penetration in a variety of heavy, industrial, and precision fabrication and machining markets. Those include aerospace, defense, heavy equipment, and even space exploration. Projects also tend to involve significant upfront planning and coordination, with Merrill playing the role as both fabricator and integrator.
“Merrill has a fantastic distribution of end markets that it serves,” Carter said. “We want to keep and build off that. Our goal is to provide fully integrated solutions.”
The Integration Plan
Integration of operations will occur gradually, Carter said. “It’s still early days. But there’s a lot of opportunity here. For instance, [Metal Trades] offers Merrill a way to get its product to sea through another avenue other than the Great Lakes. Barging products can be much more efficient.
“The three businesses will operate independently for a while,” he continued. “Over time, you will see more of the Keel brand. But for the most part, we intend to operate each entity independently.”
He added that the most immediate integration will occur within the company’s back-end systems, including enterprise resource planning (ERP). “Merrill has invested significantly there, and we see operational insights and efficiencies that we can bring right into the other platform companies.
“Then of course comes the business development function, which will be more centralized within Keel, so we can take advantage of available capacity to deliver on opportunities that come our way.”
Besides having riverside access for barging, Metal Trades has significant experience with deep retrofits and repair activities for smaller government vessels. That brings with it a capacity of electrical and mechanical integration required in vessel repair.
“Pegasus has expertise in complex fabrications,” Carter said. “The company has invested heavily in having its procedures qualified for top-end Navy work. Having that NAVSEA qualification gives it access to significant opportunities in the naval space. It also has a lot of expertise in program management of NAVSEA work.”
Automation: Machines and Information
Technology investments at all three companies made them attractive to investors, Carter said. Pegasus, for instance, had been working with the Navy to develop automated cobot welding cells. “You can have expert welders managing multiple machines in parallel. There’s a huge opportunity there. And Merrill has its offerings in electron beam welding, and we’re starting to see it get more mainstream. That’s an exciting area of the business.”
Moving forward, Carter said that the organization is considering some large-format, flexible welding automation. Still, company leaders are looking at new manufacturing technology through a careful lens, considering the high mix of work performed, many of it involving extremely large workpieces. “When you get into the range of different products and types of fabrications that the Keel companies perform, there isn’t a one-size-fits-all approach, especially when it comes to material handling automation. We’re not delivering widgets.”
Carter sees even more opportunity in “soft” automation—that is, the procedures and software that help eliminate what remains one of the greatest challenges in high-precision, complex metal fabrication: inefficiencies stemming from incorrect, incomplete, or untimely information.
Here, Carter said, Merrill’s systems stand out. The company has invested in customized modules that overlay the fabricator’s existing ERP. Most important, though, is Merrill’s well-crafted procedures for every job it tackles. After all, even the greatest software can’t overcome the challenges created by a bad process.
“What Merrill has really figured out is that preparation is the key to success,” Carter said. “Merrill does some extraordinary planning on a detailed level. They can break down the work, and they know exactly what their capabilities are. They understand their cycle times, and they keep their finger on the pulse of their operation.
“When you match that with systems that can really support the execution of a detailed plan, all the way through to fruition, you’ve unlocked something special. This is an area where we’re planning to put right in the center of Keel.”
Training and Career Exploration
For years, Merrill has offered its Merrill Institute, a welding school that operates independently; some graduates choose to apply for careers at Merrill while some are hired at other companies. The idea is to grow the talent base both within the fabricator and throughout the surrounding community.
“Clearly, training is critical to our growth,” Carter said, “and Merrill Institute really has evolved into a unique entity. Their success could be expanded into the Pegasus and Metal Trades’ region around Charleston, to accelerate the growth of our workforce. That’s critical in helping us meet our customers’ demands.”
Such training will complement the increased opportunities being part of a larger organization will present. “I’m telling people, ‘If you’re ambitious in your career, being part of a larger organization, you’re going to have more opportunity,’” Carter said. “We need more craftspeople, but we also need more supervisors, managers, and planning personnel. If you look at the integration services we’re offering, those capabilities need talent.” Such talent sets the foundation for further growth, both organically as well as through acquisitions.
Regarding potential acquisitions, “We’re already looking around the corner,” Carter said. “What could complement our current offerings across all customer markets?”
Overarching Strategy
Revenue concentration can be a metal fabricator’s Achilles’ heel, and it can be especially acute in certain sectors, including defense work. A company might hire hundreds of machine operators and welders as it shifts into high gear for several years. Managers know revenue diversification is an issue, but unrelenting demand from core customers continues unabated, so the revenue concentration gets worse (that is, higher). Then comes the ensuing bust and the laying off of talent—not ideal for an industry suffering from a never-ending skilled labor shortage.
Keel’s companies haven’t experienced this specific scenario, but the risks of revenue concentration, Carter explained, buttressed the argument for the platform company’s creation. The U.S. Navy sees increased demand extending many years into the future. (“We have quite a runway,” Carter said.) Even so, building Keel effectively creates a more diversified enterprise that can cross-sell into complementary heavy-fab markets and offer cost-effective delivery options—by road, rail, land, and sea. This in turn creates sustainable growth and, not least, some engaging career paths for employees who choose to work their way up the ladder.
“We want to be the best fabricator, of course,” Carter said, “but we also want to be the best at developing peoples’ careers. That career focus will be what really accelerates us into the future.”