Ex-banker creates empire by buying, boosting sleepy businesses

Riverside Manufacturing was a sleepy New Castle firm with $5 million in sales when Fred Merritt bought it to try his hand
at running a company.

Five years later, Riverside's sales have grown a whopping 800 percent, it dominates its industry, and Merritt, 39, is
ready to work his magic on an Indianapolis company.

Last month, the banker turned business owner bought locally based Transportation Safety Technologies from international investment
firm Arcapita for an undisclosed sum. He predicts he can grow its revenue 20 percent within a year.

Those who've watched him amass the beginnings of a manufacturing empire don't doubt it.

"[Merritt] has put together a very sophisticated team, and his competitors aren't at that level," said Joe
Carson, an investment banker at Cleveland-based Western Reserve Partners. "He's managing his company like it's
a Fortune 500 company."

Merritt, a Fort Wayne native who now resides in Carmel, had no experience in manufacturing when he bought Riverside, which
designs and makes lighting and electrical products built to withstand harsh environments. Riverside components are used in
military-issued Humvees, for example.

Merritt started by rebuilding Riverside's work force almost from scratch. He moved the company from New Castle to Fort
Wayne to be closer to strategic partners, leaving behind 30 of its 35 employees.

Employment recovered–and then some–after Merritt invested in research and development and punched the accelerator on sales
efforts. Today, Riverside employs 330.

Equally impressive was the company's revenue growth. Sales swelled to $36 million in 2006, and Merritt said the company
is on target to exceed $45 million in revenue this year.

The giant leap is due in large part to Riverside's diverse client base.

When Merritt acquired Riverside, 90 percent of its revenue came from a single client–South Bend-based AM General Corp.,
the developer of the Humvee. Now, AM General accounts for less than 50 percent of Riverside's revenue, while Massachusetts-based
Raytheon Co., Houston-based Stewart & Stevenson and other firms have become bigger clients.

Back in 2002, Riverside was the fourth of five major U.S. manufacturers in its field based on sales. "Now, we're
a dominant No. 1," Merritt said.

A new challenge

TST gives Merritt a chance to work his magic in a different but related field.

The company, which employs about 180 at facilities in Indianapolis and Fort Payne, Ala., complements Riverside's product
line. It designs and manufactures electrical systems, control panels and other parts for emergency response vehicles, aircraft
and highway construction equipment.

"This acquisition is an important diversification for the company," Merritt said.

Together, he said, Riverside and TST will have revenue of $65 million in 2007. And Merritt plans at least one more acquisition
within the next year.

Those who know Merritt aren't surprised by his business success.

"Fred was not only a good banker, but a good businessman," said Steve Beck, managing director of locally based
ROJO Associates who worked with Merritt at Huntington Bank and Peoples Bank. "He had an unusually high-level grasp of
the business side. Fred could think through how a company worked and what could make them succeed."

Merritt graduated from Indiana University with a public finance major and economics minor in 1989.

After college, he spent 18 months with First Source Bank in South Bend before joining Huntington. While at Huntington, he
worked nights selling hunting and fishing equipment at Galyan's Trading Co.

Merritt left the banking business to become chief financial officer of Dura Builders in 1999. But many of Merritt's loyal
banking customers continued to contact him for advice.

Harold "Ray" Barr contacted Merritt when he sought to sell Riverside. In 2001, Merritt helped orchestrate a deal
that saw him take 40 percent of the company. Merritt later bought out Barr and another partner, and departed Dura in 2002.

Pairing efficiency, innovation

Merritt's success with Riverside comes at a time parts makers for the automotive industry have taken a beating nationally.
The Detroit region alone has lost thousands of jobs to Mexico and Asia in recent years.

"Some people think efficiency equals downsizing," Merritt said. "I tell employees, the more efficient you
are, the more secure you are in your job. Increased efficiencies is how we've been able to outbid competitors who go outside
the U.S. for cheaper labor."

Supplying goods to the military is a lucrative business, but many suppliers aren't terribly driven to be efficient, industry
experts said.

Merritt changed that, working hard to lower the costs of his goods, and underselling his competitors.

"We're not content following the industry standard," Merritt said. "We've found a way to deliver the
product more efficiently."

While Merritt was intent on making Riverside more efficient, the first thing he did was invest in the engineering and quality
control departments, growing from one engineer to 12 and earning ISO certification–meeting federal safety, efficiency and
quality-control standards. Riverside now has nine people working on quality control.

"Every time I saw a competitor's part on one of our clients' products, I wanted to know why we didn't make
that," Merritt said. "By bringing more people on in engineering, we were able to develop new products."

Merritt made no such investments in marketing. Riverside has no sales director–Merritt handles that himself–and no Web
site. But Merritt and his engineering team maintain a laser focus on the handful of customers that matter most in the tight-knit
industry.

"Merely contacting a company's purchasing agent isn't good enough," Merritt said. "We want to have
our engineers in contact with our clients' engineers to find out what they really need. We want to become part of their
business. We need to evaluate clients' needs to expand our offerings."

Because TST's product mix and client base are broader, marketing will play a bigger role in boosting sales at the Indianapolis
company. But Merritt will employ the same client contact strategy that helped Riverside grow.

He has never believed in a cookie-cutter approach, said Ted Azar, president of Linc Systems, a locally based nail and staple
gun distributor.

"He was pro-active and always looking outside the box," said Azar, who hired Merritt to help set up financial deals
for his company. "He's never been interested in the status quo. He wanted to know how to best get the job done."