How Barry-Wehmiller Built a $3.6B M&A Machine Fueled by Culture with Bob and Kyle Chapman

Sick and tired of running M and A deals on the seller's terms or worse, the banker's terms, it's time to flip the script. The buyer led M&A Virtual Summit is a full day event designed for corporate acquirers want to take control of their deals from sourcing to integration. Join us for a live M and A Science Podcast episode with IVC Evidencia, the world's largest veterinarian roll up. Learn how they pull off 300 acquisitions in a year across 11 countries at scale, at speed and without the chaos. And hear how Brenton Point Capital Partners, Easton Select Group and others scale rollups has speed. You'll hear from top M and A leaders, corporate development teams and integration experts as they break down real world strategies. No fluff, no high level theory, just tactical insights from M and A leaders who've been in the trenches. It's completely virtual, completely free, so anyone can join from anywhere. You know other M and A conferences will charge you big bucks for this kind of content. Here you don't pay a dime. Check it out yourself@dealroom.net summit or look for a link in the descriptions. See you there. I'm Kisam Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies, what actually happened during M and A deals. Hello M and A Scientists. Welcome to the M and A Science Podcast. This podcast is part of a mission to rethink how M and A is done. The old school settle that approach is dead. Buyer led M and A is all about strategy, alignment and efficiency, putting value creation at the center of every deal. Now let's be real. It's not just about closing the deal, about making it successful. It's why we uncover what truly works in M and A by learning directly from the best. You're ready to challenge a status quo, ditch outdated methods and learn how to minimize risks while maximizing value. You're in the right place for episodes, resources and tools to elevate your M and a game, visit mascience.com, follow us on LinkedIn. I'm your host Kisan Patel, Founder and CEO at Deal Room and Chief Scientist at M and A Science. Joining me today is Bob Chapman, Chairman and CEO of Barry Wehmiller and Kyle Chapman, President. Barry Wehmiller Bob Chapman is the Chairman and CEO of Barry Wehmiller, a 3.6 billion global capital equipment and engineering solutions company, recognized as the Thoraso CEO of the Year by SHRM and ranked as the number three CEO globally by Inc. Bob advocates for a people centric leadership approach, which he describes as truly human leadership. His philosophy emphasizes the importance of caring for people as a key to business success. Kyle Chapman has served as president of Barry Wehmiller Group since August 2020, leading the organization to its various platforms including hybrid equity firm BW Foresight Partners, which he co founded. With over 22 years of experience in private equity and operations. Kyle focused on creating a vibrant organization where care for people, drive for performance, coexist harmoniously. Today we're going to discuss their journeys from traditional management to a people centric philosophy and explore how culture and leadership drive success in M and A. Gentlemen, Bob, Kyle, thanks for taking the time to have a conversation, taking a break from running a global organization and doing a bunch of M and A deals.

Well, we appreciate the opportunity.

Can we start off with a little background? We need two parts. I almost feel like we need an individual background and a very Wehmiller background.

Got a pretty traditional business background, got an accounting degree from Indiana, MBA from Michigan, went to Pricewaterhouse, was in public accounting for a couple of years and was invited by my father to join a pretty broken family business that he had invested in in the 1950s, which was struggling. But I decided to take on the challenge. I began in 1969. I joined about an $18 million company. That was old technology, but I decided to do that and bring my skills to that. We've transformed the company from that original 18 million to this 3.6 billion which we're going to talk about. But again today it was a Wehmiller family company for almost a hundred years and it's been in the chapman Family since 1963. Go ahead, Kyle.

Yeah, my background, I went to the University of Virginia, studied finance and went into private equity on the East Coast. I was there for a number of years, then went into a private equity owned business that we helped purchase. It was interesting. So I was never working at Barry Weymouth. It wasn't an option, it wasn't discussed. There was no family in the business. I was on a great trajectory, worked with wonderful people, had a good career going. And then about 16 years ago, in 2008, 2009, dad and one of his board members would constantly go back and forth around the good and the bad of private equity and said, hey, let's start our own version of an investment fund, but have a human centered approach. And so I came back to start what was then called Foresight Capital Investors, now called BW Foresight Partners and led that and grew it. And it grew much bigger than we expected because of our operating approach, our human centered approach, our long term buy, build and hold. And then about five years ago, dad asked me to come over and be a cfo. I'm not a trained cfo, so that was an interesting journey. I became a Covid cfo. So that thrust me into the front of the organization and then the board and senior leadership team at the end of that eight month interim CFO stint asked that I come over and run the global organization. So it's been a heck of a journey. Not one that you can prescribe for anyone, but it's been pretty great.

I appreciate the background. It's really fascinating too to have that buildup in private equity and now back in the business. And it's just fascinating working as family because I could imagine working for my dad. But then I'm. I would be honored to have one of my boys come work for me one day. Can we do a little history on Barry Wehmiller? I'm just curious about the business origination. And you've been heavily involved in the M and A story as well.

I gave you a touch again. The company was founded in 1885 by Mr. Barry and Mr. Wehmiller. Mr. Wehmiller was the inventor and Mr. Barry was his brother in law who was the financial partner. And Mr. Wehmiller developed a continuous motion pasteurizer that allowed breweries to ship pasteurize beer and ship it to farther distances. The company grew dramatically internationally in the early 1900s. And then he died in the teens. And his wife, Lily Rashford took over until their son Fred could take over. But the company struggled when Mr. Waymiller died and his wife took over and then their son took over. The company never had the innovation that drove its early period. So it existed like many family companies based on its history. But it struggled. It struggled with international competition, it struggled with leadership. And my dad was a Arthur Andersen accountant. Was asked to come in and do the audit of Barry wehmiller in about 1950. The company had some. The banks wanted an audit. And Mr. Wehmiller said, would you join Barry Wehmiller and become our treasurer and general manager? So my dad stepped out of public accounting to help this struggling family company. Big risk. But then he had a chance to invest $30,000 in stock in the mid-50s. And then in 1963, a company approached my dad and said, we'll lend the company the money if you want to buy out the Wehmillers. So Basically, a leverage buyout. So the factoring company lent company money against its receivables. The cash was used to buy out the Wehmillers at some price, and our family became the controlling interest. So again, we inherited an older company, but important to your audience. As I said, I studied when I was a young man, because it's a St. Louis company. I knew some of the people. I studied Emerson Electric and how Chuck Knight built Emerson Electric through acquisitions. I hired some of his key team members, and I really was intrigued by this balanced business model. So my dad died six years after I joined the company. I took the passion that I had gained for the company. Bottle washers, pasteurizers, the brewing industry. And I spent from 75 to 83 trying to take its history and give it a future. And some significant financial challenges and mistakes I made. And in 1984, I looked at my finance team. Barely financeable. We were on edge financially. And I said, I'm proud of our history, but our history does not give us a future. So I began, having studied Emerson, I said, we need to acquire companies that have a better market position that gives us a better future. So I began doing acquisitions with no experience, purely to give the company a better future from its history to its future. So 140acquisitions later, we've transformed this company from a company focused on its historic markets of the brewing industry and returnable bottle washers and beer pasteurizers to a diverse global company that has seen a share price growth of over 10% a year, compounded for 25 years. So we've created a vibrant organization, really, through a combination of acquisitions and organic growth. So Again, today, that $18 million company, when I stepped into it, is a vibrant company that is now 3.6 billion. And Kyle's vision is on its way to becoming a $5 billion global company that we hope is a symbol of what companies could be, which is good stewards of the people that we have the privilege of working with as team members, as investors, as clients.

Kisan, real quickly where we are today, just going from that $20 million single product, single customer, single technology. Our $3.5 billion is a focus in two business models, highly engineered equipment. So our history, but serving the. The packaging market. So we make packaging machinery. We make equipment that makes corrugated box boards. We make equipment that makes toilet paper. You're welcome. We make equipment that fills cans, does all these things, things you touch every day on a daily basis, comes off of our equipment. The other business model, again, is professional services. Kind of complex professional Services. So we will help pet food facility. We will help all the engineering around how to process pet food. We'll buy the equipment, we'll put the controls, we'll even help build a facility. We have business to business consulting as well. And if you think about the mix of our business or three and a half billion, a third of it comes from the equipment, a third of it comes from the parts and services related to that equipment. And a third of it comes from this high end professional services firm.

Near. Privately held.

Yes. Privately held.

Yeah, but let me add privately held. But we adopted something your audience will find interesting. When I was doing an acquisition in the 90s, our company, privately held company, was valued on the basis of book value. We would sell to our executive stock at 91% of book value and we'd buy it back at 91% of book value. We were doing an acquisition trying to buy a company and trying to use our stock. And we embraced what we called eva, economic value added to value our stock in the transaction with this company. So we gave him stock and Barry Wemmler valued it eva, economic value added which is simulates market. And we valued his company on that basis. So that opened our mind to a way to value our privately held company that emulates public traded companies. Might be a little confusing to your audience that I said our share price has gone up more than 10% a year compounded for over 25 years. We value our company, the methodology of economic value added and it has allowed us to look at transactions on a very professional level. So as a privately held company, we have it simulated market value all the time. We're trading at a certain multiple, we can compare to public companies, but we don't have the issues of a publicly traded company. So that was a unique thing we do as a privately held company. I say to you, to your audience, we're a privately held company that operates with the best of disciplines of a publicly traded company and a value that constantly monitors that through this EVA methodology.

Is that based on third party valuation or just an internal algorithm you created?

It's based on Stern Stewart's EVA theory that came out in the late 1990s. The way we validate it is our auditors opine on the inputs, but it's really a discounted cash flow on steroids. It's internally generated achievable goals and it's validated by third parties in terms of when we use our equity to help buy companies. So sellers take equity in Barry Wehmiller, sometimes we'll have an investment banker validated or a wealth manager validated, et cetera. But the whole process, we're consistent. We apply the same kind of methodology around it. Ernst and Young validates the inputs and then we have people buying and selling which validate it every day, to our knowledge, he said.

We're one of the, if not the only one of the few companies in the world, according to Stern Steward, who use this to its full potential. It's like a publicly traded value without the issues, the fluctuation of emotion. And it gives us the ability to use our privately held stock as currency and transactions. And they can have investment bankers opine to it and say, yep, we embrace this in 1997. It's a powerful tool for privately held company to use our stock as currency and transaction. And it helps us align. We can look at every acquisition we look at in terms of the EVA impact because it allows you to evaluate all your initiatives and determine the value it's going to have on your stock. So it's a powerful tool.

What is like the typical structure end up looking like on an acquisition? Because it sounds like you get a good amount of rollover equity in terms of what portion ends up being like cash versus dollar financing or other tools you might be using.

The funny thing is, having done 140 acquisitions, you would think two would look alike and none of them do, right? So the answer is, in some cases we'll buy a business out 100% cash. In some cases, if it's a big transaction and we like to keep our leverage low so that we can operate in all types of environment environments, we'll ask the seller to take rollover equity into Barry Weimbler. In some cases, if there's a difference in valuation, we'll use seller paper or earnouts just to kind of help bridge the gap. You name it, we've done it. And we've probably done a couple of others that you can't even think of.

Fair enough, that's helpful. So I gotta give a minute to connect some dots here, a couple people. Jeff Giles is the first person that introduced me to your company. And I met him when I was doing research when I first started Deal room back in 2012. 13. He was kind enough to give me a bunch of feedback. But he was working for you at the time. He said, listen, Kisan, if you do anything, you gotta go to our company website and just check out all this stuff like our CEOs so big about culture and this and that. I remember going there, I went to the bow, I Was like, really fascinated. I was like, wow. It's just about the work environment, how it impacts the home for everybody, and why there's a big emphasis on the work environment. Just remember that from way back then. And then more recently, there's a gentleman, Jason Lippert, LSI Industries, that I had an opportunity to do a podcast with big emphasis. And his big role model was Bob Chapman. And, you know, just the culture. He's like, if you get the opportunity, you gotta go tell me, I'm name drop you and reach out to Bob. And it finally worked because in the last nine years I've been doing this podcast. I've pinged Bob a number of times. Won't put him on the spot too much. But I finally, finally. Which is another lesson I like to just share with everybody. Persistence is a key to all of this, any deal you're pursuing. But I did want to connect those dots because there's that big theme about culture that I really want to talk about, because it seems that you have developed a way to take culture and turn into a strategic advantage.

We did this because I had some revelations that changed my view of my responsibility as a leader. To not see people as functions for my success, but to see people as somebody's precious child who's been placed in my career knowing the way I'd lead. Barry Weimler would impact their personal life. So those revelations occurred, okay? And we began to embrace this culture. I would say to you the byproduct. So the reason we did it was through the lens through which I saw people change from what I was taught and I experienced. And what happens is that it becomes an incredible strategic advantage. In addition, not only are you caring for your people, but you attract unbelievable talent to your company. Okay? Unbelievable talent from major corporations around the world because they want to work for a place that cares about them. And again, not only does it attract talent, but it attracts companies that want, if they're going to transition the ownership, they want to talk to us because they can't talk to anybody else, will talk about the stewardship of their people. So it becomes a talent advantage. It becomes an opportunity to bring other companies into our sphere of care and becomes a strategic advantage. So again, it's amplified our talent, it's amplified our opportunities. It retains. Because talent, you have the greatest business model, but if you don't have the talent. So the company that has today exists, has got some exceptionally talented people from companies from around this country who now can bring the skills they had, but they can put it in A culture of caring. And it really creates a magnetic force that attracts talent, customers, opportunities that is powerful, not just money. It's not that we're going to go throw money. So again, the other thing I want to mention just really briefly is when I began doing acquisitions, I had no money and no experience. That was an advantage when I look back at it, because I couldn't afford to fail. If I failed, it was all over. So the fundamentals we developed were very conservative, looking for value. This culture that we've created becomes not only the right thing to do, but it creates some strategic advantages over other people.

When did you start this? Like, when did the culture focus start? Is it before the first acquisition?

Was it 1997? No, we traditionally, we began doing acquisitions like everybody else. That this really trans. Well, it began with the acquisition of three companies that we did in 1997. About a hundred million dollar acquisition, big acquisition. That's when it began. And I just. It was a series of three revelations. One is again was in 1997, we acquired a company called Hasten in South Carolina. I flew down to be there and I was standing in the lunchroom. It was March of 97. March is March Madness. Everybody in the lunchroom was breakfast, having a cup of coffee, was talking about college basketball and having fun. And I just happened to notice that when it became eight and they walked to do their job, the fun went out of their bodies. My first revelations, why can't business be fun? Why do we call it work? The second revelation was I was sitting in church and my mentor was the rector of our church. And all of a sudden I looked at Cynthia and said, cynthia, our rector, Ed, has only got us for one hour a week. We have people for 40 hours a week. We are 40 times more powerful to impact people's lives than our church. And the final one was the wedding. When I realized that the lens through which I saw people as functions, engineers, accountants, receptionists, financial team members, and the lens through which I saw people at this wedding was reversed. I said, these aren't functions. There's somebody's precious child. It's been placed in our care. That revelation led us to totally transform the way we looked at our moving from management, which is the manipulation of people, to leadership, which is the stewardship of people we have the privilege to lead. So that's how it happened. Started in 1997, ran through around 2001, which was the wedding.

Yeah. And just adding to that, Kisan, if you think about our acquisition history up until the. Really up until the mid 2000s, we bought very struggling businesses, businesses on the verge of bankruptcy. They were bankrupt but didn't know it. Really struggling businesses. And so there wasn't. Back then, dad was taught management, got his mba. He was taught the language of business and brand. Businesses were brute force. Because he was. Failure meant death. It was in these series of epiphanies in the late 90s, which was then articulated in 2000. And our kind of cultural statement at the time was called our guiding principles, principles of leadership. That's when the culture took off. And we experienced 2001 to 2008 phenomenal growth. Just tons of work. We were doing acquisitions. Our culture was gaining momentum. And then 0809 comes, and you want to test a culture. You run it through the Great Recession, you run it through the top, where all. Everything was correlated, everything was crashing. And we managed that period of time like a family. How can we all have shared sacrifice versus very few having to take the front because our orders fell off. They went down 40% overnight. The way we handled that situation, it was a fork in the road. We could have tossed everything we'd done the last 10 years out of the window and gone right back to what every one of our competitors did, was laying off tons and tons of people where we can embrace our culture, shared sacrifice, and live our culture in the toughest of times. And that's what we did. And then you want to talk about growth coming out of 09, our growth took off. Our culture was galvanized people during that period of time, downtime, we worked on the business. We were doing lean, continuous improvement events. We're doing all these things. Culture is great when everything's going well. Right. It's when you test it and we galvanize it. And then 10 years ago, dad wrote a book on it. So these series of epiphanies are in his book. Everybody matters. When you write a book about it, it's hard to not live up to it because it's written down and people are reading it.

Somebody actually sent me an excerpt from the book Jason might have. You sort of came through these realizations about culture and essentially got codified, but became part of it. I'm curious about, and it sounds like it was tested. You went through the recession. I feel like there's a lot of stories to unpack around that.

A whole nother podcast.

Yeah, exactly. I interview a lot of people, and you talk to anybody, and it's like where the fail point is in M and A. And it boils down to the culture that it's always integration related. And that if there's not a culture alignment when these companies come together, then it sort of disrupt things. And I gotta imagine this world. Every company has their own unique culture. And then I'm curious to get a sense of how you think about it, because you've established this core culture in your company, but then you're continually acquiring other businesses that have their unique culture. How does that assimilate? What's the thinking and the strategy to make that actually work and come as one unified culture?

One of the things is we are super transparent. We aren't waiting for a deal to show up. We aren't waiting and saying, oh, we're going to do stuff after the deal gets done. We are very proprietary in nature. Most of our acquisitions have been done based on relationships courted over three, four, five years, in some cases as long as 20. We're always intentional about what we hope to do with the business. And when we sit down, people are drawn to us because if it's an owner, they're thinking, how is my legacy going to be preserved? We are legacy preservers. We're legacy builders. Our goal Dad's history used to be buying underperforming companies. When you've got companies on the verge of bankruptcy, they love people coming in and saving them. So putting in culture and saying, hey, we're here to save you, etc. Is great. We moved to we buy companies that are underperforming their potential. These companies could be growing, they could have great EBITDA margins. But we see a bigger opportunity for them. We talk to them about it. We talk to them about what it means to be under the Barry Weimuller umbrella. And when we're talking about building a better world through business and we are attracting people seeking us out that aren't going to sell to private equity or a big strategic because they want to see the legacy preserved and know that their people are adopted into an organization, not acquired or whatever, but adopted into an organization. Cultural stuff kind of starts happening naturally. And because we're so intentional, because we're so transparent, because most of our transactions have been based on a relationship that's been built over time, the ground's fertile for cultural assimilation. We have programs, we teach people what it means to listen. We teach financial literacy classes, we teach all this stuff so that we help develop people along the way. But the ground is super fertile in any acquisition. We wrote a book on it. People expect us to be cultural stewards of the businesses anyway. That that intentional transparency and Discussion around what it means to be a part of Barry Weimbler and what our broader mission is both attracts businesses to us and allows us to culturally assimilate a lot easier.

Yeah. What I'd add to what Kyle said is people say to me all the time, I can understand having a good culture and your core business, but how do you bring it to all these companies that you've adopted, acquired all over the world? How do you do that? And I say one of the things we've Learned in this 20 year journey is that everybody in the world, regardless whether you're in China, India, Serbia, Italy, Germany, you simply want to know that you matter. Okay? That is a universal human truth. And I'll never forget I was in Los Angeles where we were adopting a company and I was talking to the team members and said, welcome to the family. You've got a good future with us. And a lady spoke up and she looked like she might have been in her 40s. She got tears in her eyes. She said, I never thought I was going to get a chance to work for a company that cared about me. Okay? So I would say to you, whether the company is financially successful, whether it's struggling, the universal truth is people want to know. They matter and they hear about us, but they think a lot of companies say good things but don't live those values. We're only as good as our reputation. So remember, what Kyle and I are sharing with you has been validated. Harvard wrote a case study about eight years ago on our culture, and it's become one of their better selling cases. With 70 universities in the world using it to teach leadership, how to care for the people you have the privilege to lead. One other opportunity. We had an opportunity to acquire a company in France. It was a good debate with our board because of the challenges that they perceived of operating businesses. With all the government intervention and workers councils, I eventually got them comfortable. I flew over to meet with the workers council, okay, in fact, the union, but they represent everybody. But management, sat down with about eight people. I explained, welcome to the family. We're going to build a good world together. And I share with you what we believe in. And I shared our guiding principle, leadership. Our overriding statement, we measure success by the way we touch the lives of people. Normally, workers councils, unions are in conflict with management. At the end of the discussion with this group of eight people, a gentleman named Felipe looked at me and said, Mr. Chapman, could I say something? I said, sure. He said, Mr. Chapman, we've been waiting for you for 32 years and they began crying.

Wow.

Why? Because even the government can't protect your soul. The government can't show that you matter in Serbia. We had a unique opportunity to acquire exceptional company in Serbia, competing against all of our competitors who wanted to acquire it. And the owner picked us because of our culture. And we now have almost 500 people in this plant. And the culture is amazing. So this is a universal truth. In every part of our country and every part of the world, people want to know they matter. Okay? And that is not simply you can't ask people to care. You have to teach them how to care, which is what we do. So I would say to you, we didn't do this to attract companies. We didn't do this to attract people. We did it because it's a responsibility of leadership for those people in your care to send them home each night knowing that who they are and what they do matters. Because the way you lead your company impacts the health of your team members. It impacts the way they go home and treat their family.

You matter.

Teach people to care.

Yep, Novel idea.

So a lot of the things you both described, I talk a lot about buyer led M and A, and this is my observation that first time you do an M and A deal, it can be very seller led, maybe the bank process. You go through it and then you do another deal and the process evolves and usually around deal 10, it shifts. This becomes very buyer led. You've described that you're proactively sourcing these deals. They're not just showing up to you with the book. You're actively building these relationships over long term that you got to know them. That's buyer led, very proactive, very intentional. And then the other part is the culture piece in terms of the integration. It sounds like it's so much driven around the culture. I was curious about the execution. Is there things that you do because the transparency is the other big thing you emphasize, Kyle, which is all, again, wire led. It's like there's no surprises. This is what's going to happen when it comes to actually executing deals and making them successful. What does that look like in terms of being proactive to get the alignment on integration and planning and the leadership and everything to really make it successful? Because again, a seller led process, you're dead focused on closing the deal. You get the deal closed and it's, here's the keys. Bye. And it doesn't sound like you're doing that.

No. He said, I wish it was something more dramatic or some unveiling it's literally just about sitting down with our intentions with the business. Sometimes we'll buy a business that whose facility is in a place that doesn't make sense for us. And we'll say, listen, we cannot buy your business and keep this facility. It is up to you if you choose us. But if we have to leave this facility, we want to be intentional about it. We want to treat people well. We want to let them know well in advance and help them either make the transition with us to another facility or help them find their next role in life. But if somebody's, oh, I can't tell them that I'm not, we're out. If we can't be transparent with owners with what our intentions are, the other thing is we share information. We're a private company. We could be like, oh, you know what we'll tell you when we get on the other side. We share our growth, we share our share price, we share our financials, we share our intentions, we share. And yeah, maybe sometimes we overshare, but it's worked more often than it hasn't. And it really helps align expectations, et cetera. We also set expectations on what it means. Sometimes these businesses we bought maybe did or didn't have the best culture. Maybe they didn't share information. Maybe they didn't do cultural assessments. Maybe they didn't do things to recognize their people away. We let them know that's coming. Just like somebody would say, hey, I'm going to have KPIs that you're going to look at from a financial perspective, or we're going to do some commercial work together. The cultural initiatives are as important as anything else. That's what I think we bring Unique as a buyer and why people are more and more attracted to this. I would just tell you right now, I wish we had unlimited capital because the momentum that we are receiving right now is unbelievable because of the way we adopt and preserve legacies and grow and scale organizations.

Keisha and the other thing for your listeners to add to that, when I began in 1984 with my just common sense to start doing acquisitions, I looked for companies that had a better market than we were in. But eventually, what I look for, because in the 80s, I really struggled as a company and I learned a lot when I struggled. And so in 1988, when we had a chance to kind of start again fresh after we spun off two thirds of our company in the London Stock Exchange, and now we were financially stable, I said, what did I learn? What did I learn? What I learned to do was fix struggling companies, which I had done in our market. There were a lot of struggling companies. So I took what I had learned and I took it to other companies that had similar issues. That's Kyle talked about. We talked about. We started with companies that were struggling. Why? Because I felt comfortable that I could bring value to struggling companies in the future. And it worked out extremely, extremely well because what I learned through my mistakes in the 80s gave me a skill that other people didn't look at these companies because they were struggling. I looked at them and saw value. So I would say to you, I'm not that smart, but I have good common sense, I'm creative, and I have a positive attitude. So I was able to see value where other people didn't see value and buy at a competitive price. Because we did the deal, they're not going to sell to us at less than that. I saw value where other people didn't see it. So again, it was pretty much a passion to diversify our company, reduce our dependence on any one market. We built this, again, the business model design. So I want to just emphasize that, Kishan, our business model design is extremely intentional. It's based on a diversity of products, markets and customers. So if something changes, we don't hurt our people. And I learned that from Emerson Electric. So we're very intentional with our competencies to have diverse markets, customers and products so that, again, things change. We've seen a lot of change in our country in my lifetime, and we are resilient to that which has already been tested. And we will continue to make sure that we are thoughtfully diverse in fields that we believe create opportunities for us in the long term. Recurring revenue, consulting revenue. So we're not dependent just on capital spending that tends to swing. We've got recurring revenue and consulting revenue. So the biggest thing anybody in your audience can do is make sure you have a vibrant business model design and you stay within your competency. I did a presentation in Washington University a few years ago on acquisitions, and I read a study that 77% of all acquisitions fail to achieve the goals of the acquirer. Why? And I said, because of deal momentum. You get in these deals and you got a bid up and then you got to make it work, usually cut cost and transition people. So I would say to you, we had to do acquisitions to have a future, but we had no money. So we had to acquire companies that other people don't want. They'll virtually finance it. And that gave us some beginning competencies and Then we had this big event that we spun off 2/3 of our company on the London Stock Exchange which gave us a financial. Harvard wrote a case study on it. It gave us now a new financial foundation now to build a second company from again. Our history began in 1988 with a $20 million company that now is 3.6 billion and is immensely thoughtfully diverse. It's a unique business model that I think will serve all of our stakeholders and our customers well.

What's the biggest risk in M and A?

The biggest risk in M and A is overselling revenue synergies. Honestly, that's how people talk.

I'm surprised you kept them.

That's how you convince yourself to pay more. But honestly, it truly is a misread on culture. If you don't have cultural alignment, things just fail. People operate in silos. They don't want to collaborate. Having that cultural alignment is super, super important. When you're aligned culturally and you have standard expectations of what you want to do together, people lean in and work together and collaborate. But if you've got toxicity that exists in one side, it's very difficult to do well.

Okay, is it fair to say there's two parts? There's front end of the deal. Pre close. It is the price and the right expectations for the deal. Post close it's people. It's churn is probably your biggest risk.

I wouldn't say churn is. I would say just you're right, motivation line culture.

Yeah.

Which might create churn.

But I wanted to get into that because that's when you hear about things going wrong. It is. You don't get the good communication. So you have all the fud settle in. People are uneased about what's going to happen if they still have a job and all these things. And then at the end of the day people aren't happy, they're not very productive. I want to click into what does that look like from day one? What does that look like When a company comes to your organization day one.

We share with them what we believe in. It starts with a very unique relationship. And let me go back to your statement about cultural alignment. We rarely buy a company with a good culture. It's not that we have cultural alignment because we rarely have leaders who focus on culture. They focus.

You do any culture. Sorry to interrupt, but do you do any like cultural diligence? Is that a big part of it?

No. One of the biggest companies we acquired up in Wisconsin, $200 million company had a horrible culture. They'd been through Layoffs and changes and churn and market. We'd already struck the deal, and we went up and interviewed some of the top people, and we said, everybody hates everybody. And it's been one of our most successful acquisitions. Because the minute I have to tear.

Up my M and A playbook, now.

You should. Because when we stepped into this company, we said, we believe we have a future together. Let's go do good things. And it changed overnight. Okay? So we don't need cultural alignment. We need to make sure that we can be good stewards of this business and then share our vision. So the first thing I do is sit down and meet with people and say, welcome to the family. Here's our vision together. And then we live it. And we can show them people who, like Cal is talking to that are talking to us about wanting to bring their company to us. They can go look at some of these cultures. We live in a country where 88% of all people feel they work for a company that does not care about them. You're not going to find good cultures. You're going to find maybe a good business from a financial standpoint, and maybe you'll find a nice family company with a nice family. But it's not an intentional culture. It just happens to be a nice place to work. We don't really do cultural due diligence. We make sure we can be good stewards of this business, and then when we step into it, like I did in France, I sit down and say to them, welcome to the family. You have a good future with us. Let's go do good things. And people virtually come to tears.

Okay, so let's say I'm incoming leader from a newly acquired company. What do you want? I'll be VP of sales. That's a fun role. What does that look like? Like, day one. I get that maybe there's a town hall and you're bringing this message, which gets to some level of excitement. But I know things. We do this, and then things die off really quickly, and it's business as usual.

No, no, no, no. There's nothing about business as usual.

Teach me how do you sort of really make the actual change?

First of all, we have a vision. We have a very specific vision of what we're going to do with this business that we share. So it's kind of like being in the locker room and developing your play pattern. So Bill closes and the team runs out in the field and executes the play pattern. Okay. It's not. Oh, my God, we bought it. What are we going to do now? Again, we want to be good stewards of these companies that we have the privilege of adopting. I like the word adoption rather than acquired. Nobody wants to be acquired. They want to be adopted. Our goal is to have a play pattern that VP of sales, he's now excited because he's now part of a company that he has a Future with. Again, 140 acquisitions around the world, and you have this culture. That's. How's that possible, Bob? Because people want to know they matter. They want to feel safe and they want to feel they have a future. And that is what they feel in our company. And it doesn't take long for them to feel that and look around. My first call this morning was with 53 new team members from around the world who joined our company to hear how they have experienced our culture. And the stories of the major companies they worked with are horrible. Most people work for, in quotes, legendary companies, but they were not treated with respect. They were laid off, downsized. We have something that we've been blessed with, is very unique, which we care about, the people we have the privilege of leading, and we treat them with respect and dignity. And people respond immediately to that. We touch their soul and they share gifts. So you're VP of sales. You're the happiest guy in the company because now your clients are going to see that you're part of a company that has got a strong culture. When we have customers visit our plant, the first thing we do is have our team members welcome them. Because we're people. We're not machines. We're people. Minutely short story. I was interviewed by Washington University organizational development professors a few years ago. And after an hour and a half interview, they looked at me and said, you're the first CEO we've ever talked to that never talked about your product. And I thought a minute and I said, I've been talking about our product for the last hour and a half. It's our people. I won't leave this earth proud of the machinery we build. I'll leave this earth proud of the people who built that machinery. It caught them completely off guard. So we have been blessed with the vision that people are our purpose. Okay? And giving them a good future means performing at or above industry norms, attracting good talent. Since Kyle has joined us, attraction of talent that he has brought in to now with our scale, the future of this company is unbelievable in terms of the talent we have right now, blended with this culture, blended with our robust business model. It's something that we want to share because it could heal a lot of this issues we have in this country where people don't feel value, they feel used, laid off, downsized, right sized, fired. The language of business is broken.

Everybody always thinks that when we do an acquisition like the Barry Ramler bus shows up and drops a bunch of people in and everything's solved. We only invest in things we find fully understand. We have proven playbooks, commercial playbooks, people playbooks, financial playbooks, all these various strategies. And we've, because we're buyer led, we've been very intentional about talking to people about that and due diligence and asking them questions. And they realize, oh, you face those problems. Yes, we have, we know how to tackle them. So if as VP of sales you aren't excited by the time this deal is struck by researching Barry Whamler, talking to your leaders, then we haven't done a great job. Most of the time it's pretty transparent that we're coming in and they know that our intent is long term, buy, build and hold. And we are proven business scalers. And as somebody looking to develop personally and professionally, you're going to bring cultural programs and you're going to bring opportunity for me, for growth. As dad said, I'm the happiest guy alive.

Remember you described a family business, but we have 600 investors in our company, team members and outside investors, and several high net worth families. And they look at this stock and they look at its performance and they look at what it stands for. And it's a highly attractive stock that's attracted some exceptional families that want to put their money in a company they believe in. So again, it has attracted capital, it's attracted talent and it's attracted opportunities and it's attracted our clients.

I want to role play a little bit, just like a first deal scenario. We're a young company, about 10 million ARR50 employees. But I'm ambitious to bring M and A to our organization for growth. And I'm exploring. I'm looking at a couple deals now. Culture has come up in both of them. I have one where question mark engineering culture. The other company is a question mark on the entire culture. And that was one that I thought like maybe I just want to stay away from that one. But now you, you've got me thinking about it differently. Can you coach me on this? Like first time doing acquisition, how do I make this work? How do I not screw it up?

So remember when I started doing deals, I couldn't have failed if I failed on My first deal, it was all over, okay? I was so financially fragile. You have to look at this opportunity. Are you confident that you can bring value to this organization, that two plus two equals five? Because again, once you build that muscle memory of behavior. So if you're looking at a couple of opportunities right now, and you've got. You'll always have cultural issues. I've never bought a company that had a good culture. Okay? I have a lot of companies that have a good culture today, but because we brought that to them. So what you gotta do is, what is your message to these organizations? And how are you gonna pay a fair value that does not burden the company? Cause you overpaid and you have to turn around and you lose the confidence of your investors because you overpaid and you underdo. So many people think, oh, two plus two is gonna be five. We're gonna put these together and then we'll get this. I say make sure you know exactly how when you put them together. You need to be extremely clear on how you're going to create value. Now, again, that's the way I started. Because if I failed, it was all over. I learned my skills with failure is not an option. I was incredibly intense to make sure that I was a good steward of these. So if you look at these opportunities, I remember we had Bill Smithberg, who was chairman of Quaker Oats on our board, and he said to me one time, bob, how on earth do you find all these opportunities? And I said, bill, we are looking every day for opportunities. Every day we are looking for opportunities for the right one. We're not chasing deals. We are targeting companies that we believe in the long term would fit. And as Kyle said, one company I pursued for 20 years, okay? So I would say to you, in terms of the deals you're looking at, you've got to make sure that you know exactly how you can be a good steward of that business and what price you can pay. It's not going to burden that company with debt that's going to turn around and cause it to fail. Because again, 77% of all deals fail.

My quick advice would be, everybody says they've got a great culture, but there's some cultural cracks in every company we bought. And the key is to understand where the root cause is. So we bought businesses where the leader was the cause of the bad culture. And the one that dad was talking about, where we did a massive turnaround, it was that one. I've done another deal where the leader was like a wet blanket sitting on top of the organization. And once we got that, the organizational vibrancy popped. You got to understand the talent, where things lie, et cetera. Then, as dad said, what's your point of differentiation? Why you or why the company? What do they bring to you? If you're just capital, then you're winning because you're paying the highest price and not because there's a point of differentiation. They fill a gap. They have talent or leaders that you have. They have a technology that you want or that you have a technology you could deploy. So you really have to have that clear path to synergy. And then lastly, you have to have multiple ways to win. Everybody's got revenue growth and all this stuff, but you have to have some plan B's and C's that you understand. Listen, if something doesn't go right, if we lose a customer that we thought would stay or whatever, how am I going to make up for that through other avenues? And then I would just be transparent with folks and meet with many folks a lot of times if you find that a leader, as a smaller business, a lot of your acquisitions are really people dependent, right? There's a few people that are driving a lot of value. So making sure you understand how contingent and how risky those are and that you have points of communication with them prior to close. Because if somebody's not letting you talk to them, that's potentially a cause of a bigger issue. Either they're not happy, or there's just some things to think about as you develop this stuff. And then post closing, be there, be present, be transparent, be human, all those simple things.

When I began doing acquisitions in 1985, there may have been private equity firms, but I wasn't aware of them. There were mainly diversified companies like Dover and Bemis, who I was acquiring companies from companies where acquisitions didn't work out. The environment I see today that you're up against, that Kyle's up against, we're up against, is the emergence of capital going into private equity. And what they're willing to pay to place their money and what they're willing to do to make sure they get that return is a dramatically different environment than when I began this. Okay, I've seen some prices that are. I cannot even imagine what people have put at risk by some of these companies at the prices. If you overpay for a business and it doesn't work out, it's difficult to have a good culture because, again, we want a fair return on our investment. We want to be good sewers, we want to Feel good about it. So it's a real. There's so much money that's gone into private equity now that is chasing deals and is ratcheting up the price. It's a really much higher challenge today than when I began in 1985.

I'm sensing it. So things creating value, making sure you have a real clear thought out approach on how you're going to create value. I like the point Kyle, you made on understanding the points of differentiation, both your company and the target and the people factor. Understanding where the value lies in the people and their influence on the culture. Because you might have that one bad leader and that's area you want to focus on. Where you're at too is like different maturity guy can't come in trying to replicate the Barry Waymiller way of doing things just yet. I feel like that really took time to establish that reputation around the culture. Where Kylie, you mentioned is people actually look forward to it. They know what's coming. I'm not in that position. I got to maybe start communicating. Hey, this is what our culture is like. But it sounds like some of that stuff actually comes over time.

We have case studies written about us. We have a showcase that we can let people tour our facilities without any chaperones. Even when I started Forsythe, I had no credibility. We were just an offshoot of Barry Weimar. But I pointed to Barry Weimar, so I got to point to case studies. I said we're bringing that tool set for the businesses we're investing in. I had a. An upper hand getting started, but yeah, you're right. But just you got if you have to be consistent and you have to be transparent and you'll develop that track record quickly.

This is great tips, gentlemen. Kyle, so I gotta ask from your perspective, third generation family member business, historically this is the third generation is one that screws everything up, right?

Yeah, about 12% success rate. Thanks for bringing that up.

Seems like it's going pretty good just talking to you. The fact that you could be on the same call with your dad is actually a good sign. You know, it reminds me of I was reading the book the Dethroning the King of the Anheuser Busch takeover which takes place in St. Louis. And a good friend of mine actually was a CMO at the time. So it was got to see both sides of the story. But I'd love to hear just your journey and how do you make it work. What's good and maybe some advice for me. If I can bring one of my.

Generations to the business, the Third generation versus second generation. We did. There's a whole nother podcast around the growth of the business from the 70s up to 83, the almost death of the business from 83 to 87. The public offering, which again there's a case study on that, and then the rebirth of Barry Weimler in 1987. So I like to say we're still in the second generation of the rebirth. I hope that just helps my statistics a little bit better. So that's one thing. But I'm the youngest of six children. I have three older brothers and two older sisters. We have a wonderful family and no one worked in the business. I always felt that the best gift you ever gave me was no entitlement. So I went out and saw new things. I saw new ways to structure deals. I saw new ways to go into a plastic film manufacturer versus a distribution business versus buying a property casualty insurance company. So I saw all these things and then I wanted to get into a business. So I went and joined one of the businesses, the private equity firms I bought. And I wanted to see what it felt like to be on the other side. I knew nothing when I was in private equity. I was like, oh, do this, do that. And then I'd go back behind my Excel spreadsheet and wait for the next board meeting to say things that didn't make sense. I wanted to have a little more substance to who I was. Went into a business and felt that what it felt like to be owned by private equity and a little bit of more shorter term thing. All that said, the opportunity came back to start Foresight Partners, leveraging my private equity background with my dad, the board and they thought it was interesting, but it's like be this cute little side project. Well, we built just under a billion dollar business at Forsyth. I talked to you about early days. I was pulling from Barry Weimar, like grabbing things to take to our businesses. And by the time we started getting bigger, Barry Weimar started looking at things we were doing at Foresight and started pulling us over. Just this wonderful culture, Barry way where everybody kind of pushes everybody to get better. Then naturally I was asked by the senior leadership team and my dad and the afford to come over now, would I say, hey Tson, have your son go into private equity, give him a fund, see how it goes and then, then he can help run the business. It's not a natural course and it's not really replicable, but it allowed me without a sense of entitlement. Even when I came back to start foresight 16 years ago. I never thought I was going to work in the mothership. I thought I was just going to build off this thing. And I realized that things that we were doing collectively as an organization really worked with each other. It just happened naturally. And my dad and my relationship is phenomenal. You could probably tell we balance each other well. Stories and anecdotes versus data, that might be one element. I don't have the entrepreneurial flair he does. So I have to make a lot more data driven decisions. But the transition has been amazing. The company is amazing. Again, my path, I don't think I could say, hey, copy paste this, that lack of entitlement, go do things, go learn, go see. Because you can become really insular if you work in a business for 30 years having not seen other business models or how the world works. And that's given me an advantage to help this transition even better than it would have otherwise.

No entitlements.

Yes.

I have three kids. I'm feeling inspired to have three more.

I have four and I'm not inspired to have two more.

Let me add Cal's background is spectacular with great business education. He worked with some great people at bank of America for capital investors and then he had a chance to work on one of their platform and then he started his own business with and build his own credibility. It was an unbelievable path. I had a totally different but equally unique when I joined Barry Wehmiller in 1969 when my dad said, would you consider working for Barry wehmiller? Here I am, 21 years old, 22, doing well at Pricewaterhouse. My dad said, would you like to join this company? I need somebody I could trust. Okay. So my title was somebody he could trust. And we didn't have a great relationship but we thought we could do it together. The beauty is I went into my own management development. I worked in manufacturing, I worked in license agreements, I worked in customer service, I worked in a finance. I had a chance to get behind how a clock works. Not just looking at the hands, but understanding how it comes together. Great time. So when I stepped up, when my dad passed away and all of a sudden I understood so many parts of the business that that really allowed me to see things other people couldn't see. So again I would say to you, the key to my is my comment. I saw value where other people didn't see it and my creativity allowed me to apply it. So again, Harvard did the case study on our culture which again as I said, is one of their better selling cases. But they didn't do one on our business model because it's very unique. Kind of the uniqueness of the way I came up, the reason we started Foresight capital. As I said, the world needs to evolve beyond private equity, which is about deal flow and flipping to long term value creators. Kyle has really embraced this. So again, the way I got here I don't think is replicable. Okay. The unique journey that got here. Now the way Kyle's taking it is he's captured the legacy, the good news, but he's brought his skill sets in today's world. And we're continuing to grow and organically and through intentional adoptions. We kind of got here in a unique way, but we're now blending those two together to create a great future for the people who put their faith in us.

That's a really great context and it sounds like you're very humble to that experience as well of having those different roles. And likewise with not having entitlement. I got to ask, what's the vision? Are we going what's. Because now we got multi generational aspect to it. We've sort of accomplished quite a bit. What's the next decade generation look like?

Until Kyle joined the firm, I felt that when something happened to me that the company should be sold to a thoughtful buyer because of our unique journey. And then when Kyle joined the firm, it gave me a whole new perspective because he embraced the legacy of his grandfather and his father to carry this forward. But he brought totally different skill sets. So I would say to you that the legacy that we're very proud of now I believe will carry on because Kyle has embraced it. The organization embraces it. So again, in my opinion, what we are blessed with is this legacy. It's not about creating more wealth. It's about being a symbol in the world for the way business could be a force for good to heal this poverty of dignity at the world where people don't feel value, they feel used. I always say you can retire from a job, but you cannot retire from a calling. We've been blessed with the message that could heal the brokenness and business could be that force for good if we knew how to care for the people we have the privilege of leading where our vision is.

We are just getting started. So we're a three and a half billion dollar organization. You could characterize us historically as an industrial equipment business with this little investment thing over here and this engineering consulting services over here. And what the transformation we're going through right now is. Barry Wehmiller group is really A value value added operator and investor business models we understand with an unending pursuit of people and performance and harmony and a permanent capital mindset. When you talk about your organization in that way and I told you the two business models really understand it opens the aperture of our growth. So now our business isn't we're a packaging platform, a converting platform, a consulting platform or this. We have an industrial and packaging automation platform, our most mature. But we've got innovation and growth going over there. We have our professional services segment which has high organic growth opportunities. Unbelievable people running it. And there's a lot of other businesses with similar business models in that that we can grow. We have an engineering consulting business, but we've also grown an insurance services business from mid-30s million to 500 million. We see an opportunity to grow organizations there and we have this budding life sciences technology business where we help automate the assembly of medical devices and we make single use centrifuges that are helping cell and gene therapy, therapy, drugs go through clinical trials. In each of those have tremendous growth opportunities. So dad said 5 billion, that's selling it short. We could be 6, 10 billion dollars over time. We are our biggest governor because we are family held and we have capital that needs and so the vision is unbelievable. But my real vision is that people talk about Barry Wehmore and my dad's leadership style like they talked about GE and Jack Welsh and Honeywell and Larry Bosney and all these other greats, these wonderful people, people that turn businesses around and did incredible things. But I want us to be our unique approach to business with people and performance and harmony. Not one in sacrifice of the other to prove out that business can be the most powerful source for good. That's a mission we're on. That's the momentum we're gaining. We want to be a wonderful place for companies to preserve their legacy, for people to develop into their full potential and for shareholders that have aligned expectations for us. If we can do those three things again that like we're just getting started, I feel like a three and a half billion dollar startup.

I'm really inspired. I'm on a star set listening to this conversation and rethink how we approach our own culture and internally and externally.

Kyle summarizes it beautifully. The most important thing for us, every time we have the chance to adopt another company, it's like opening another church in another community. The ripple effect is dramatic. By getting scale and global impact, we believe we can be a symbol for what business could be. And we need to not talk about it. We need to live it and share it and start a movement so business becomes a force for good. Exactly as Kyle said. Because we live these values and we live them around the world. It's a global impact and it could heal this poverty of dignity we have in the world. So we're very much on a mission. But with the talent we have and the business model we have, we can be good stewards of all the people whose lives we touch.

I gotta ask, what's the craziest thing you've seen in M and A?

When we talk about a buyer led strategy, that means you do a lot of things in order to get a seller to sell to. Your dad once had to go visit with a gentleman and his doll collection. The things you do to get those early deals done. That's when he had no credibility and no money. He had to get people to like him. The craziest thing I see right now is multiples. People are paying for business.

Yeah. Kyle and I look at it all the time. But the crazy, obviously the things I did to do as Kyle said, I had to go visit the guy's dolls he bought for his wife around the house. There was a doll in every single piece of furniture in their house I had to look at and I didn't get the company. So I would say to you that prices. I see people being forced to pay to get deals because you got all this money that's got to be placed. I'm astounded at the price that people come to and the damage that's going to do in terms of the people that have got to be restructured to make that number work. So I'm very concerned with the pricing levels and the impact it's going to make on the company's ramifications. If you pay too much, it doesn't work out and people get hurt.

It's hard to get returns now. That's for sure.

Yep.

This has been a great conversation, gentlemen. I appreciate you taking the time helping me become a better M and A scientist.

Thank you. Appreciate it.

Our goal is for you to help us make people aware of the need for business to be a source for good in the world. Your questions have been great and we appreciate your interest and we hope you help us share this message with the world.

Fellow M and A scientist, if you listen this far, I gotta hear from you. I had so much fun doing this interview. Reach out to me on LinkedIn. Let me know what you think. Give me the good, give me the bad, me some ideas for other topics. Give me some criticism. I welcome that too. That's how I get better at this. Till next time. Here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M and a function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on MNA Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.