How To Successfully Execute Deals With a Small Team

As our regular listeners know, people, leadership and culture issues can make or break a deal. That's why I'm excited to be joining the HR M&A Roundtable's third annual conference. I'll be there alongside M and A giants like Ken Freeman, former CEO of Quest Diagnostics, Mark Cassidy of Vestigo Ventures, and Sally Larson of LPL Financial. This year's conference is optimized for virtual attendance and is the best way I know to learn practical hands on tips and techniques for managing managing the people, leadership and cultural issues. Visit mascience.comhr to learn more and get a discount code exclusively for MAScience listeners. Again, that's mascience.com HR I'm Kisan 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 and what actually happened during M and A deals. Welcome to M and A Science Live where leading M and A practitioner share lessons learned from their experience. When you use proven techniques in M and A, more value is created. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our newsletter. Again, that's mascience. Com. I'm your host, Kisan Patel, CEO and founder of M and A Science and Deal Room. Joining me is Jason Lippert, CEO of LCI Industries. Jason's conducted over 70 acquisitions. Today we're going to talk about how to successfully execute deals with a small team. How you doing today, Jason?

Hey Keesan, how are you?

I'm great. I appreciate the opportunity to chat with you. Can we kick things off with a little background on your M and A experience?

I was never formally trained, but my family business was acquired by a public company in the late 90s and it wasn't maybe three years after they gave me the reins that they started letting us make some small acquisitions. So started with two to five to $7 million acquisitions, eventually grew to bigger size deals. A lot of them were all within our industries that we were doing a lot of business and manufacturing industries that we were in. That's kind of how we got started doing deals.

And so this was before being public company, you're still privately owned and I think at the time private equity owned.

No. So we were purchased by a public company on the Amex in 1997.

Okay.

So we went from private to public in late 97 and then our public company that owned us went to the New York stock exchange in 2001 I believe.

And then when you started doing deals.

It was right about 2001, right around there. Did our first ones.

Cool. That must have been a fun time.

Yeah.

And I think we'll talk a little bit about your approach around how you work with companies and expand on value. One of the things that was interesting that how you mentioned you went going public. Can you tell me a little bit difference in terms of how you sort of pursued doing deals and how that may have changed as a public company?

My family had done a couple small deals when we were private and I wasn't involved with those deals. The big difference was that the public company leadership had some more refined and sophisticated metrics around. Hey, here's. Here are the kind of the parameters where when we were private, we probably did things more off the cuff. And hey was if it was a good fit and we could see some strategic long term opportunity and joining forces with somebody, then we would do it. But all of my deal experience has been on the public side and we've gotten more sophisticated over the years. And like I said early on, it was some really small deals in our space around steel manufacturing and geographically, people real close to where our home base was in the business.

So as a public company, you had a bigger financial model to go through.

Yeah, they were very interested in going down an inorganic growth path and we were growing fine organically, but they wanted us to bolt on, widen our competitive moat through some inorganic acquisitions. And they gave us some basic parameters. And I was in my 20s at the time and like I said, I hadn't had any formal training and doing deals. It was something where we just started with some real small deals and learned and eventually the deals got bigger and more meaningful, both from a top line and a long term strategic standpoint and to the point where now we're doing two to $300 million deals in some cases and looking certainly looking at a lot more than we ever have.

Wow. After a company gets acquired, is there an automatic change to the management team that you're a part of?

Yes, I think everybody looks at it differently. One of the things we've evolved into in terms of deal evaluation is we found that it's a lot easier to do deals when we acquire a really great leadership team. One of our prerequisites when we make a deal these days, a leadership team has to be solid. And if we decide to do a tuck in, or in some cases the leadership is they want to exit, they're only going to sell the deal if they can exit. And when we want to do those types of deals. We need to make sure that the leadership is available on the mothership side, on the big parent company side, to make sure that we've got people that can slide into place and lead strong out of the gate. So leadership, we either have to have it ready internally where somebody can fully focus on that, or we have to acquire great leadership with the deal. And other people, you know, they'll scrape and they'll do other things and lean it out. But we look at things a little bit differently, I think.

So it's not gonna be undefined thing. There's gonna be a clear plan. Either we're building off the existing team and really looking at the growth opportunities, or we better have a plan in place to make that change happen quick.

That's right.

You've done over 70 acquisitions. Yeah.

It doesn't seem possible. We didn't start five years ago. We started 20 years ago doing deals. Or at least that's when the company started letting me and our team start making deals for the business.

So how'd you do it? Did you have a corporate development team assist you? What does that structure look like?

No, it's funny, like I said, I didn't have any formal training. Building a team around M and A and acquisitions and integration never really occurred to us. We were just. We saw a company that we liked and we generally went out and approached them, figured out how we were going to integrate, got the deal done. It would be borrowing some accounting resources internally, it'd be borrowing some of our other manufacturing and HR and IT and marketing resources. And to help think about, hey, is this a good fit? How are we gonna integrate? So there wasn't a lot of. There wasn't any in the beginning outside resources or dedicated teams focused on getting deals done. And we really did that through the better part of 2016, probably before we started adding separate resources to help evaluate and get deals done. And ultimately integr and the team still to our scale I think is pretty small compared to most.

How many like actual dedicated people at M and A do you have between front end doing diligence through integration?

One it's more of a resource than what we ever had, but they're fully dedicated on evaluating deals. And I think our deals are mostly strategic. We've got four really key industries that we consider ourselves knee deep into or waist deep into. And so we're only looking at deals in those spaces. We know which ones we want to acquire. So I'll feed the deal or one of my other Key team members will feed the deal and so we don't have to sit there and scrape a bunch of books coming from investment banks and things like that, like a lot of private equities might do. We know who we really want. We go after and get them to the table and get them interested and then that's when you know our team again. We still borrow resources from all over the company. So you could say that there's some people where a half hat of they have a full time job but when a deal comes up, they got to be available and dedicate some resources there.

I like the part where all this stuff's organic. Organic that you just started doing deals from scratch. You didn't come from a banking background or anything of that sort. The thing I really want to unpack is what were some of the lessons learned along the way. And maybe you got to rewind a little bit, think about some of those early deals and I'm never going to do that again type of moment. But I'm curious how that, what were those lessons and how did it evolve?

Getting too far into something really new, those generally are very difficult to do when you're stepping into a new industry or stepping into a completely new product line. We learned how to do better diligence over the years when it comes to not just the leadership team at the top level, but really diving deeper and making sure there's leadership strength all throughout the business. Because in manufacturing there's heavy leadership and activity on the front lines of the business. And if we're not checking the leadership down to the front lines, then the top level is always going to look okay. They're always going to represent and tell a good story. But until you get down to the front lines of the business. So we look a little bit closer there, like I said, we try to make sure that the business at least comes with a solid top level leadership team. Because we can't get in and especially some of the size of some of the businesses we're buying today, we can't afford to get in and start over unless we were planning on it. Evaluating the leadership and doing a lot of diligence on, on the customer side and the product side is really important to us. I would say those are the key things. Not tucking in a lot of deals where we're taking a facility and team and taking them out of their element and trying to pull them into an existing facility that we have moving equipment and people and all the resources that the business are running. It's just so much Easier to keep them standalone and then not going something that looks attractive, that's at a really low price, we tend to stay away from those more. If it's a garage sale, we almost tend to look the other way, even if it looks enticing, because it's a garage sale for a reason. So we try not to get overreactive around deals that just look like a really good deal unless there's something meaningful there.

What are the red flags? What causes you to turn the direction?

Really bad leadership or toxic leader that takes a long time to fix. Usually that means that there's a tough culture and those are hard to penetrate sometimes, unless you're going to really make some wholesale changes, which again, we do a lot of work and effort and resources that we don't have necessarily have the time to dedicate all that resources if there's not a strong leadership team there. So I'd say that's probably one of the bigger things.

Well, can you give me an example? Like what would be your indicator of, hey, there's going to be some leadership issues.

You got to spend enough time there. You got to do your homework, you got to spend time. I do a lot of listening. Can generally tell if I listen to somebody long enough, if the story's feel, if it's good. And then it's, hey, take me to your. Take me to introduce you to your team and let's poke around the team and see what the team thinks and how good is the team. How long has the team been together? That's usually the team's been together for a very short period of time. It's likely that there's not a lot of chemistry there and there might be some opportunities. But generally if the leadership seems toxic, we're. We're running. If the culture seems toxic, it makes it a tough go. We look for growth trends. We got to see a path of aggressive growth, not just maintaining what you've got. It's where's the growth path? And generally that comes around really good innovation departments. So if you're not innovating, we're probably less interested. It doesn't mean that we're not interested at all. But if you don't have innovation and developing new products, then that's less interesting and attractive for us.

Got it. So good culture, employees, leadership through the company, making sure they got growth and innovation. Anything else in terms of red flags.

What the customers think about them, that makes a difference.

Is there a way to find that out? Do you just actually try to have conversations with some of the customers or.

Yeah, because it's. Yeah, we just try to have conversations, some of the customers, loosely, without divulging the confidentiality and things like that. It's just ask around, poke around. Sometimes it's supplier peers, sometimes it's customers, sometimes it's the consumers. Just how does everybody feel about the products and customer service? And are they really diving in and trying to go deeper with this supplier? Are they trying to pull content out and away and move it to move it to their competitors?

You do a lot of these deals yourself where you mentioned you don't have this vast network of bankers and so forth. So you sort of are involved in the industry, know the space, know the players there. What does that look like in terms of your sourcing process now? How are you approaching the opportunities? Having conversations with some of these other executives to start facilitating it into a potential deal.

So a lot of times it's just a phone call, myself or somebody else on my team that will feed a deal. Have a conversation with the executive leadership and we might have a longstanding relationship. Relationship already. Look, in the handful of small industries we're in, even though we're a few billion dollars, the industries are relatively smaller and I wouldn't say niche, but they're smaller. Everybody knows each other. It's not hard to get around. It's not hard to know who all the players are. And it's really easy. I've been in the business for 27 years and my average tenure and my top 20 executives that sit with me are 18 years. So we know all the players and ultimately a lot of suppliers that build components in these different industries, they know if they're ever thinking about selling, that we're a great partner to sell to. We've done 70. And you're going to get a reputation, good or bad, one way or the other when you do that many deals. And I feel like we've got a really great reputation and we treat the sellers really well. A lot of the sellers we've we bought from over the years are still connected to the company in some way, shape or form through either consulting agreements or they just stay close to the business and stick around and they want to know how things are going and they'll recommend us to other people. So.

So a lot of long term relationship building. But is there sort of like a prompting, hey Jeff, let's go grab a beer. And they bring up the fact that we've known each other for a while and then your company is really interesting and then love to chat about an opportunity with you?

Yeah, it's like that. It's real informal. And hey, we're not going to sit down on the first meeting and lay it on you and make some big presentation. Let's say, have you ever thought about selling your business? Or if not, have you ever thought about it, or do you plan on selling it at some point in time? Just so that we know where they're at, more often than not, if they say, hey, we're not ready yet, they're going to make the phone call at some point in time and say, you know what, you planted that seed a while ago. And I've been thinking about it and it just feels like a good time. I just like to sit down and explore what that looks like. And in other cases, we do get some calls from investment bankers because we're in Europe now, we're in aftermarket, we're in commercial vehicles and the marine business. And there are some people that don't know us too well, so they will reach out through an investment banker, but they still know that we're a good acquirer of companies and we're a solid partner from seller standpoint. Some deals happen that way too. They happen more formally, formally through a process.

So of the percentage of deals you've completed, how much were very linear? I've reached out, had this conversation, expressed my interest to acquire, and we moved through a linear path to get a deal done versus did the introduction one, two, ten years later. They said, hey, the time's right. Jason, let's have a conversation.

Of the people we've approached directly, 80% of our deals have been not through the investment banking route, through a formal type process. Of those 80% that we do, hey, let's reach out and let's reach out to the owner and have a conversation. I'd say 75% of those deals happen relatively quickly.

Okay.

And the other 25% happen at a later date.

As a CEO, you're spending a lot of time nurturing these relationships, having these conversations. What does your time look like in terms of percentage of time you're spending on the M and A activity versus you got to deal with investor relations and internal operations and so forth.

Well, I think as a CEO or a leader for any position, you just have to be really good at time management and how you spend your time and how much time. I tend to move probably more quickly and not spend a lot of. A lot of time analyzing and pondering. And I've thought about it long enough. We approach somebody, hear their story and make sure it confirms everything we were thinking. We generally move pretty quickly. I know some people you can pencil whip deals to death and it can take a long time to get a deal done and take an exceptional amount of time. And that would take a lot of time away from the other things that are important that I do or that other leaders in the company do. So time management's really important and if you manage your time well, you can make time to do this kind of thing, but takes a lot of practice and intentionality and to get efficient. So just a lot of practice.

Well, it's interesting. I hope There's a study one day of assessment on CEOs and their competency around M and A. Because I feel like it varies dramatically company to company and you're on the other end where you're very hands on and know your stuff. I want to talk to you about value creation. What are you doing to create value in these companies?

You know, the great thing in my opinion about where we're at today is like I said, We're 3 billion ish. We've got substantial resources in all areas. So the average business that we're looking at is 30 to 75 million dollars somewhere in there. It's kind of a broad range. But the deal size keeps changing as we get bigger. We're not looking at too many $5 million deals anymore unless it's IP related and we get some kind of cool product or something like that. And there's, it's more a paper related transaction than a business transaction. So we're looking at bigger deals and they keep growing. And whether it's a $30 million deal or $100 million deal, you know, their core raw material is steel or aluminum or foam or fabric or whatever the raw material is that they use. We use a lot more of that and we're able to go in and immediately create synergies on raw materials that creates a better ROI and it creates a quicker payback and return on buying a business. Depending on where they're at. And there's sophistication in the sourcing world, some source, okay, a company that's 50 million and others are not very good at all. They got in the business because they developed really good products and or they had really good sales or they had some really good customer relationships. But sourcing is really the key when it comes to return because if we can buy 10% better, it makes the deal pencil a lot easier and gives us more room for error as we operate the business than if we Bought something where we really couldn't move the needle on, on raw materials at all. We look at our, what innovation we can bring to the table. Typically when we approach a company, we've already got some plans for their products and whether it's use our broader distribution network of customers and we've got these relationships maybe that this doesn't have. And we can plug their products immediately into our revenue chain and our customers. To me it's things like that and then it's ultimately how can we grow the business? Where can we grow the business? We've got all these different areas that we can take somebody that usually these companies that we buy are singular market focused. It's a component for a train or a bus or an RV or a boat. And when we can take that and move it across multiple industries or even in the case of Europe, we move a lot of products back to the US that have real interesting designs that the US they buy a lot of our European products. They wouldn't have had that opportunity in Europe, for example, if we hadn't partnered up, bought the company and used our distribution network back here to move products.

From Europe to the US Economies of scale, accelerating innovation and expanding distribution.

Yeah, and it's a lot like what the public company that bought us in the 90s did for us. We would have moved as a family company at a very slow rate to grow our RV business. But when the public company bought us, they turned around right away and said, hey look, we want to give you $20 million a year. I know my dad, when he was running the business, he might have been willing to spend a million dollars a year and that was a stretch. So maybe we could get a new plan up a year. But the public company was letting me put up for a year as quick as we wanted to grow. And so we would add that same value back to some of these small family owned businesses that we're buying that were very risk adverse and conservative with how they spend their capital. And we have bigger visions and we see bigger potential because we know where they can grow or we can help them grow faster and like you said, expedite some of that growth through just quicker capital infusion.

Why did they make you CEO? This normally doesn't happen or you're part of the target acquisition and you ended up becoming CEO of the whole entity.

I don't think it was planned. It was one of those things that I was third generation and when the public company bought us, I know my dad told them that, hey, I've got My son, and he's only a few years out of college, but he's doing good and he'll take the business over someday. And I'm sure the public company guys were saying, yeah, sure, that sounds good, but we'll see. So it just worked out. We got. Got lucky. We're blessed.

Usually it's the third generation that screws a business up. So usually that's a whole nother interview.

Usually. I think that's why my dad sold it, so I couldn't.

Right. That's the ideal succession plan to sell it before third generation screws it up, which is awesome. You didn't. You kept a motivated drive and kept progressing.

Yeah, it's worked out really well.

I want to talk to you about leadership and culture because I think that's another element of value creation or. First time we talked, I told you I'm in Chicago. I wanted a fun family trip for the weekend in Indiana. And where'd you send me to Shipshew, right? Yeah, you sent me to Shipshew. So here I'm in Amish county, which, by the way, was an excellent trip because I took the kid. They actually do a whole tour where they take the kids on Amish farm and milk cows and do all this stuff. And you employ a lot of those people. Yeah, it was interesting because I'm a person that talks to people. And I said, yeah, I'm here because I met the guy from LCI Industries, and then he told me this is where I should come and do a little family trip. And right away, people knew. People knew. Oh, yeah, Everybody knows them. They're great. They're a great company. They support our economy over here. They're great employer. Everybody's got a friend or cousin that works at lci, so it would intrigue me. And I realized, like, you sent me there indirectly to do some diligence that they spoke so highly of the company. I was so blown away and impressed by it. So I really love to hear a little bit about how do you approach that, especially when you acquire a company, too, because there's always a thing where every company has their own unique culture. Then ultimately you need to create some kind of uniformity around it. But love to just hear your approach around that.

It's actually one of the most exciting things we work on, and I didn't mention it, but it's one of the soft rois, the soft part of ROI that nobody talks a whole lot about because there's no way to really put an ROI around it. But we're One of the few companies out there that spend a lot of time around culture and leadership development. You mentioned an M and A team. I don't have much. There's. But on the culture and leadership side, we've got probably 24 individuals right now in the company that they do culture and leadership development, and that's all they do. And a lot of that's focused around our newly acquired companies. So typically, as we're trying to work all the time on improving our culture and moving the leadership needle for each and every leader in the company through these teams, often we have to kind of move some of them over to the acquisitions and say, look, the company knows where we're at, and every business unit in our company has heard my message, heard our leadership team's message, and that flows through the organization. But when we get a new company coming into the family through an acquisition, they've never heard the message, or they might have heard it from the outside, but they don't really understand it that clearly. So we have to go in and make sure right away they understand that there's no compromise on the values. So that is a wholesale change we make real quick. Love that you might have had values before. Most small companies we buy, they don't have them, and if they do, they're just hanging on the wall. They don't talk about them on a regular basis. But that's one of the things we do right away, is we throw out our values and talk about how we hold people accountable and align people to the values so that the culture is consistent. If we don't hold people accountable, then those are the companies. When you don't hold people accountable to the values, those are the companies that people say, hey, they put the values on the wall, but they don't live up to them because everybody does something different and nobody's held accountable. And then you don't have a culture or you have a bad culture. So, you know, real simply, I see culture and leadership development is probably the most significant piece of widening your moat or developing a competitive advantage. Because ultimately, when your culture is great, more and more people stay over the long term. And when more and more people stay over the long term, you just get more momentum in the business. You just do safety, efficiency, quality, innovation. They all get better. When more and more people are coming into the business with their hands in the air saying, hey, look, I'm coming to Lippert today and we're going to make stuff happen, and I'm going to put all my energy and passion into the business and we're going to do great things as opposed to culture that's blah. Or moping into work or they're not calling in and saying, I'm not coming anymore. They're just not showing up. The difference in those two businesses are drastic when it comes to efficiency and safety and quality and innovation. And to me, that's where we spend a lot of our time is. Because that's developing a huge competitive. It's giving us competitive advantages that I know our competitors don't have because they're dealing with turnover and training and all this stuff at higher levels of attrition. So we just happen to spend a lot of our time there.

This is how you're creating value.

Yeah, totally.

Your energy went up about three notches as soon as you got into the leadership culture part.

Yeah. But I'm telling you, we've been on the journey for 10 years. We do a lot of things at other companies, and a lot of that's just making sure people know that we truly care about them. We listen and we don't spend our time just talking and barking orders and things like that. We want to know what we can do to make it better. Because they're here 40, 50 hours a week and we have the ability to impact their lives in a pretty significant way. And if we do that in a positive way, they're probably going to bring more energy to the business. And if they bring more energy to the business, that probably gives us a competitive advantage over our competitors. So it helps the business and it helps our team members. And ultimately we use some of that energy and hours for community service and things like that that we've got pretty substantial initiatives on.

I'd like to learn more about this because, one, I find it very relevant and I'd probably say we're one of the companies that have values written on the wall somewhere that nobody knows where it is. I'm curious to take that as a company and you've acquired that business and now how does that company transform, what does that journey look like from having those values in the wall written somewhere to actually make an impactful. Making a difference in their company?

Are you talking in terms of just any company or are you talking about an acquired company? Or I guess it could be both.

Yeah, because it just in general, because like I said, we probably fit that bill. And I've been told by other CEOs it's such an important thing. And it's still. I'm learning it and I want to know. Because you're At a more mature state. What does that happen? Because it sounds like you're making that transformation with the company's requiring.

Yeah. The stat I like to use with team members, especially acquired businesses all the time, is that 88% of the people in the country that work feel like they work for a company, doesn't care about them. So what's that say about culture? It says that 88% of our cultures aren't that great in the business world. And we were one of those companies that prior to 2013, we didn't have. We didn't have any values at all. It wasn't. We didn't have them on the wall and didn't follow them. We didn't have them. We ran hard, we worked our people hard, and when they couldn't keep up, we moved them out of the way and found somebody else and left people in the dust. We started with values. And whether you have them on the wall or not, just make sure people know that they mean something. We're going to make a big effort to make sure that people are held accountable. And if they're not, we're going to coach them up. And if they can't be coached up, we're going to either transition them to a role where maybe they're not in leadership, or we're going to transition them out of the business. And so the people see that, hey, look, if you don't follow the values or you don't line up to the values, then you're probably not going to be able to work here over the long term. Likewise, on leadership development, we have to pour back into leaders and teach them what leadership is. Because most people, if you think about it, they got to a leadership position not because, you know, they really follow the values and they're good performers, but they were just there every day. And especially in the manufacturing world. And if you think of the frontline supervisors, they're there every day. They work hard, but it doesn't mean that they lead well. But we promoted them anyway. And that's how most companies do it. You gotta make sure that the values are alive and that they're followed. And you just start there. And then just. I told my workforce in 2013, I said, hey, look, I know we throwing these values out here and we haven't always done this. We haven't lived up to these. But watch us from this day forward. And as long as we're doing what we say we're gonna do, and we follow the values and we're trying hard to hold people Accountable, then just come along with us. And if we don't, then you're free to go trust us and trust that we wanna make an honest, solid effort. And it's a long journey and the journey never ends. We still have steps to take. Some of the steps that, that we're taking today look vastly different than what the steps somebody might be taking a year or two in.

So really holding accountability to people, acting upon those values and generally being proactive about the leadership development and continuously improving leadership. Even though you're looking for good leadership to begin with. Yeah, it's almost like there's an element of coachability or continuous learning that needs to be in there as well.

One of our first steps was three years of listening sessions. So again with acquired companies, I mean, this fits right into M and A or with our existing businesses that were slowly transforming, transforming the culture with. We did three years of listening sessions and just said, hey, look, I'm coming through the plants. I haven't been through the plants in a long time. I used to weld. That's where I started. So I'm not unfamiliar with the manufacturing areas. Started up a lot of our welding plants worked side by side with a lot of people. But as we grew, I just grew out of the facilities and didn't go back a whole lot. But I made it an effort for me to go back so I could hear firsthand what people thought the problems were. And they're really simple problems to solve. And some of them cost money and some of them didn't. Some of them were just, hey, we need to make some leadership changes. Others were, hey, look, we've grown 10x over the last 10 years and our bathrooms are the same size and they're dirty and our break rooms are the same size and they're dirty and the plant's unorganized. And man, could you just put some paint on the walls? Could you buy some more microwaves for lunch? Could you buy some benches to sit on for lunch? Just easy stuff. But we weren't listening. We were just too busy trying to get the next 100 million in revenues. So as we changed those things and they saw we were listening, they came around and they went from leaving all the time to saying, hey, I'm going to stay here. Then we started investing in community service type projects and we started hiring leadership coaches and personal development coaches to cater to our frontline team members, who by the way, got 1500 of those leading 10,000 of those people in our company. So if we're not taking care of that first level supervisor. 10,000 people aren't getting cared for. So we really got this leadership coaches plugged into our frontline leaders just to teach them what leadership was, teach them what our values are, and to engage them on a higher level so that they're not just showing up and we're giving them a production schedule and they get it done and go home. How they lead during the day is their business. Those days are done.

I like the emphasis on listening because the best ideas could virtually come from anybody.

They do. They come from everybody. They shouldn't come from just five people.

Yeah. They don't come from the top. A lot of times. They come bottom up. So.

That's right.

Let's talk about key lessons you've Learned over doing 70 acquisitions.

Oh, key lessons. Well, I told you a few of them were we stay away from garage sales. We tend to focus on the growth path. We tend to focus on innovation. We tend to focus on good leaders. We've acquired a lot of companies where we bought companies with high capacity leaders in play that were capable of doing much more than what they were doing. We take some of those leaders and we. We give them more responsibility because they just were high capacity and they were only doing what they were doing because that's what they were in charge of and that's what their company was.

So I wanted to hear about. You don't have to name names, but I want to hear about that. We shouldn't have done that deal.

We shouldn't have done that deal.

Yeah, I want to hear about that.

The only deals that were really tough for us were the ones we did 07, 08. But even today, they're great businesses. We bought a furniture company for the RV business in July of 2008. The financial crisis obviously was a few months later. Business tanked. It was the highest. It was a $40 million acquisition. It was the highest cost acquisition we had ever made. And we're sitting here, what did we just do? But that business today organically grew to 300 million. Our president of North America came from that business. So I look back at it and say, yes, as horrible as 08, the end of 08 and 09 were for that business. I still would have pressed the go button on that. 10 times out of 10. We've made all the businesses we bought work again. A couple of the garage sales we bought, they were really cheap. Didn't work out too well for us. Some of those you pitch a few million dollars, it's not the end of the world. We've tried to innovate in some spaces and try to buy some companies and make some things work on some ideas. They didn't work too well. But. But we're not risking 10, 20, $40 million at a time. We're risking a couple here and a couple there. So there's a few of those. But when you look at 70, most people would say, hey, if you had a 70% ROI, that was meaningful, that would be a good rate of success. But we, I think we bat in the 90s all day long.

It's almost like there's not like hard lessons to pull out of it. It's almost here's a risk tolerance that you have to be comfortable with.

Yeah.

And then there's also a time factor where you're almost like, hey, if I benchmark this deal one or two years after, it would look like a fail. But then we look 10 years later and it was a massive success. Right. So there's long term view on some of this stuff as well. Is it easier to do these deals as a public company? People get excited that you're calling them because they know you're listed or is it a little bit?

I think people get more excited inside our industries because they've heard good things about us. They know we're a good acquirer. We know that we treat the sellers really well. They know generally they're coming to work for a company that's got a lot of potential and that has had a really significant growth rate over the years and is a good company to invest in and that the people are pretty solid and strong, that a lot of people like to stay here over the long term because of the way they get treated. So I think that's always compelling for sellers and team members that might not be owners but might know that they're coming here. It certainly gives us more powder to do deals with because there's more of a risk appetite. But other than that.

Yeah. Different type of balance sheet to work with. But. But sounds like fundamentally similar considerations about doing the deal. Your sort of strategy and everything needs to be aligned. If the CEOs doing their first acquisition, what advice do you have for them?

Start small, stick with again. Some people have heavy risk tolerance and they're willing to get into something that they know not a lot about. That's not me. I got to feel good about the business and the products and the growth potential. And again today for me it's how does it plug in to our business and get better? If I can see that, then A lot of people that might be starting out doing their first one that might be. There's zero revenues today, and that's their first bucket of revenues that they've got to work off. And if they're doing that, I just say, hey, look, you know, it has to be solid leadership. You have to have no weird gut feel. Your gut feel about the leader or leaders of the business have to be rock solid, and they have to be great people. And I pick people that are on very solid moral footing and not people that are running fast and hard and things like that. And for me, if they've got faith and they've got a faith background, that that means something to me. I think everybody looks at things a little bit differently, but the people that you acquire will make or break the business. You got to do a lot of good due diligence there and spend a lot of time, not so much talking, but listening to the people that are selling the business to understand who's coming with the business at all levels. Not just that, not just the top level, because you make the mistake there, then you don't know what's and who is running the business.

You got almost this view of coming together as one big happy family.

Yeah.

Have you had that where the culture was bad or you found out later the culture was bad then?

Oh, yeah. Nobody intends on having a bad culture. They just run the business too much off the numbers and it drives a poor culture because it's not compelling and inspiring to anybody. If people are asking us about the numbers and they're not led, well, whether it's at the president, CEO level or whether at the executive level or whether it's the manufacturing level, if people aren't led, well, they're going to leave. The leadership isn't inspiring. They're eventually going to leave. To me, those are easy problems to fix. Just teaching people about, again, it's that 88% number. 88% of the cultures are not great out there in business. So you're likely going to buy cultures and leadership models that aren't compelling. And it's just turning on the light bulb. And real quick, people will turn and pivot because it feels better when you start inspiring people through culture and leadership development. That just fills you up a little bit more than just what the numbers do all the time. And if you can transform some people's lives, because now you're not making their lives miserable and the leadership sees that, everybody kind of jumps in and the culture needle, it moves pretty quick. It doesn't take A long time to move culture if you do the right things. So you can take a bad culture and move it to a good culture in a pretty short period of time. If you put the values there and make sure the leaders are right and that they're bought in and that you're holding people accountable to the values and putting some extra resources there around leadership development and personal development and community service. Work that into the business. I still don't meet a lot of businesses that have leadership development resources. People that are dedicated to that, they say, oh, HR does that, or I do a little bit of that in my job and I mentor and I coach. Well, that's great. But someone needs to. That needs to be somebody's job.

One dedicated M&A resource. 24, 25 dedicated leadership resources.

Yeah. What's that tie in?

Yeah. Jason, what's the craziest thing you've seen in M and A?

Some of the money being thrown around, especially in the private equity world. Not so much the way that money's thrown around because the multiples are much higher there, but just the model of stripping things down and stripping things away. And the only thing that matters are the numbers. And that just is I've worked my way out of that mold for the last 10 years and focused on building a strong culture. Because if we build strong culture, we're going to build strong people that want to commit to the business and bring energy and passion in the business. And we do that. The business model generally wins as long as we're evaluating people based on performance as well. But when you strip everything back to the numbers, it's just not a sustainable long term. And you know how that model works. They're looking for a quick, you know, let's turn it in 4, 3, 4, 5, 6, 7 years and sell it. And that's the goal.

Squeeze the pennies out of the dollar.

It's probably not too crazy or off the wall, but that's the one thing that I think is kind of nuts.

You look very healthy and happy, so I'm wondering if that's attributed to that approach.

Yeah. Yeah, I think so. Look, the one thing that keeps me coming back to the business every day after 27 years, the life transformations we have through culture. There's a lot of people that come into this business. I think we've hired 1500 people this year already. And a lot of people are coming from bad business culture models where they've been beat up and yelled at and screamed at and they come here and it's just they can breathe, they can think, they're encouraged, they're inspired to do well and ultimately that's what they end up contribute to their jobs. And then the leadership lessons they learn about what leadership and values look like. They take it home to their families and it helps transform the family, their families and other people they touch outside the four walls of our business. And to me, that's what's fun about business is hitting the records and all the goals that we've set for ourselves as a business, but also the life transformation and impact we get right along with our people. We're fortunate enough to have 14,000 team members that have another 20 some thousand or 30 some thousand family members attached to that and we've got the privilege to care for all those people and we can make a difference in the world.

Jason, thank you so much for your time today. I enjoyed this conversation.

Hey Keesan, thanks for having me. I really appreciate it. It was fun talking to you and getting to know you a little bit.

My pleasure. Here's to the deal. Thank you for taking the time to explore the world of MA with our podcast. Please subscribe for more content and conversations with industry leaders. If you like our podcast, please support us by leaving a five star review and sharing it. I enjoy hearing feedback and connecting with our listeners. You can reach me by my email. It's Kisan K I S o n@dealroom.net M&A Science is sponsored by Dealroom, a project management solution for mergers and acquisitions. Additional educational content is available on Deal Room's blog@dealroom.net blog. Thank you again for listening to M and A Science. See you next time. Views and opinions expressed on M and A 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.