Mastering M&A Integration Through Leadership Development and Cultural Alignment

Today's episode is brought to you by S and P Global Market Intelligence. S and P Global Market Intelligence has private companies covered. Whether you're looking for your next investment or MA target, conducting peer comparisons, assessing counterparty credit risk, or monitoring your supply chain, SMP Capital IQ Pro's extensive private company data can give you the insights you need for a competitive edge. Uncover tangible insights on private companies by visiting sp global.com private company data. Again, that's SP global.com private company data. Let's face it, too many deals happen because they can happen, not because they should. Buyer led Ms. M&A flips that approach. It's about starting with intention and asking why at every step. Why does this deal make sense? Why will it create value? Why is now the right time? Instead of chasing reactive opportunities, Fire led M and A is about leading with strategy. It's about being proactive, going after the right companies, finding the vision and building the plan to make the deal successful before the ink dries on the LOI at dealroom, we've worked with hundreds of M and A teams to adopt this approach, helping them align their M and A strategy with long term goals and avoiding common pitfalls. And now we've made it even more accessible with a simple framework for implementing Buyer led M and A. This framework gives your team the tools to line, execute and deliver real value every time. Buyer led M and A isn't about working to close a deal, it's about working to make the deal successful. Visit dealroom.net to learn more about the Buyer led M and A framework and transform your M and A process into a value driving powerhouse. Here's to the deal. 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 and what actually happened during M and A deals. Hello M and A Scientists. Welcome to the M and A Science Podcast where we learn from the best in M and A to uncover proven techniques for enterprise value creation. If you're interested in learning more about how to optimize your M and A practice or want to get involved with our community of forward thinking M and a practitioners, visit mascience.com subscribe to our free weekly newsletter. You want to keep up with us on the go, head to LinkedIn and follow M and A Science. I'm your host Kisan Patel, Founder and CEO at Deal Room and Chief Scientist at M and A Science. Joining me today is Jason Lipper, President and CEO of LCI Industries. LCI is a component part supplier for leisure and transportation traded on NYSE under lcii. Today we're gonna talk about driving success through culture and leadership. Jason, how you doing today?

My favorite topic. Thanks for having me, Kassan. That's awesome.

We're here live. Is this headquarters?

This is our global headquarters. We've got two corporate offices right in the local vicinity here. But this is considered our corporate office.

LCI headquarters in Elkhart, Indiana. Is this the heart of Amish County?

It's the RV capital of the world. Right here. You're in it.

This is the RV Cafe of the world. Is still part of Amish County.

Yeah, it's Amish country for sure around here. I'll give you some good places to go after we get done.

Awesome. Well, thanks for taking the time from running a publicly traded company to have a conversation about making deals successful. Can we kick things off a little bit about your background?

Man, I hate to say it, but I've been in the industry and the business here for 30 years. My dad, after I graduated from college, he put me in the weld shop. I welded for about a year, took a entry level manufacturing supervisor position as my first job here. Actually got transported out to Pennsylvania to run a small facility out there and stumbled into RVs and the rest is history. We started building RV parts while I was running the plant out in Pennsylvania and got moved back here. I'd never really grown up here. Realized that this was the RV capital of the world and was a kid in a candy store. I started developing a team and building RV products for all the manufacturers that were already here was just good timing. And we were purchased by a publicly traded company around that time. Dad retired. It's all worked out.

This is interesting. I, like you, didn't get easy breaks. You had to start developing technical skills. And it seems like you went into the operations of the business. It sounds like you're actually building some organic products that you're taking the market or just stuff that you are indeed in house.

Yeah. So a lot of what we do, we're an innovation house for our customers. Our customers kind of look at us as an innovation wing to their own businesses because we'll try just about anything because you never know what's going to be a home run and a success.

So then you got acquired. It wasn't cost synergies to get rid of you that kept you.

Yeah, they really bought into our RV strategy. We were just kind of starting to grow the RV business away from our legacy residential housing business that we had. So thankfully they saw the vision. They saw enough in me and our team to be able to give us some capital to build some facilities and really grow business with some of the OEMs. And that worked out.

When's M and A come in the picture?

Well, it started with us. We were one of their first big acquisitions. It was a private equity business run out of New York with a small board of directors and they bought a couple housing companies. We were one of them. And after we showed them that we could grow out of that legacy business that we were acquired out of, they started giving us capital for acquisitions that started out with a handful of two to $5 million acquisitions that were really nice little bolt ons to eventually started giving us 20, 30, 50, $100 million chunks of capital to go buy companies to really expand our presence in the RV market and other markets.

At some point you went public?

Yeah, we went public in 97, I started in 94. So not long after I started the, my dad sold the company to a public business and they let us really innovate and try some things in the RV business and it worked out.

Oh, so you were acquired. It wasn't by a private equity fund. It was actually by a publicly.

Yeah, they were traded on the American Stock Exchange. At the time I said private equity, but it was run like a small private equity at the time because it was a pretty small business.

Interesting. And then you sort of became part of the bigger business for them.

Yeah, I don't know if that would happen in today's day and age. I was 25, 26 at the time. And today it's just not really. With all the restrictions and regulatory stuff for public companies, you don't find too many 25 year old CEOs. So it was good timing.

Yeah. So M and A became pretty early in the picture. Basically got acquired public and then you started acquiring other businesses and that's been pretty big driver your career.

Yeah, but we've done about 70 some since I've been CEO of the business.

So how does that evolve? I was always curious. I've been putting a lot of content about buyer led M and A, that the first time you do a deal, maybe a very traditional seller led process, but as you do more and more deals, your M and A muscle, let's call it, matures and your process becomes more and more buyer led in a lot of different ways. Have you seen something like that happen?

It's been a really interesting evolution for us. We started out with buying really small Companies. I didn't have any experience in M and A and I didn't have any M and A people. We had this path for growth charted out and where and how we wanted to grow. And there were some obvious supplier peers and competitors in the way. And we just took a natural progression of this company makes the most sense at this time. And this company makes sense. And they weren't coming from investment bankers or anything like that. It was me and our team running to some of the people in the industry here locally and saying, hey, look, probably not looking to sell, but if you're interested, we'd love to sit down and have a conversation. A lot of those conversations blossomed into full blown M and A conversations where we ended up consummating a deal and bolting on all these great, interesting little businesses that added value to our strategy to supply components to the RVs.

Having this proactive in just sourcing the deals. You have a strategy and then you're going out talking to the business owners when it comes to actual execution of those deals. How has that evolved? Because in the same vein, has it become more controlled? What were those key things that you've learned to make deals successful?

I'd say that there's a couple key common denominators there. If I look over the last three decades we've been buying companies, but there's certainly a sweet spot for us. We could go buy companies anywhere we've got the capital to do it. We generate a lot of cash as a business, but we've really said, hey, look, there's a certain fence we want to stay in. There's certain industries we want to play in and certain components in those industries we want to play in. So we've limited kind of our playground and we feel we've got lots of opportunity in these six areas that we do business in today. We don't want to be in commoditized products. We learned that early on. We don't want to be in a spot where there's 20 other competitors. And we're always two good companies that are enough to chase the price to the bottom if you're both really aggressive on getting market share. So we stay away from commoditized products and we look for good leadership teams, leadership teams that want to win, that are passionate about winning. That's one of our core values. We get really excited when we find teams that have this wide open growth space to grow their own market share with whatever products they're building and supplying or ideas they have for services and Things like that. The other thing is typically we like to stay in kind of a sweet spot of let's call it 20 to $100 million. We've done deals smaller than that, we've done deals bigger than that. But that spot really, we found, provides a lot of value from the standpoint that we can go in, we can really drive some meaningful purchasing synergies. We can drive meaningful manufacturing synergies. You get too big, you've got companies that are already developed manufacturing excellence and some of these other areas. So the real opportunity to me is in some of these smaller businesses that we can just quickly bolt onto the business and get synergies fast and then make it a meaningful part of our already existing company.

Do you look for businesses that are specialized, strong leadership team? You mentioned the 20 to 100 million, but it's like a criteria of knowing what's going to be successful for you overall. How do you think about capital allocation? And I'm curious because you have a business that obviously has organic growth happening. You're building, supporting the businesses in their growth and then you're doing acquisitions. How do you think through that as a publicly traded company, there's all sorts.

Of ways we could spend our capital. I'd say at the top of the list is just investing back into the business. We do a lot of innovation in our business, so we put a bucket, a part of the bucket of money there and then launching new products obviously to grow organically. But then there's a lot of projects involved in just making our existing processes and manufacturing more efficient. Whether that's through automation or whether that's just through driving purchases of new equipment that can help us be more efficient, both from equality and safety and just manufacturing efficiency standpoints. Those would be the top couple of buckets. And then M and A is right there as a close second or third was budgeted.

Hey, this year we're planning to put 500 million to go do acquisitions. Like how do you.

We look at our. Obviously our cash flows, but mostly when you look at our CapEx that's aligned specifically toward capital projects for the business around innovation and manufacturing efficiencies and manufacturing driving more manufacturing excellence. And then, then based on what kind of year we're forecasting and the kind of money we expect to make in our earnings, then we look at. Okay, here's where we look. We can spend on M and A. I would say if you averaged over the last 25 years, we've been doing meaningful M and a the last 10 years. I say before COVID we were 100 to 200 million a year in M and A. So it depends a lot on the year. Last year we didn't do a whole lot because we're in kind of a 14 year low in terms of our core business.

Do you have like a target structure? If you acquire a business in terms of how much you're buying out with cash versus equity rollover versus earn out, is there sort of a target or is it all up in the air, deal by deal?

Return on invested capital is the most important thing we look at. And ultimately we want returns in the high teens or twenties. Some of that is going to take resources to get after. So it's just. It depends on where you're at in the cycle, depends on what they're going to ask for the business. We like to stay in that four to six and a half times EBITDA calculation for what we pay for a business. Would we be willing to pay more? Yes, but it's got to have some really special attributes to be able to do something. Really special growth opportunities or maybe some patented products or innovation that hasn't yet hit the market. That's coming, that's already baked in, but it just hasn't launched yet. Things like that.

In terms of paying like cash versus stock.

When they bought Lippert, we were the only stock deal they've ever done. So in all the last 70 or so, we've not done any stock deals. It's been all cash.

Cool. I'm going to ask you some of the business stuff. I know what you're really passionate is culture. You published a book about culture.

I was a co author with 25 other people in a book. What's important to me is just how we can impact the world through better culture and leadership. We have this opportunity with Lippert at 15,000 team members and their family members, maybe 45,000 total people. We have a direct impact on. We can have an indirect impact on the community. We just have all this potential impact and we really try to look through the lens of how do we maximize that impact with the people that we touch for 40 hours a week when we come into contact with a lot of people and those can be negative experiences and touches or those can be really positive experiences and touches with those people. And when you've got 15,000 people per se for 40 hours a week or 50 hours a week, we can have a lot of really positive impact that they ultimately take home and that rubs off on their families. And we really feel how we do that is special and important. And if we do that well, we're impacting the family unit. If we can encourage more businesses to think like that. We just think that the world will be a better place to live in if family units are getting stronger and healthier.

And those of you listening just for reference, this is Jason's first time on the podcast. He's been on the podcast for. We had a good conversation about culture. This conversation, I'm hoping to even click in more detail and get a little bit more practical. Let's just use case study of your company. Let's talk about the culture of it first. Just to understand what are the values. How do you sort of really look at the way your company culture is defined?

I get asked that question all the time. Because you could go to a lot of companies, you could ask 20 different people what their cultures are. Hey, define your culture for me and for us it's really simple. It's just our core values. It's being passionate about winning. It's team play with trust. It's honesty, integrity and candor. It's caring about others. It's positive attitude. Those things define our company culture. So we don't have any confusion about is it this or is it that? It's no, it's our core values. So we talk about our core values. We evaluate people based on those core values. Whether you're an executive or a frontline team member making windows, everybody gets evaluated on the same values.

You measure people in terms of. We measure team members performance but you know, is the sort of values measured as well.

It can't be a value weighted on all performance and it can't be a value weighted on all values. So it's a really healthy delicate balance and blend of evaluating people on their performance and on their adherence to our company values.

I've done a number of these interviews and culture is always the thing that comes up in M and A and it's either the thing you basically blame that went wrong, why integration didn't work. There was a lot of cultural differences and that's the reason teams weren't working together and they weren't playing nice. They do top down management. This team does bottoms up management. There's clear differences why this is not going to come together nicely. You spun that around in a whole different way of anybody I've talked to where it's more of the driver of your value creation with the businesses you acquire.

I would first say that when we go, we buy other companies, for example, we're very direct about Culture. When we walk in, you probably have a great culture. You might not have a great culture, but whatever it is, we define our culture by our values. And we spend time with every single team member making sure they understand why values are important. That's the big piece from that end. But we also believe that if the culture is good and we're also courageous, and if there's people that don't want to do it, then we have to respectfully move them out of the organization so that it doesn't get mucked up and we don't need the drama. And there's already enough excitement and difficulty when you acquire and try to integrate a business, so you don't need all the drama on the culture side of it. So we're very quick to say, look, you're either on board and you're going to walk with us. This is good stuff. You're going to enjoy it. We feel like your life will be impacted in a positive way. But if you're not on board, that's okay, too. We can help find another place of work or whatever, but what we're not going to have is dissension for the first six to 12 months of integrating the business. When it comes to culture, where I do feel culture is a competitive advantage is I liken it to two team members that come to work every day at two different companies or maybe even the same company. One team member is coming and the culture's okay. Maybe it's a little bit worse than average, an average culture, whatever that might look like. And the other one's coming to a culture where it's just thriving. The values are alive. People can count on the values. People love working there. This person's running the business every day with passion and energy, ready to participate and help make the business better. Where the other one maybe is just like, man, it's okay. And I just think about the productivity differences in those two team members and what they're going to add to their respective teams in the business. And. And I think it's vastly different. Yeah, maybe a little bit of it's a person, but I think a big part of it's the culture. And the more effective your culture, the more you're going to drive productivity with each individual team member.

But it is a deal philosophy that we're going to acquire this business. The employees are going to join LCI and they're going to be part of our culture. They're going to adopt our culture as opposed to our companies are going to combine together and create a Unique culture for.

Yeah, not the latter. There might be some good things that we find in these companies that we buy because we don't. We're very upfront with people. We are companies that we acquire. We don't have it all figured out, but what we are willing to do is continue to evolve the culture and make it better. So if a company we acquire brings some really good ideas, we're going to integrate those ideas and build them into our culture versus try to say, hey, let's find a happy medium between the two. No, these are our values. You might have had different values before and they might be good. It doesn't mean if they're not good values, you can keep following those values, but these are the ones we really pay attention to.

Do you have an example of that? A company you brought over and said, hey, this is something we've learned or could adopt from our company.

Some of the recognition things that other companies do, everybody does that a little bit uniquely and differently. Some of the celebrations and things that happen, I would say across the board, from manufacturing to recognition to all sorts of things that they do with respect to just how they do life at work.

There's a culture of open mindedness in your company that allows you to pick up ideas from other places.

Yeah, because I think that's the great thing about culture is once you start on the journey, it's just an ever evolving journey, that there's always the next step, a better step to take. And to us, when that step becomes apparent, we grab onto it and take the step and we all move together. That's how a company gets better. It never stays stale if you're always moving it in a forward, moving direction. We're very open in innovation. We talk about innovation in the company. Innovation in our culture is probably one of the most important things we do because we don't want it to get stale. We don't want people to just expect the same old thing every day. If we can make it better, let's make it better.

Let's click on pre loi. So pre loi, you want to learn about the company's culture, but is there key things you're trying to learn? Are there red flags you're looking for of why you wouldn't do a deal? What does culture look like or understand culture?

Pre loi to me, you never really get in and able to spend enough time on the inside and know what culture is really like. And when you talk to somebody, not going to say we got a bad culture, we got this problem we got that they're trying to sell their company. So you know, you're, you're getting the sales pitch. So we just tend not to worry about it too much. If we really like the company and we like the leadership, there might be opportunities there. We know we can always improve on that.

Because you meet leadership, does that give you a good sense that, hey, leadership seems to have a good culture, that maybe the broader company or have you seen that be completely off?

I've seen it both ways. I've seen it pitched really well and it is what it is and I've seen it pitched really well and it's not anything like it is. But. But at the end of the day in a manufacturing business, 95% of the team members are on the front lines of the business. And that's not what you're seeing. You're having most of your diligence conversations with the top level leadership of the business. And you might get a peak or two on the factory floor, but you're not staying there for a long period of time. But in a manufacturing business, the culture is where the manufacturing is. We kind of just go in on day one and make sure that the front lines of the business, along with the supervisors and leaders know exactly what we're going to be shooting toward and with respect to culture and what the expectations are. And it just takes time to get that in. Because I haven't found many companies that do culture in a manufacturing business all the way through to the front lines of the business. I just haven't seen it very often. So we just go in with the expectation that we're going to transform culture on the front lines of the business. And we know how to do that. We got a playbook and we just execute on day one.

That's a great VR shift. They're a wild bunch. Didn't get a chance to interact with any of them. That's fair. That's not the big emphasis in early diligence. You like the company, you get a general sense of what management's going to be like to work with. But the broader company culture is still a question mark. When you move through, you sign an LOI and you start really getting an opportunity to do more diligence. Anything there that you're really starting to look for or get a sense of or maybe even how well the employees are going to adopt to your culture.

A lot of the businesses we acquire, they don't want you spending a lot of time inside the business for a couple reasons. One, they don't Want you to look hard at what they have, because there's always a little hesitancy. What if they walk away and it's a pretty big company, they can manufacture just about anything. What if they start seeing some secrets on how to manufacture our stuff? So we don't get on the inside to really understand the culture as well as probably what we'd like to. But we do the best job we can, and we're pretty good at sniffing things out and doing enough observation where we can make some general assumptions. But sometimes those assumptions are wrong. And again, we rely on the fact that we know our culture's effective. So whatever environment we walk into, we know that we can transform the culture and people just by putting the values in place and getting coaching and coaching up leaders and all that good stuff.

You turn culture in a competitive advantage. And that's sort of what you're betting on, is that you're going to improve the culture of these employees and they're going to be more motivated and productive.

Absolutely. They're going to be happier, they're going to be more motivated. My hope is that they say, this is the best place I've ever worked. I'm ever leaving the productivity of that team member versus the one that's like, meh, I find another job that pays better, I would move.

Let's get to it. Give me a playbook on how to.

Do that, on how to execute.

Yeah.

First off, you have to have resources dedicated to that adventure. It takes a lot of work and energy and you can't do it with the existing people that are there, whether it's the manufacturing managers, the supervisors. I mean, you need a team of people that can go in and do that. And here we've got a culture and leadership team. So we've got leadership coaches, we've got personal development coaches, we've got chaplains, we've got community impact team members that help our plants in especially our acquired businesses that have never really done serving in force in their histories. We come in and we do a lot of teaching and coaching. That's a big part of the playbook, helping people understand why we're doing what we're doing, why we focus on these core values, why we focus on leadership values. Reducing turnover is important to the business. Nobody likes to train people every other day because people leave. And nobody likes to deal with the quality problems because new people on the line, they mess up, they're going to. If we can reduce turnover through just having great culture, then we can impact quality, safety, efficiency and innovation. All in a positive way. And having a culture team as part of how we'd execute for one, and then having really great manufacturing leaders that own those businesses that we acquire, because we don't let them just sit off on their own and throw them a few resources and say, good luck, we'll just report in every month and see how you're doing. We're in their business, so our best manufacturing leaders and execs are in those businesses that we acquire, making sure that culture integration's happening. We're taking advantage of synergies in the business, whether it's purchasing or manufacturing synergies, whatever those synergies might be. So the resource dedication on the manufacturing side and leadership side, and then the culture and leadership side just on the front lines of the business are the most important ways we execute. But you got to dedicate resources.

Yeah, that makes sense. I have a culture team and this could be a variety of different coaches, depending on your more detailed approach. And then the way your leaderships are involved in these companies.

And every leader is getting coaching in the business. So if you're a first level supervisor, that's where we're putting most of the emphasis on. Because most first level supervisors up from the front lines of manufacturing, they have the least amount of leadership training in their respective careers. They just don't get it. Executive level people, they get all these training resources all the time around leadership, but frontline team members that are busy running manufacturing cells on the front lines of the business, they, at least to my experience, haven't received a whole lot. So that's where we spend probably 80% of our time up front with respect to leadership training and culture training is with those frontline leaders. Because those men and women are leading, in essence, the entire factory. And if those leaders don't understand what culture and leadership needs to look like, then how are their work cells and the people in those work cells supposed to understand?

You sent me an excerpt from your book. Actually read it.

Oh, did you?

Yeah. Awesome. There's a part in there about how you want every employee to have both a personal and professional growth plan. Yeah, tell me more about that.

That's like the biggest part of my life right now is making sure that that's actually happening in the business. Because again, I watched men and women. I was at a listening session yesterday, got to listen and take part of that listening session. Just tell me about what's on your lap, what's on your leadership action plans, what are your personal goals? I care about the business related goals, but I know if these men and women in our business are growing personally and their personal lives are flourishing and getting better because they're setting goals and accomplishing goals and the team members around them, they're celebrating with them. I know that they're going to show up better to work every day. If they show up better to work every day, there's probably a good chance that they're going to be more productive, that they're going to add value to the teams that they're on, that the business is going to do better. So I just believe that's a great place to spend your time. And if you had to have run a business with 15,000 people, I'd rather every single one of them be flourishing and growing and developing as human beings because they're chasing after their goals.

Personally, I'm bringing it up because it sounds like a pretty practical thing. And I was curious, does this get implemented? You got the culture team, but like you've got newly acquired employees coming in. Is this part of it?

It is. My take with our culture and leadership team is don't push people. This isn't a box check, this isn't a race. Just introduce the idea, get them taking steps and eventually they'll realize how good this is for their own personal life, the lives of the people around them at work. Because if they're being impacted positively, they're probably impacting the people around them positively. And then they're impacting the people, whoever they go home to might be friends, might be family, spouses and kids. If they're improving their personal lives, they're going to be impacting everybody that they spend time around outside of work positively.

That's true. We do that in our company. And I feel like it gives you a better connection with your team members. You sort of know what their goals are and what they're working towards and you feel something greater. When we're developing great relationships, if you.

Want to develop a great relationship, you can't do it all surface. You got to go deep a little.

It's not my goal, it's our goal. And you know what that means to each person that's different. What does that entail? And I'm curious, just when you talk about putting this as a professional in the personal growth plan, are there some just key elements that go into it?

We keep it very simple. It's on like a five by seven card a little bit bigger than that. So there's enough room for you to write a few personal goals and a few career related goals and we don't push anybody to do a certain amount. We just say, look, even if you have one personal goal, let's write the actions down. That's one of the things our leadership coaches help our leaders do, is help them drive some of the actions. It's not good enough just to put a goal down. We also inspire them to get an accountability partner, too. So if you write the goals down, have an action plan behind it, and have an accountability partner, there's a higher likelihood if you have all three of those things that you're going to start improving your life. And that's all we're trying to drive. I think we've got close to 65% of our 15,000 team members that have leadership action plans today. We started this process three years ago, but the stories I get back from people, and the best ones are, hey, I'm a better mom, I'm a better dad at home because I'm doing these things. Being a better dad and spending time with my kids or having our kids all sit around the dinner table at night without their phones and eat dinner together. That's one of my goals. So when I hear that kind of stuff, it just melts you. It makes you feel like, man, there's a much greater purpose for us as leaders at work, making sure the people that we're responsible for and that we have the privilege to lead go home in a positive way. We can help do that by driving that into them at work. Not just about being good at productivity or whatever it is that your job is, but it's also, how do we help them be better human beings so they can impact the people at home better? Our world needs that.

How else do you apply that tactically? I like the idea of having this plan. That's something you introduce and show a level of commitment to the new team members that you bring in. You got this team. What else are they doing to foster? I'm looking at the opposite of this is what's going on in my head. I'm thinking of, if you don't do this right and you create a poor employee experience, people quit. They get frustrated and they quit. There's a lot of things that you can easily do to screw that up. You just don't talk to them, don't communicate what's going on. They hear through the whispers of a deal happening, the concerned job and whatnot, but it's very different to just communicate that. But then even take a step further of how do we really introduce you to the culture and what you're committing to.

There's all sorts of responses to whether it's a leadership action plan that we're trying to roll out to our team members and explain to them why it's important we get eye rolls. We get, you know, I've never done this in a business before. Why are we doing this here? Why are we talking about this? Can I just put my head down and do my job and go home and earn my paycheck? The answer is no, not here. We want people to grow and develop and the hard things in life. Generally, what I found through my 30 years of being out of school is that in life experiences is that you need a little bit of push sometimes through the hard stuff. So that's what we're here to do for our team members. There's a lot of people that say, I don't want to do that right now. That's not for me. And we just say, look, just try it. We're kind and we're thoughtful and respectful about the process. We're not like, hey, do this or you're fired. We don't say that to anybody. We know that once they start tasting growth and development, all of us, we're okay. What's next? And we just know we just need to push them to get them to that point. On the flip side, we've had people absolutely leave, say, I'm not doing this. This isn't for me. I don't need to do this. That's okay, too. It just means they're not ready to jump into personal growth and development. You and I both know people that are the same person today. They were 20 years ago.

Exactly.

To me, that doesn't sound like a lot of fun. Doesn't sound like a good way to live your life. We've experienced better. I watch the transformation of people from just taking baby steps to complete transformation, where people. I've had several people say that they were so depressed they were thinking about suicide. Matter of fact, I had a woman the other day in a listening session, say, one of my best friends committed suicide because her boss was so miserable to her over the five years that she worked there. And she couldn't take anymore. She was so fragile, and she took her own life. And so that's the impact that bad leadership can have. So why not tilt the needle toward all the good stuff? Let's help people grow and develop. I think there's a lot less chance people will be. Whether it's depressed or have anxiety or all sorts. I think it helps people mentally to be Able to work on their own personal professional growth and have the space and time and freedom to do that at work and leaders at work that care about that kind of stuff versus put your head down and just get your stuff done. I don't want to hear about your personal baggage or anything. Just put your head down and get your work done and go home.

How do you communicate this to incoming employees? You call a big town hall and give them a big speech and what do you do?

We made this big culture pivot in 2013, as we probably talked last time. So we've had 10 years of taking steps and it's permeated so much through our company. Our turnover is very low today because we have people that are choosing to stay. They want this, they worked at other places, they don't want to go back to that. Even in some cases where they maybe not make as much money as they would be able to going someplace else. But they're happy, they're feeling cared about, they're able to work on their own personal professional lives. They just feel fulfilled.

I want to get like a reenactment of here's new team members joining and just giving them that ease that, hey, this isn't going to be a bad thing. We're coming to rip out your company and pieces and this and that. But there's something that we can. An opportunity to grow better together.

Yeah. So specifically on an M and A opportunity, the people that are going in there have already gone through the leadership action plans. They've been around our company and our culture. They can explain it well. And when you get enough people around you that are saying, oh, yeah, that's true, yeah, this is what we do, it works really well, we're going to spoon feed you, we're not going to shove it all down your throat. There's power in. Once those relationships are developed with our people and the company, we acquire, the relationships start to develop. You watch people's integrity. Are they doing what they say they're going to do? And then once the relationships are developed, if I tell you that, hey, I've done this lap, it's really good, it's something we do in the business and here's how it goes. Here's my lip, I'm going to share it with you. And then they do one and then the next thing you know, they're taking it to their team members and they're talking about it doesn't all happen fast. The point is you just got to start that process and not be the opposite. Where Companies just say, we're not going to do that. And then it never gets any legs because it never starts.

Do you have metrics of success around how well companies are doing post acquisition?

Yeah, that could be a separate podcast because we have a whole packet of leadership metrics that we look at everything from how many people are filling out leadership action plans. So what are some of the wins people have had in their accomplishing goals? I mean, we've had like, people will put marriage goals, they'll put better relationships with our kids. We measure all those things that people put down because they'll tell us, I go into some of our plans today, and they put all their laps, copies of all their laps in the break room.

So the leadership action plan contains the personal goals?

Yes, yes. A leadership action plan is both personal and professional.

Okay.

And again, I really think there's more power in the personal goals than anything else, because if they're look at, we both care about our job, but we care about our personal lives. And I think that's true for every anybody that's in the workforce. So have them focus on the business goals first or the career goals first. It's not what's most important to them. What's most important to them is themselves, their family, everything around them. Once they leave work, I prefer that they start setting goals there because if A, they know the company supports that, that's a good thing, and B, if they start setting goals and accomplishing goals, it's having meaningful impact and they're coming to work saying, I've never worked at a place that's really cared about me enough to allow me time and space to set personal goals and encourage me to go after them. And by the way, when I go after them and I accomplish goals, I feel good. I'm coming to the business in a good head space, and I'm able to be more productive for my team and for the business.

Other metrics, you have metrics of just folks adopting this element of your culture. Anything else?

Yeah.

People typically churn.

Yeah. So another big metric we follow as a company is just our community service hours. Anybody that served in one or more community service events in our business, we track that because we think there's a direct correlation between serving and being a great team member. I think 78% of our people, at last glance, had participated in at least one serving event that the company's put on. We did 125,000 hours last year of community service. We've been doing this for seven years now, and we've averaged over 100,000 community service hours every year. So we basically ask all of our 100 plus facilities to do a few serving events every year. We have a team, resources, set up to make all these community connections with the charitable partners. They set up the events and then call our leader at one of our facilities and say, hey, look, we've got these three or four options in the next month and a half. Which one do you want to take? Okay, we want to go to the boys and girls club or we want to go to help with hospice or elderly care or go clean up a park. They have choices and then all they have to do is pick one and then invite their team members to come. A lot of people start serving for the first time. Community service and community impact is something we measure pretty significantly.

So interesting. These success metrics are correlated around cultural behaviors that you're trying to do.

I think it's directly related to retention.

What other metrics we got lots. I'm just used to the hr. They just how many people churned this month? That's all we want to know.

And again, what I tell you is if you don't have a culture and leadership department and resources dedicated, this stuff's never going to get done in a way that's meaningful and impactful because HR is too busy. All the stuff that we're talking about, I guess you could hire an army of people in hr, but then they get focused on compliance and some of the black and white nature of and regulatory nature of HR and not, hey, look, what is our culture? This team's just focused on what drives good culture and what drives our leadership improvement and training.

This is all in house. I know there's a lot of leadership consultants you can get out there, but this is a team you have in house. What are their backgrounds? What are you looking for?

I got everything from sports coaches to teachers to pastors and the people that have been in the leadership coaching profession. We've got about 27 people in that department. And I would encourage any company out there that's listening. I don't care if you're 50 people or 100 or a thousand, hire one. We started this whole venture. We had probably 6,000 team members when we hired our first leadership coach and we just hired one. And then we saw the benefit and the transformation and how people were learning about leadership. We're like, we need to do this more. And I didn't want to do consulting. A, it's costly and B, we needed somebody full time. So just go out and find the right people to do this kind of work.

Do you ever use your culture approach with courting the CEOs, convincing them to sell their company?

Oh, yeah, for sure.

How do you do that? Teach me.

I explain a lot of the things you and I have talked about and what they realize is we've been doing it pretty good. But man, partnering up with somebody that's been there, done that and has different ideas, now we have this great opportunity to collaborate. It's almost like having an in house consultant and they get paid because they're selling their business. They get to stay on and make a wage. That's good.

Is that part of it that, hey, there's a career for me after selling that I can grow at this company, I still get incentivized pretty well public so I can sell my shares when I need to.

Yeah, Less risk, right? Running the business and yeah, it's all of that. And I would say 90 plus percent of our businesses that we acquire, the leaders that are running the business and we buy it stay on for some period of time, not six months, but a longer period of time. And who better to stay in the business and help run it than the ones that started it or really were successful running it.

They feel a level of confidence. What they learn. You probably have a reputation in the market.

I think so. I don't want to be so bold to say that we've got a great reputation, but what I can say is that one of our parts of our culture department is an external arm that does nothing but field calls and questions from businesses that are trying to figure culture and leadership models out that are more healthy and effective than what they're doing today. And a lot of that's because they've seen us on social media. They know somebody that knows us. They heard a story, they listened to a podcast. We have that arm of our business here. We had 13 businesses in two weeks ago and they do a day and a half in the business. They go to plants, they talk to our leaders, they see what the front line looks like. In manufacturing, you let people steal all.

Your ideas for free.

I do.

Really nice of you.

I think it's a way to impact the world in a positive way. And somebody was nice enough to share it with me. That's how we really. One of the ways that we really pivoted was seeing a better model and somebody that was willing to. Bob Chapman was willing to sit down and share his ideas and share his successes. And hey, this is what I learned. And that's the best Way to be able to learn and then ultimately execute.

Yeah, that's true. I think it's important that you got that kind of role model and Biden, so it's great. And for you to give it back as well.

And I've watched companies transform. My best days are when I hear that a company we've helped coach hires their own culture and leadership. Head VP or chief culture officer or something. That's the start is having one person that can actually, because, you know, the CEO or the owner of the company is going to be connected and starting to drive initiatives outside of HR to some respects. So that culture actually has its own. And I think it sends a. A great message to the team members. Hey, look, we care enough about culture and leadership development that we're making its own department and putting resources there. I think that says a lot to the team members versus who runs culture in your business? Hr. That doesn't make me too confident as a team member that HR is going to be handling culture.

Yeah, you split it up, make it its own group and then you're doing these acquisitions are going to have a lot more attention and focus on making those changes.

Right.

The culture. You have metrics around how they're adapting to culture with the leadership plan, community hours. Do you correlate that then to financial performance?

One of my favorite things to do is look at turnover. Look at the plant's culture index and engagement scores and then their financial performance and the higher the financial performance, generally, they've seen a lift in a culture index, Engagement scores and low turnover.

Pretty correlated.

It's pretty correlated. And if there's a plant where we've got really high turnover, I can't even think of an instance where we've got great financial performance where there's high turnover. It just doesn't happen. You cannot be efficient running a manufacturing business when people are leaving all the time. And so then it really stops us to say, look, that's one of the plans we have to work on to make sure that we're really assessing leadership. And usually there's opportunities there where we've got performance improvement plans in place, we're trying to work with people and coach people. But then at some point in time you got to say, look, we got to make a change.

And if you go through this, you're probably going to find people that are just not engaged.

Yeah, they have a different understanding of what engagement is or what our values are. They're just not engaged to the level that we'd like to see them as a Leader.

It's hard to get people to change.

Yeah, it's really hard. And there's people that that will tell you they're open to change and that won't. And there's people that will tell you they're not open to change and they won't.

Then what do you do? You move out of the business.

If they're not willing to change at all, then you have to move them out. Unless you're willing to suffer with mediocre results or poor results. We know too much these days about how we can impact people and change things performance wise to the better just by changing to better leadership. But as you know of great leaders that understand culture and understand what we're driving towards, it's just not overflowing out there with those types of leaders.

Anything else you want to share around this approach of this proactive culture development with incoming employees that I could apply when I buy a company, really define.

Who'S doing the hiring in the business, who's doing the team member evaluations. When you hire people into a business, a lot of times HR might be the only gate. I think that's not good. I think that HR is important to be a gatekeeper there and evaluate that potential team member. But I like to get other people, other leaders around the business to evaluate who's coming in. Because it's family here. We don't want to mess it up. If we let somebody in, that's going to be toxic. In the worst case, that's going to drive some of our best people away if we don't deal with it quick. And I just don't want to take that chance. I would rather look at the person a hundred different ways and have multiple people evaluate that person. Because maybe there's something one person sees it, another person doesn't. Have multiple conversations and interviews versus just hire people in quickly.

That's a good point.

That's just one of the things we do when we're looking at acquiring businesses, taking on new team members that aren't familiar with us, that we've acquired. We really look at that closely when we evaluate every leader very closely. Because you really can't evaluate the leadership until you watch how they lead. You can't sit in a room with this and talk to a leader and know all you need to know about the leader. You need to see how the leader acts in action. You need to see some kind of engagement survey from the plan on what do they think about the leadership. They'll rate them. Our engagement surveys are extremely important in how we determine the health of each individual facility in our business. And that includes new businesses that are newly acquired.

What's your intuition in identifying a good leader? Especially like early diligence? That's the thing. You want to know quickly if you're wasting your time or not. Because you could have a whole two companies. I could tell no way this is going to work out.

Yeah, I mean, certainly we've had those instances. But again, unless it's the.

What is it? Is it gut feel or is it just something you can ask that I.

Think you got to witness? I think I've got a pretty good gut. But I've learned over the years not to just every time my gut tells me to do something, to do it. Because when it comes to people, you're not always going to see things in one conversation or a couple conversations. And that's why I say you got to watch how they act and their actions generally give way to how they deal with people, how they deal with issues, how quick do they lose their cool. As a leader, you got to serve your team members. And if you're not a servant leader, that shows up. That's pretty evident in a short period of time if you're watching people. It's tricky though. That's why business is hard. That's why a lot of businesses aren't successful. They miss that part.

It was like the art of the deal that you can't deny. That part is really takes some experience to do.

Yeah.

And it's tough to write a playbook to standardize it.

You got to buy the right companies. You got to buy them at the right time for the right price. And then once you get them, you got to make sure that it doesn't start going a different direction.

How's the market been for you? You've seen the whole Covid cycle happen. And then post Covid, we had a huge run up on, I feel like every industry around 21, 22 and now things have tapered down, really slowed in a lot of industries. What's that cycle been like for you? Because you were incidentally in like the industry that benefited the most from the COVID period.

We're a cyclical business, the RV side of our business. So that's one of our six business categories. But RV ran up really high. We had a record, record production year for the industry and for our business in 22, and then in 23, our revenue slid about a billion and a half dollars. So when a cyclical business cycles way up to a new peak, it's going to cycle way down to a new low and it'll probably stay there longer. We've been there since the very beginning of 2023, the latter part of 22, and I think we've done a really good job managing through it. In a cyclical business, sometimes the job is just make it through with good cash flows and healthy balance sheet and knowing that you made it through a cycle and then there's an upswing coming.

How do you keep your prepared for that? I feel like you just got to have strong cash flow. Is there anything, is there certain cash reserves you want to maintain? That's tough. You want to take some good bets and make returns. But at the same time, how do you have defense in case there is a big downturn?

Yeah, strong faith is a big component of it too for me. But I would say with respect to cash flows, look, I've been run this business with my team for 30 years now and we know how to manage through a cycle. Flexibility is really important. Being flexible and making decisions quickly around cost centers and consolidating business units to be able to have effective cash flows. When you're going through an unknown period where we didn't know it was going to slide a billion and a half when it started to slide, but you're making those cuts all the way down until you see the market kind of bottom out. And that's kind of where we've been the last six to eight months. We kind of been bouncing along the bottom and our industry hasn't really gotten any worse, but we haven't seen the recovery yet. We've been healthy. We managed through it way better than we did 2008. And this one felt worse to me than 08 because we were only 08. We might have been $700 million or $800 million, something like that. So we had very little, I say little compared to what we have today to manage. When things slid in Latter Part of 22, we were $5 billion, had a lot of people, a lot of plants and that's a lot of things that start shaking apart versus when you're only a few hundred million. So it felt way worse, but we fared way better because I think we're just more prepared. We've got tenure, leadership, and we just know what to do when it comes to being flexible in tough times.

What's your day to day like as a CEO of a publicly traded company in terms of time you're spending on M and A versus just internal operational stuff with a lot of Community and just good face of your internal team and external. What does it look like on average?

If I can just cut out some of the nuggets that I know I spend consistently, it's a few hours a week in terms of listening sessions with our facilities. So whether it's a virtual listening session with one of our team member leadership groups and these are leaders at the frontline level. So I have, in those listening sessions, I have the frontline leaders of the business, men and women that are directing traffic on the front lines of the business for manufacturing parts. They present the business to me, our five pillars. So that's really cool for me to get to hear from them. A lot of them, it's their first time presenting in front of a group and in front of me. And I get to hear how they think about the business. And you know, the plant leadership, they kind of sit there and they just kind of be mediators. They're not doing the presenting, which is really cool. I spend time with some vision casting during that period for 20 or 30 minutes and then I just take questions for 30 minutes. So that's kind of how that those listening sessions go. So I do that for a few hours every week. I probably spend an hour or two depending on thinking about M and A every week and going through lists. And again, we don't go to investment bankers and ask for lists of companies that are for sale. We're thinking about, okay, strategically, if we were going to buy anybody in any of our industries, which ones would be most appealing and have we had a conversation with them? Is it time to have a conversation with them? So spend some time thinking about M and A this season. Lately we're really reformulating our next few year plan. Strategic planning is always part of what I'm thinking about. I spend time with my leadership team, I spend time with our customers on a pretty regular basis. It's really important for me to know, are we helping get them where they want to go? Are we innovating and providing the value they expect as valued partner in the industry of the business? Keeping up those customer relationships, hearing what they're thinking about and where they're going is really important to me as well. But those are some of the bigger chunks of my time, I'd say.

What about the overhead of just being a publicly traded company, all the investor relations, earning calls, stuff like that? Doesn't that a little more taxing than being a private company?

Yeah, it does. There's a lot of work there. I mean, you look at all the regulatory stuff that we have to do that other companies typically don't. We're thinking about things. But again, I've got resources for that. We've got a sustainability leader which most businesses don't have. Our finance department does a great job handling a lot of the public company stuff and our CFO leads that when it comes to.

It's not that bad for me.

It's a lot of work. It is an enormous amount of work. I think today to be a public company versus I remember when we were public before Sourbanes actually came out and the level of workload there, both for the company, the board of directors and the investor work and all the other things that come along with it. It's a different ball game today.

I like it. Listening sessions. It's good because you're hearing from your frontline team members, the ones that really make a difference.

And I get to usually see the business. I'll take a tour, I'll go out and see product being made and spend time with the plant more than just the listening session. But yeah, that's a big part of it.

M and a strategy and then strategic planning. Sounds like it's a mix of your internal leaders and your customers.

Yeah. Are we staying to plan? Are we doing what we said we were going to do the last period? Whether it's new business, innovation, all that kind of stuff.

I appreciate it. I wanted to curious what the day to day life is like.

That's the fun part of my job is, ain't it? Then there's the emergencies. There's this stuff that pops up that I got to drop everything that I'm doing. A lot of people haven't their jobs and it's okay. We got to focus on this for the next few hours or a few days.

Is this something we want to talk about? Is AI and automation as key areas for future investment?

Yeah, I think every company is especially manufacturing for automation. I think every company's got to really consider those two things with respect to automation. For us, we're in manufacturing and there's multiple reasons to consider automation. And most people just think, oh, you can build it quicker and you don't need people to come in every day. Yeah, that's part of it. It does solve some labor issues. It's the consistency of production. When you're manufacturing parts or pieces of parts that you have with automation that's really helpful. So quality generally is one of the biggest improvement opportunities. When you automate a work cell or a process for us and then the safety piece of it Too. We put a lot of automation in just to help make jobs more safe where they're not lifting ungodly loads of steel parts and things like that, or in a certain position where they're welding or doing some kind of assembly. And over time, you do that assembly or job for 40 hours a week, you can start causing issues and things like that with your health. I think automating for safety, automating for quality, and automating for efficiency. Those are the projects that we really look at to drive. Are we going to spend a couple million dollars and automate this or is there a bigger priority for the capital?

Are these all driven by vendors that come to you inbound or are you proactively going outbound looking for solutions, mostly internally, where we'll.

We've got enough automation in our business today, where our general managers or our plant leaders will say, okay, we need to look at how we can automate that process. Then we'll bring in our automation people. We have somebody in house that focuses on automation. Yeah. So we'll bring that person in. Maybe bring some outside consultants in that would look at and say, okay, here's what we think. Let's put a plan together. And then if it makes sense and we look at the returns on those investments, we either do or we don't do them. And then on the AI side, that's all newly developing, but we're really looking at it around our call center where we take 100,000 phone calls a month, we get 60,000 emails a month, where it's repair and replacement and service type things. A lot of consumers calling and asking questions about how does this part work? I can't get that to work. So we have this volume of data that just comes into our call center every day again to the tune of a hundred thousand calls a month, tens of thousands of emails a month, about 10,000 chats a month. And all that gets dumped along with all of our technical publications and technical videos and documents. And we're starting to develop some AI around assisting our agents that are handling all the calls with these complex. Think about the training it can solve, getting to the resolution quicker, solving cases quicker, which all leads to a better customer experience. We're definitely a lot of companies, I think, working on that angle.

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

Oh, hey, I love that you're passionate about becoming an M and A scientist. I love the term.

I'm going to do this. I don't want to use the word weaponized culture, strategic advantage using culture of the strategic advantage. It's something that's definitely resonated with me in this conversation.

Awesome. I hope more people feel the same because I do feel that if you really believe you can change somebody's life in that 40 hours a week, every week, you've got people. And I don't think many people would argue that you couldn't do that if you were intentional. If you feel you can do that, then I think you get more productive team members and people that are more passionate about your business and care about the things you care about as a business leader versus a person that doesn't.

Care about your people.

Yeah, sounds simple, but it's more difficult.

To execute consistently, get reactive and so many other things that it's being very proactive about it is a big takeaway. Got to have team members that are focused on doing that. The M Scientist, you made it this far. I appreciate you listening. Always welcome feedback criticism so I can get better at doing this. Feel free to reach out to me on LinkedIn. 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 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.