Tim Sullivan has bought and sold companies of all sizes.
As chairman and chief executive officer of South Milwaukee-based Bucyrus International Inc., he brokered the 2011 sale of the company to mining giant Caterpillar Inc. for $8.6 billion.
In December, Sullivan sold his 11-employee Brookfield software startup, GenAlpha Technologies LLC, to private equity firm Shore Points Capital in a much smaller deal.
And in his current role as president and chief executive officer of Milwaukee-based specialty vehicle manufacturer REV Group Inc., Sullivan has executed a number of bolt-on acquisitions, including Lance Camper Manufacturing Corp. in January.
Sullivan will share the lessons he’s learned in his varied experience as the keynote speaker at the 2018 BizTimes M&A Forum on March 21.
The goal of the transaction drives the whole process, he said. And the integration of the two companies is important to consider up front, as well.
“It’s easy to go and buy something, but then to assimilate it and integrate it, if you’re unsuccessful in that aspect of the process, everything else means nothing; you’ve failed and you’re not going to get the returns,” Sullivan said.
He will also walk through the process of completing an acquisition or divestiture, and key points to consider.
“A lot of people tend to overthink it,” Sullivan said. “Usually, what you know already is going to be sufficient to help you understand what needs to be done through the acquisition process and then after the acquisition for integration and assimilation.”
The M&A Forum will also include a pair of panel discussions.
The first panel discussion, “Motivators for a business sale: Lessons learned,” will include panelists Lawrence Burnett, a shareholder with Reinhart Boerner Van Deuren s.c., John Lauber, founder and former owner of LauberCFOs, Linda Mertz, CEO of Mertz Associates Inc. and Mike Graf, former owner of Letterhead Press Inc. The discussion will be moderated by Ann Hanna, managing director and owner of Taureau Group.
Mertz sold a portion of her investment banking firm in 2011 to focus on her M&A strategic advisory work.
“I think that one (motivator) that I personally would like to see people think of more frequently is thinking of life strategically,” Mertz said. “…If we look at life from the big picture perspective, what do we want to accomplish?”
The most difficult part of selling, she said, was settling into her new role.
“You know the changes are going to be significant, but you’re never sure how the change is going to settle in, and it’s stressful,” Mertz said. “You can have a plan, but I think that you need to have some flexibility in that.”
Lauber, too, said he has been challenged by establishing himself in a new role after 30 years of running a business. He sold LauberCFOs for a variety of reasons.
“I think some of that goes back to … my dad died of a heart attack when he was 42 years old. That kind of gave me an awareness of my own mortality. I’ve got a degenerative muscle disease, and again, while that did not drive the decision, it provides a context. I didn’t want to hang on and not be able to continue to do the things that had made the business successful,” Lauber said.
In addition, the market conditions were right to sell. Once he had decided to sell, he just had to find the right buyer.
“I just was looking for that right fit,” he said. “Someone that would have the same type of care and focus on employees and customers that I had.”
He found that in Mark Wiesman and Julie Tolan, who bought the business in February 2017.
Graf decided to sell Letterhead Press because he had been doing the same thing for 35 years and was ready for a change.
“Not that I’m not extremely happy, I’m still running the same company, but I think in a few years, I’ll probably be doing something different,” he said.
He advised business owners to consider all of their options, including ESOPs, and get ready for a lot of paperwork and due diligence.
“Be prepared. That last three to six weeks can be a wild ride,” Graf said.
The second panel discussion, “Recapitalize or sell? Know the benefits and pitfalls before deciding” will include panelists Jonathan Eder, co-owner of In-Place Machining Co.; Steve McGlothlin, executive vice president and chief credit officer of Old National Bank; Ron Beam, a former owner of Complete Office of Wisconsin Inc.; and Paul Sweeney, partner at PS Capital Partners. The discussion will be moderated by Molly Dill, managing editor of BizTimes Milwaukee.
A top factor to consider when considering whether to sell is how much the business is worth, taking into account the industry’s current market conditions and expected conditions in five years, McGlothlin said. Often, the owner knows that best from experience in the field.
“That first step is, ‘What range am I going to be in?’” he said. “A lot of businesses don’t know what they’re truly worth on the open market.”
Then, consider all of the exit strategies, which range from recapitalization to an employee stock ownership plan to selling the whole company.
“Obviously, the first thing you decide or evaluate is the offer itself,” said Ron Beam, who recently sold his share of Germantown-based Complete Office of Wisconsin to Office Depot Inc. “And the second thing is who it comes from. Most owners, I would think, care about the people that helped build their company and make sure the buyer’s not going to tear it up.”
For Complete Office, recapitalization wasn’t a consideration because the company was well capitalized and was not on the market when a couple of offers came in.
Complete Office, which had six shareholders with various ownership stakes at affiliated companies in the state of Washington and California, also made a number of acquisitions over the years, and Beam got a feel for what makes a good acquisition target.
“You’re looking for a good name, good employees. You get a feel for that when you’re out competing every day. You kind of know who’s strong and who’s difficult to compete against,” he said.
The thing Beam most wants other business owners to know is they need to have a plan for the company after they retire.
“The number one thing that I see is a lack of clearly defined succession management,” McGlothlin said.
Eder sold In-Place to private equity firm Platte River Equity and then he reinvested some of the proceeds into the business.
When considering whether to sell, he evaluated a number of factors: First, none of his children were interested in getting involved in the family business, so there was no family succession plan in the works.
“A second factor was, I’m looking down the road three to five years,” Eder said. “I know for me, the decision to transition to a new career is not going to be today I own the business, tomorrow I’m retired.”
He also wanted to decrease his administrative responsibilities significantly, and didn’t want to remain majority owner while someone else ran the company.
“Before you sell your company, make sure you’re clear in your mind the reason,” Eder said.
Sweeney agreed the business owner needs to set the parameters from the start. Whether he or she wants to stay actively involved in the business could guide the decision of whether to recapitalize or sell.
Economic cycles also play a role in deciding which route to take. It’s good to look at the current market and anticipate what it might be like in five years.
If the business owner is nearing retirement age, it may not make sense to wait through another economic downturn before selling, Sweeney said.
On the other hand, if the business is doing well and the owner’s timeframe is flexible, it might make sense to pursue a recapitalization.
“It would be that they have a lot of confidence in the business, but want to take some money off the table to diversify their investment portfolio,” Sweeney said.
The M&A Forum will be held March 21 at the Pfister Hotel in Milwaukee. It will also include three concurrent breakout sessions. More information is available at biztimes.com/maforum.