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Making An Acquisition

The story of one distributor’s decision to form a new company

Effective January 1, 2010, the ownership group at Riekes Equipment Company (Omaha, NE) partnered with Jeff Bublitz to purchase the assets of Bublitz Machinery and form Bublitz Material Handling in Kansas City, Missouri. It was not something we had planned to do, but when Jeff Bublitz approached me last October to determine if I had any interest in bringing the two companies together, it did make sense.

A combination of events had created financial issues for Bublitz, and Jeff was looking for a partner that would continue his operations and retain as much staff as possible. We had a long history of working together as Yale dealers with bordering territories. Bublitz matched our model in that it has an active service department, good rental stream compared to the assets acquired and a great group of personnel. Also, Riekes was financially strong with a great young team of leaders. It all added up to an opportunity that seemed to fit the bill for everyone.

After weeks of discussion and analysis between Jeff and me, we decided to jump in even with the obstacles we faced. The question then became what form the acquisition would take. For a number of reasons, we chose to buy only the assets, such as the rental fleet, inventory and contracts with vendors and customers. We did not want to buy the building, land or anything that was not directly related to operations. The old company, Bublitz Machinery, still exists, but it is essentially a real estate holding company from which the new company, Bublitz Material Handling, leases the assets.

The new management team of Bublitz Material Handling: (l-r) CEO Operations Jeff Bublitz, President Duncan Murphy and COO Pete Womack

The new management team of Bublitz Material Handling: (l-r) CEO Operations Jeff Bublitz, President Duncan Murphy and COO Pete Womack

We decided to make January 1, 2010, the effective date for valuation purposes. One of the wrinkles of an acquisition is picking the time at which to value the assets. If you say it’s going to be effective January 1, then you have to go through and verify all the assets and make sure everything is accounted for correctly. However, you almost never actually pull the trigger on that exact date because of all the due diligence that’s required.

So we knew everything wouldn’t be ready on January 1 and that it would take bit longer than we expected. There were a few tax issues that held things up. Namely, we bought the assets at market value. Some of those assets, particularly the rental fleet, had been depreciated fully. Our market-value purchase created a gain for Jeff on which he would have to pay taxes. However, the cash situation—if he’d had a lot, he could have kept the company going without help—made it necessary for us to structure the agreement so that taxable gains were offset by taxable losses, and cash exchange was kept to a minimum.

The bank Bublitz was using failed in the middle of the purchase, which delayed things even further. We got through that, completed year-end inventories and all the accounting issues, and were able to close on March 1, 2010. From start to finish, the process took five months.

Luckily, things went much smoother with the supplier contract process. Each company’s primary line was Yale, who strongly supported the move. They were extremely helpful throughout the process.

Creating a New Culture
I had a meeting with my Riekes upper management and told them about the opportunity, and told them we were only going to do it if we could get the culture right. Merging the cultures is probably the most important thing about making an acquisition. You need to find a company whose existing culture has some fundamental similarities so broad imposition is not required. Operational processes can reinforce culture. Make the obvious changes in operations, expenses and staffing immediately, but do not change just to change. Allow everyone to become acquainted, develop relationships and trust in the future. Utilize people from all your company departments to work with their counterparts and encourage everyone to ask questions concerning anything. Finally, allow things to settle for a bit after initial change. After six months, people who are having obvious issues adapting, even after attempted intervention, should be removed from the bus, as Jim Collins purports in his book Good to Great.

In our case, we decided the best way to get the culture right was to have a key member of the Riekes team join Bublitz to reinforce our Riekes culture. Within a week, Pete Womack, branch manager of our Sioux Falls, South Dakota, location, came to me and said he was ready for a new challenge. He was managing 14 people and wanted the chance to take on more responsibility. Pete was a great Riekes employee, and now he’s fully immersed in the new business. He joined Bublitz as a partner and became its COO and sales manager on March 1.

Pete had been with Riekes for 17 years, so he knows the ins and outs of the Riekes culture. He has been able to answer questions and help smooth the transition on that end. We also shared old issues of our internal newsletter that had a focus on communicating our culture. Jeff Bublitz completely embraced the changes, reinforcing Pete and our combined vision of the future.

A Manufacturer’s Perspective
By Steve SpaarIn January 2010, EnerSys purchased certain assets of the Douglas Battery Manufacturing Company. We will continue to manufacture and market the Douglas Battery brand and product designs.From a cultural perspective, we wanted the transition to be as seamless as possible for the Douglas customers and employees. We have been intentional in making very focused and limited changes to the Douglas process. About six months after the acquisition, we brought all the reps together for a national sales meeting. We gave them a tour of the manufacturing facility in Richmond, Kentucky, and displayed the exclusive production lines for Douglas brand batteries. We held a town hall meeting where the sales organization could openly ask any questions and give us their feedback—good and bad. We wanted to keep the doors of communication open during this whole process.That meeting was a critical moment in the culture transition. For the Douglas organization, the ability to get to “touch and feel things” at the plant, as well as meet face to face with the corporate group who was responsible for handling the Douglas brand, reinforced their confidence in the competency of the EnerSys management team. It gave them assurance that EnerSys was in the Douglas brand for the long haul. We know the value of the Douglas brand and want to keep it alive and ensure that it thrives.Steve SpaarBoth groups had to be open to new ideas and new ways of doing things that weren’t familiar. It’s easier said than done, of course, and there were some growing pains getting the transition going, but we’re now on a good road with things going smoothly.Steve Spaar is marketing director for EnerSys, located in Reading, Pennsylvania, and on the Web at www.enersys.com.

One of the most important things we did was to immediately start having joint sales meetings with the sales teams to get everyone on the same page with our marketing and sales plans. Also in the parts, service and rental areas, we had Riekes people observe Bublitz operations. We didn’t want to change everything; if they had good methods, we tried to take the best from both worlds. Culture change is not a conscious decision, but an evolution. We know what works at Riekes. We mix in the best of Bublitz to create a hybrid of best practices.

The Early Returns
Bublitz employed 46 people in 2009. We are at 38 now. We are going to be hiring some technicians so that number will bump back up a bit. People are excited and their attitudes have blossomed. Generally, the morale is very good. We’ve had a few head-butts on occasion, but for the most part, people are embracing the change. Our Bublitz operation has renewed energy now; we’ve even had other people in town come in to say they want to work for us because they see us as a major player.

My time requirements in Kansas City have been heavy. I’m probably there an average of one day a week, and, there are loads of e-mails and calls daily. I know the Bublitz team is very capable, so I need to be better about pulling back and look forward to doing so.

The single biggest piece of advice I can give is that nothing is as easy as it looks. It will take time to raise performance to match your goals. It will take time for the culture to become embedded. Given that, make sure you are adequately capitalized to give yourself the time it will take. It also takes a lot of mental and physical energy, so be prepared for the drag on you and your staff.

All that being said, we’re excited about the future. Our share is up, people are excited, we have positive cash flow, and our new initiatives are taking.  We weren’t looking to make an acquisition, but now that it’s happened, Bublitz Material Handling is full steam ahead.

Material Handling Equipment Distributors Association
Duncan Murphy Meet the Author
Duncan Murphy is MHEDA’s immediate past president and president of Riekes Equipment Company, located in Omaha, Nebraska, and on the Web at www.riekesequipment.com.

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