How to grow and merge cultures when purchasing a company
By Steve Guglielmo
Deciding to pursue an acquisition is a big decision. Aside from the normal due diligence a company must do, there are other factors to consider before deciding to pull the trigger. Will the company’s culture match? Is it an industry and a market you truly understand? Do you have the right staff in place to ensure a smooth transition?
Often, a company’s financials seem to indicate a match but the human element that doesn’t show up on the balance sheet doesn’t mesh. And when that happens, it can lead to both your company and the company you acquired suffering.
At the 2014 MHEDA Convention in Orlando, Florida, MHEDA members Duncan Murphy, president of Riekes Equipment Company and Bublitz Material Handling, and Chris Wetle, president of Pape Material Handling, will offer best practices on how to facilitate a smooth organizational transition. Among the topics that they will discuss are managing growth and merging cultures during an acquisition.
A New Industry
Pape had been an extremely successful forklift dealer in the Pacific Northwest for many years. However, President Chris Wetle felt that to be successful in the warehousing business going forward, the company would need to offer a systems and racking component in addition to its forklift business.
“We felt that the future of material handling was in high-density warehouses, and systems are a huge component of that,” Wetle says. “So we felt that we needed to be a participant in that corner of the business.”
Pape had worked with several different systems houses whenever customers had asked them to provide rack or shelving. However, the company still knew very little about the industry.
“We met Dave Salman, who ran one of the most successful system houses in Western Washington, and he basically said to us, ‘We’re in the system business and you’ re in the material handling business; we should be able to pass leads and work together ,”‘ Wetle says.
This arrangement lasted for two or three years, as Pape began to learn the industry and learn about the company culture at Engineered Products. At this point, Pape made the decision to purchase Engineered Products and form one turn-key operation.
“We had really no expertise in systems, so we asked Dave to stay on and provide that for us,” Wetle says. “That doesn’t happen very often. He agreed to stay on for five years and that was eight years ago.”
Wetle’s biggest concern about a potential acquisition was that they would acquire a company, find that the companies didn’t mesh and be left holding the bag with an infrastructure in a business that he didn’t understand completely. This is why he suggests forming a partnership before making the decision to purchase.
“You probably won’t have the expertise within your organization to make this fly from the start, so find as good a partner as you can in the area you want to move into,” Wetle says. “Find that guy and get to know him and then make the acquisition.”
Once Pape made the decision to acquire Engineered Products, he set to work integrating the two companies so that they could work as one.
The companies began to have joint sales meetings where the salespeople from the equipment and systems sales teams could pass leads back and forth.
“We set up a great incentive program for leads going in either direction,” Wetle says. “If a forklift salesperson gave us a lead on a systems project, we pay them a significant amount just for that lead.”
Wetle also began to integrate the two staffs, having systems salespeople go with equipment salespeople on sales calls to see how they interact with warehouse managers and also to answer any questions that the warehouse manager might have regarding rack or systems. The company also embedded a forklift salesperson in the Engineered Products office to answer any forklift questions that may arise. That integration has been a major reason for the continued success of the acquisition.
When Riekes Equipment Company President Duncan Murphy was approached by Jeff Bublitz, president of Bublitz Machinery, about a potential merger, he was intrigued.
“Riekes was about as big as we could get in our area,” Murphy says. “We knew a lot about Bublitz because they were selling the same lines that we were and we had worked together on joint projects. We wouldn’t have to learn a new industry or business.”
A potential acquisition would expand Riekes’ footprint without having to take on a new line. However, though the companies sold the same products in the same industry, there were some large differences that had to be overcome before Murphy would feel comfortable making the investment.
At Riekes, culture is very important. It’s not a soft word or simply a message on the wall. It’s a way of doing business.
“If you have strong culture that people resonate with, it will drive success,” Murphy says. “If culture looks like a home-spun piece of artwork that sits on the wall, that’s not culture. It’s a wish. Culture has to be something that people recognize and identify with.”
And there were some cultural differences between Riekes and Bublitz that would have to be addressed to ensure that an acquisition would run smoothly. The goal was to build on the traditions at Bublitz Machinery, hence the name remaining similar after the merger, and then install and reinforce a focus on the customer backed by performance. Jeff Bublitz was a fit, he just needed help that he had never had before.
“I realized that I would need to have a key player come out of the Riekes organization that knew our culture and could imbue that into Bublitz,” says Murphy.
Pete Womack, a branch manager in Riekes’ Sioux Falls, SO, branch volunteered for the challenge. He moved to the Bublitz office in Kansas City to partner with Jeff in building the new Bublitz.
But introducing a new culture isn’t something that can be dictated. It requires open dialogue and an exchange of ideas.
“We had a very transparent method of doing business,” Murphy says. “We were up front in saying, ‘There’s going to be some changes.’ But it was a two-way communication. We fostered an environment of collaborative discussion as opposed to dictatorial direction.”
Though Womack was the only Riekes employee who physically relocated, Riekes has several employees that collaborate with their Bublitz equivalents at all times. The companies hold joint sales meetings six times per year.
The acquisition also Jed to staff growth, which allowed for a further integration of culture.
“When the acquisition first took place, Bublitz had 38 employees. Today, Bublitz has 65 employees. Of the original 38 Bublitz employees, 16 are still there. So of the 65 total employees at Bublitz, only 16 are even aware of the old culture. It makes the cultural changes easier. They’re building their own foundation at Bublitz but with the same ideas that make Riekes work and move both companies to world class.”
Without a strong culture and a willing staff, this acquisition might not have run as smoothly.
“You’ve got to make sure that you’ve got enough talent on your team and that your staff has the time and appetite to build and grow. If you’ve got senior staff who are overloaded or don’t have the ambition to grow, all you’re going to do is subtract from both companies,” says Murphy.
For more information about making an acquisition, don’t miss the presentation “Managing Growth During Acquisitions” on Tuesday, May 6, from 1:00 p.m. 2:15 p.m. at the Loews Portofino Bay Hotel at Universal Orlando, Orlando, Florida.