Well Capitalized

COO Discusses First Few Months Under Private Equity Ownership

February 08, 2020 Chris
Well Capitalized
COO Discusses First Few Months Under Private Equity Ownership
Show Notes Transcript

We sat down with Mike Tiner, COO of Andover Corporation, to discuss his recent experience in the private equity acquisition process. Just four months removed from Andover's sale, Mike covers the following topics, among others, from management's perspective:

 

  • Whether to sell to management, a strategic, or a private equity firm
  • What Andover was looking for in a partner
  • What to expect from due diligence
  • Communication with employees during the sale process
  • Preserving company culture post-acquisition
  • Advice for owners considering a private equity exit strategy

hello and welcome to well-capitalized I'm your host Bobby Kingsbury managing director at MCM Capital Partners today I have with me Mike Tyner chief operating officer at andover corporation thank you for being here Mike and welcome to be here Mike it's it's an interesting experience right now in a unique time for you given the fact that you're fairly new after the acquisition we just acquired Andover corporation roughly four months ago so you have a lot of fresh information and maybe the wounds are even fresh after that too many waters after the transaction so if you could could you please explain a little bit more about what Andover does as well as a little bit more on your background all right well in Deauville corporation is a coating company and we manufactured thin-film optics for aerospace the medical industry life sciences it's a vacuum deposition process we have 14 coating chambers we coat for our universities and a lot of the prime contractor defense contractors all over the country excellent so how long have you been at an end over corporation so I used to go half a days at high school leaving 12 o'clock and show up at Andover Corp and I would work from 6 o'clock to 7 or 8 o'clock at night at the time there was only the two owners and a friend of mine who worked there that got me the job you know started from there went full-time in June when I graduated from high school when the story continued from there you're a band of four band before a band of four I think we were doing about $20,000 a month Wow and then fast-forward 39 years later how many employees now 55 and we're hoping to do just under 8.5 million this year so now 39 years later there was a unfortunate situation where the founder and business owner passed away and you know you guys had started going through a a sale process which was probably a little bit scary and different for you guys kind of not not knowing what was gonna happen what what were some of the biggest concerns that you had going into this transaction yeah well when you hear that the company is up for sale your first concern is you know her are we gonna have a company you know going going forward are we gonna have a company that's an doable corp and or is it gonna you know be purchased by someone who's gonna you know dissolve the company sell off the equipment so you know that was the biggest fear I mean I we were assured right away that you know that wasn't gonna be the case that it was a good viable business and looked like a great opportunity for someone to come in and purchase us and keep us going and so do you had gone down the path or they say to go down the path of of hiring an intermediary intermediary and for the business owners who who are watching this and considering exiting their business what were some of the I guess unknowns that you had uncovered during the process some things that you really didn't understand or didn't expect going through in terms of maybe time that was necessary and hiring an investment banker and going through a process over some of the unknowns that that you uncovered once the broker was hired I mean there was a lot of support so he did I mean the the brokers did a I really do in the end I felt like the brokers did a great job they provided a lot of information but they you know they required a lot of support from Netscape right team of three or four of us a lot of support as far as you know you know the actual selling of the company and we're I mean selling like putting your best foot forward you know you know showing we were going reporting you know the opportunities things like that so it really was a lot of work but it was a really good cooperative effort they did a really nice job presenting the company representing where we were going they they did a nice job with the data package I think you guys could attest to that yeah - but on like I said on the other and there was a lot of participation we were probably meeting you know a few hours a day probably every day there for weeks and weeks and then once the process started we were really spending a lot of time with with clients again putting our best foot forward for the company but you know there was also a part of that where you're you know you're selling yourself right to Azure as you're going forward you know if you want to make sure I'm around to with with the company as we go forward but you know those were some of the things yeah you know once you got into the process you did you pause etcetera you know you really do have to start thinking about where your place is in this along with the company as you move forward in how were we're interacting with the brokers but you know the they did a great job representing the company I didn't have any expectations going in so I'm not sure if there was anything that surprised me I know that in the end it was a lot of work so and meanwhile the expectation was you know to keep the business going right and going well yeah so we did you know during that whole process we actually finished up what was our what was our best year ever we're hoping to have our best year ever this year in 2019 but we did finish that up actually with all of that distraction going on which really did you know it actually helped expedite some of the delegation that was required and some of the delegation that was lacking with the previous owner where was a privately held company and and kind of tightly managed you know we really weren't given the opportunity to to take the risk to delegate so I think that process actually in a lot of ways helped us delegate because we were we were tied up in the process and other people did did step up and do the work it actually made us I think it made us stronger going forward great yeah I think a lot of business owners don't realize the amount of time and effort it takes not just from them but from their executive teams and takes them away from really running the business you have to choose an investment bank you have to write the the memorandum you have management presentations and then maybe most of all diligence yeah when you choose the the partner that gonna move forward with diligences yeah yeah that's it that's the next level right you go through the beginning process and kind of the recording and then when you know then when you're all done yet the the diligence was this was intense yes but again and again in the end you know a positive process that showed you like strengths and weaknesses of your company so Mike when you were going through your process and putting the process two together with the the intermediary that you hired as an executive management team you probably put together some sort of checklist that you were looking for in a buyer the attributes you were looking for in a buyer what were some of the things that were on that checklist what were you looking for in a partner we were looking for a partner that could help us grow the business obviously and and be a mentor to us as they were moving forward to the management team but we were also looking for a partner that wasn't gonna come in and change the company dramatically and let us continue on the successful path that we were on so we had many of the people that came in and interviewed had had really specific roles for us so it was kind of funny we had we had a company that had was a satellite company and they had a specific industry they were selling satellites and they wanted us to exclusively make the filters for their satellites and it was really interesting yeah but you know a little a little scary as far as just you know their really focus yeah so narrowly focused and obviously we're gonna continue to do some of the other stuff but they were talking about significant growth in a in kind of a direction that was that was different so you know again we felt like we had a good plan for growth you know having a good partner to supply the capital and give us the kind of the fuel in the engine to move forward I think was probably the number one thing and you know I mean me personally I wanted to see the company continue as it was you know in the culture that we had and it always goes back to culture right a lot of times it goes back to culture I really do I mean we have a we have a great shop we have a happy workplace and I think you know we all do our best work in in that in that type of environment and you guys have been great in continuing that so did did the sale process create any managerial issues for you whether it was with other members of the executive management team whether it was with the direct reports or throughout the business you know like you said when to find out that the business was for sale and it's kind of an uneasy feeling especially for most of the employees and to create any managerial issues forty-eight it didn't I think they did a really good job solving that and I and they think they did a really good job of you know putting a team together that was an attractive team so I think the brokers and our in our in our president John Connolly did a nice job they thought that out so we immediately I was promoted from the sales manager website sales manager to the vice president of the company and then we took two other key employees and they were moved up to the vice they were given the titles of vice presidents of their perspective departments and I that was an excellent move again it for anyone who came in and immediately showed you know who the key plays were I think they did a nice job of positioning the company so again it was easy to see the lines of authority and again gave a boost to us too and let us know that you know we were the guys that they were gonna represent and help move forward and ended up being the people who you know received a little equity in the company also so I think they did a good job of laying that out I thought it was well thought out that that portion of it right did did you have to deal with you know any rumors in in the marketplace I mean some of those are typically tough to to overcome but going through a sales process were there any rumors that you guys had heard in the marketplace yeah we I think they did a really good job so the the owners were really they were really concerned they would do it two phases of that when the owner got sick they were very concerned that we were privately held company and the owner of the company was well known in the industry so when he got sick they were afraid that that was going to affect the business in a negative way so that was almost a precursor to the sale and I would say that we we handled that the same way so we tried to keep the sale of the company quiet also you can kind of protect the the brand of the business once you got in once you got past that once once Richard passed away the people that were close to them in the industry when I would go to the trade show something people were asking what's gonna happen and you know and I would always tell them that you know with you know Richard left us with great bones we're we're gonna continue successfully you know you know no matter who owns the company then when you got to the employee side they were absolutely concerns that how would it affect the employees if it trickled down would we stop losing key personnel and if I had to do that over again I would have addressed the employees on the first day and told them what we were gonna do what the scope of the sale was you know that we were looking because the scope of the sale always was find a partner that's gonna let us continue to run the business as is so and over has a unique and strong culture to your point in discussing cultures both the retention and recruiting tool and when we went into the company it was something that we were really attracted to I mean you have a chef you have a kitchen you guys see breakfast together they eat lunch together it just felt like like a family yeah I'm happy shop yeah I think it was very important to to you guys and during the process what was your biggest concern you know as most business owners their companies they formed a unique culture what was your concern going in that maybe that culture might not be yeah again if you know depending on who purchased us we were concerned that that the culture would change I was pretty confident that the culture wouldn't change if we kept our our management team in place because I think the culture was driven by the management team and as long as we kept those guys in place we would be in good shape I think and again the you know treat people fairly put them in positions to succeed I think that having that the kitchen and the shop the chef at our company is brilliant and keeps people there all day it helps with the social life but you know people aren't running out for lunches half it keeps kind of clicks down we're all in the same room you know big conversation people are available for questions during once it's a that was a really great idea in is worked out really well over the years having gone through the process if from a business owners perspective and they're watching this can you articulate two or three things that maybe went smoother than anticipated and then two or three things that maybe didn't go as as smooth during the process I thought the the the business dinners and the meet and greets those all went you know those all went smoother than they thought and those were all really good experiences you know interacting with successful businesses people who are interested in your business and then you know especially as the process went along it went down to the four or five people that were really interested in you you know became a really flattering process a lot of validation of what you were doing over the years that there were so many people interested in how you were doing business and you're in your culture in particular so that was the you know that was the nice surprise the thing that I didn't like you because of the process also like we brought direct competitors in yeah and it was really only one company that we took off-site and I think again if you there's a certain amount of information that was just published for everybody to see right which I mean I think you could filter that down and maybe be a little more discreet with that and then we actually had direct competitors that came in and toured the floor of our company but you know it still kind of makes me a little nervous and you know talked about our largest customer industries in what separated us so I mean if if I was them I'd go home and say well this is what separated them whatever try that right right so that was that was something then again I you know at the time I wasn't you know I had made some recommendations but I would I would caution any business owner to really evaluate you know you're really letting the you know exactly exactly so I think that's probably who hell worth the effort to slow the process down we only went off site with with one company and you know and that did it had a completely different feel to it but it it because they were our competitor so and you know and they're with different companies that had come in we're we don't we didn't hire a lot of people from outside the industry but we had a couple people who who had been through this who had some really negative feelings about private equity coming in and buying companies and had some had some stories that you know that we needed to to circle back but one of the companies that came in was one of the companies that a couple of the guys on the Fluke is here in the same industry came in and had a bad experience with them so yeah it was like why fob while fire it went through the shop that this company was interested it was a large company and it was like wow it was so we actually had some fires to put out and really kind of told people that you know this was almost enough to disqualify most enough to put them in a different position yeah so you had talked about slowing the process down maybe that's something that you might have liked to seen gone differently now having been through it again what or maybe some of the two or three things that you might have done differently or maybe you thought the process might have been handled differently yeah again that that was the main one to just watch for the competitive edge maybe filter the information a little better that that was online and we you know we talked earlier about you know maybe a little more straight talk with the employees as far as what was going on the status of it you know making them feel like they were involved in the process too rather than keeping them in the dark so what did you do that they were kept in the dark until they were rumors that that went around and I really it at one point we just had an all employee meeting and just said hey this is what's going on and this is the scope so like I said if we I feel like if we did that from the beginning it you know it just has a difference he lost all those rumors and you won't have had to deal with that see what it felt more at ease yeah because at that point we were in a we were in a trust and the trust had assured the management team that they were gonna find the right partner and that obviously the selling price was part of it but in the end the right partner would be the deciding factor that you know it wasn't necessarily going to be you know a top dollar thing it was gonna be the best partner within within you know you know the legal responsibilities of the people who were responsible for selling the company and you know I and I think if we felt it if we started with that message you still would have had like you know every time you have an all employee meeting this three guys that leave with you know three yeah we want to find those three guys but uh but you know but I think we would have at that point like I said you know in it again that that was our culture anyway we were all in together so maybe a little bit of disconnect in that regard that you know and maybe a little more trust in the employees that you know hey let's tell them what's going on keep him informed let him know where the you know the landmarks are in the process and you know kind of all together I think that's the that was the biggest thing and really the only thing in the process that that was a that was a bit of a headache and caused some stress for for our guys on the floor yeah I think that's a good point you know it like I mentioned we we look at a number of different businesses and oftentimes the consensus is to not tell the employees upfront what's going on and I I don't know if entrepreneurs or business owners give the employees enough credit where they will be able to handle something like this it doesn't need to be sneaker the more you can get out in front of it the better its it's going to be now there's obviously are some certain situations where it doesn't make sense but I I think most would benefit from yeah we you know upfront here we have this this transparency conversation at work especially lately because I'm a big transparency guy so we have the transparency conversation and and I feel like if you're transparent and someone takes you up on something man if you if you can't explain it there's probably an issue there so you know and then the reality of complete transparency is out there too so you have to be you can't be you know can be a knucklehead about it but you know but you know the the exercise of you know we're being transparent and here's some you know unique feedback or things that you didn't expect to hear I found that that's been really valuable and we you know we've kind of relive the exercise every day at work with the with the new management team but that's something that I I believe in it you know taking a few lumps with that too but I do think if you applied it to this it's it's it's good advice like if there's something that you don't want to tell somebody you know I think you need to look at that anyway right there's something that you don't want to flow down to your employees you know you know ending it depends where you know I guess where you're at and where within what what the end game is so know earlier in the conversation you talked about getting down to last forward imagine presentation something what smoother than normal yeah who's you know kind of it it was flat you know is in a dating phase yeah you know it was flattering so now that that were done David yeah right and now that it's it's it's four or five months and it's still early we're still in the honeymoon phase yeah but tell me what your experience has been so far it's it's just been great it's it hey a candid okay yeah don't sugarcoat it I love Harry no honestly it's so far it's been exactly as promised we you know we're you know we're reporting to guys weekly we have a I mean I you know I'm I'm smart enough to know that things are going really well and that's probably another reason why you know it's it's gone so well but it's just been exactly as advertised you guys have been great we knew you pointed out a couple things that we needed we needed more help in our outside sales apartment and we made that hire we needed help in our finance department from that we concluded that if we made those adjustments in the sales that we're gonna need some more help on the tech level and engineering levels so we made four key hires in the first quarter you know based on a feel like a cooperative effort with a with MCM but no it's been great I feel like you guys have been great mentors especially to myself but I know the reality is if we have trouble they'll be more involvement and more advice and you know yeah lead to a successful conclusion yeah I think we'd be there to help to help aid you to provide guidance you know sounding board for you and yeah and your team as you guys move forward to help you get through some of those issues fortunately you know it's early things are going extremely well but I I want to get back to you know what what you said a few minutes ago about the employees because you know a lot of times in in terms of private equity were considered a lot of the the bad guys or the dark the dark force and most of the time it's you know they're gonna increase earnings increase value of a company by cutting either by cutting employees by cutting costs and it's interesting to hear you say in the first four months of ownership we have hired at least six people you know during that that timeframe and I think from a private equity standpoint what we want to do in to help you guys is to continue growth to build a foundation for growth and I hope we yeah that portrayed that enough yeah we're we're we're planning for success so we like to say it work we're planning we're planning for the success we needed to you know yeah we're building momentum so if I had a concern if things continue to go this way that you know our actual our shop OPSEC I want to make sure that you can actually produce the products you know that we're selling and I think MCM was a great partner and that I expressed that to Harry in you early that I said you know we have to be careful about the salesperson that we hire we don't want to bring in work it doesn't you know that isn't a good fit that's gonna overrun the company it's gonna allow us to deliver the high quality and on-time delivery that's given us our our niche in the market and I think we did we did find after process that you guys were very helpful with we were we found the right sales personnel great so great so now looking back holistically you've been at the company for 39 years okay you know unfortunately there's a baby like eight so you made the company for 39 years you started when you were six yeah okay no child labor and you know you had an unfortunate event happen where the business owner had passed yeah you've gone through a iterative sales process you have found a partner that's hopefully gonna help continue to grow your business so far what advice would you give to a business owner or anyone else in an executive management team having been through this process when most of them haven't advice I guess some of the things we talked about you know I think the transparency with the management team in the ownership in any employees really about what you know what's what's your goal what do you what do you what are you trying to achieve by the sale of the company and I guess I would just very like in our case I mean I think we really wanted to keep the company going in the image of the of the previous owner and I think we've done a nice job with that and we've kind of broken away from some of the conservative restrictions but the company's always going to be running the way that he wanted to so I would say no you know really kind of have a clear goal of what the scope of the sale is where you where you're headed and then you know bring everybody along well I appreciate Mike thank you so much for for joining us 80 minutes I spent a pleasure look forward to many good years to come thank you thank you [Music] [Music]