Making an acquisition
In 2016, Cornwell closed a deal for Kennedy Manufacturing in Van Wert, Ohio, a maker of tool storage equipment of which Cornwell had been a customer for years.
“That facility made fantastic boxes that were very well received, and we were able to bring to market,” Studenic says. “Unfortunately, when we left them in 2004, Kennedy was in a pretty bad situation. At that point, there were conversations about, ‘Well, maybe we should just buy Kennedy.’”
But they didn’t. Instead, the company shifted its purchasing dollars to another storage equipment manufacturer. When that box maker was spun off of its larger conglomerate years later, it affected production. Cornwell wanted control over its own destiny, and its thoughts went immediately back to Kennedy, which, now backed by a private equity firm, was in a bit of a stumble.
Studenic, an accountant by training, eagerly rolled up his sleeves and, alongside an accounting firm with M&A experience, dug into the details, which gave him greater confidence at the negotiating table. The deal was signed in October 2016.
Cornwell has since invested $3 million to $5 million in new machinery and equipment for that business, while working to instill Cornwell culture, changing workflow and setting expectations. Kennedy, which was doing $14 million in business at the time of the acquisition, had revenue of about $18 million this past year. While that may not be what Cornwell wants from that part of its business long term, Studenic expects the purchase will pay off as projected.
Around the same time as the acquisition, Cornwell built a 107,000-square-foot warehouse near its Wadsworth headquarters to replace the bursting-at-the-seams 33,000-square-foot warehouse that still sits adjacent to its headquarters. The move enables it to more efficiently and safely move product, the volume of which has grown in the past decade from a franchisee purchase average of around $2,500 per week to $6,000 per week.
A microcosm of Cornwell
Some 690 independent franchisees are currently crisscrossing the lower 48 in Cornwell-branded trucks packed with tools, pulling into the parking lots of auto technicians to sell them whatever they need to keep cars running. They are Cornwell’s No. 1 customers, representing about 99.5 percent of the toolmaker’s business.
Cornwell needs its customers to buy tools, but also needs them to sell those tools and keep their independent businesses operational to generate revenue for their supplier, which is also their franchisor. That puts Cornwell in a unique managerial position.