Industrial and Distribution
Todd Berger first got a taste for the transportation and logistics industry as an intern for American Backhaulers — and it didn’t go well. He vowed to never work in that industry again.
After all, it was a time when pioneer companies like Google and Apple were the leaders of innovation, and in Berger’s words, the transportation and logistics industry “just wasn’t ‘sexy’ and lacked innovation, and I wanted to change that.”
Fortunately, Berger thought it over and came up with a different goal. He re-entered the industry in 2001, working as a dispatcher at Transportation Solutions Group. Berger recognized the need to anti-commoditize the business and proposed opening a trucking company to ensure TSG’s competitive position in the industry.
While management was skeptical of his venture with Berger being only 26, he created and began to operate Freight Exchange, a full truckload carrier that subsequently turned a profit in its first year of operations.
From that point on, a curious situation occurred. The more initial pushback he received from management, the better the final outcome. In 2009, Berger proposed his idea of 3PLogic, a contract logistics management provider that included customized software. He again received criticism from management because 3PLogic required a significant capital investment for software to be developed and key personnel to be hired.
Berger was unfazed. He presented the idea to a current client — and the customer decided to fund a significant portion of the venture. 3PLogic now provides logistics services, technology solutions and consulting services, and is considered the strongest arm of the group.
Berger’s style is a trial-by-fire leadership philosophy that he applied early in his career and still follows today, believing that a leader can learn something new the same day that it is put into practice.
He also is always cognizant of demonstrating a strong sense of humility not only within his demeanor but throughout the operation of the business.
How to reach: Transportation Solutions Enterprise, www.tse-llc.com
Companies spend more than $2 trillion on acquisitions every year, according to an article in Harvard Business Review. Yet studies frequently cite failure rates of mergers and acquisitions (M&A) between 70 and 90 percent.
David E. Shaffer, a director in the Audit & Accounting practice at Kreischer Miller, says problems are often the result of poor planning. Companies are enticed by the opportunity to create synergies or boost performance and fail to consider all ramifications of an acquisition.
Smart Business spoke with Shaffer about ways to mitigate the risk and ensure a successful transaction.
Why is the M&A failure rate so high?
Many companies don’t establish a clear business strategy for mergers and acquisitions. Some questions that need to be answered include:
- What are the goals of the merger or acquisition?
- Do you want to leverage existing resources or create a new business unit?
- What is the maximum price you are willing to pay?
- Must the seller agree to some holdback of the price?
- What happens to administrative functions and management of the target company?
- Must key employees sign agreements to stay?
- Will you negotiate between an asset purchase and a stock purchase?
- Is culture important?
You should be proactive in identifying candidates for acquisition. Companies that have done many acquisitions tend to ignore requests for proposals because the sellers in such situations usually go with the highest price. They reason that the law of averages is against them and at least one competitor will overpay.
Instead, companies involved in many acquisitions prefer to target entities and establish a relationship before that stage in order to avoid a bidding war.
How should the due diligence process be conducted?
It’s important that you don’t take shortcuts in your due diligence. Hire professionals who are knowledgeable about the industry; they can negotiate better deals for you because they are not emotionally attached and can push harder for seller concessions.
Due diligence should address internal and external factors that create risk in the acquisition and focus on key factors driving profitability — employees, processes, patents, etc.
The more risk present, the more you should ask for holdback in the selling price. For instance, if much of the profit is derived from a few contracts, require that the contracts be renewed under similar terms if the seller is to receive the full purchase price.
M&A failures often result because buyers concentrate too much on cost synergies and lose focus on retaining and/or creating revenue. Client retention at service organizations is at significant risk following a merger or acquisition, according to a 2008 article from McKinsey & Company. Clients will receive misinformation, so it’s important that the acquiring firm step in quickly to assure clients that service levels will equal or exceed what they have been accustomed to expect.
What needs to be done post-acquisition?
It’s important to have a clear post-acquisition plan, including financial goals, with as much detail as possible. The quicker value is created by the acquisition, the better the result for the buyer.
Key post-acquisition steps to ensure a successful integration include:
- Developing the organizational structure.
- Developing sales expectations.
- Identifying what processes and systems will change, and when.
- Developing performance measures.
Finally, you also need to hold key management responsible for producing results.
David E. Shaffer is a director, Audit & Accounting, at Kreischer Miller. Reach him at (215) 441-4600 or firstname.lastname@example.org.
Social Media: To keep in touch with Kreischer Miller, find us on Twitter: @KreischerMiller.
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STL Ernst & Young Entrepreneur of the Year
Robert D. Taylor
Chairman and CEO
Executive AirShare Corp.
After Robert “Bob” D. Taylor asked the widow of an aviation maintenance company CEO what he could do to help, he found himself running the company until it was sold. And by that time was he hooked on aviation.
It was November 2001, only a short time after 9/11, and Taylor wanted to start his own aviation company despite the industry’s turmoil. Executive AirShare Corp. was created with the idea of running an aviation company the right way.
As chairman and CEO of the only “days-based” fractional aircraft ownership company, Taylor has built a business that excels at meeting the demands of clients with a focus on safety and customer service. It serves a niche market looking for large light jet or smaller aircraft.
With its fractional ownership, the business’s regional approach puts it closer to customers and drives down costs. Compared to the typical hours-based model, the days-based rate model has more customer flexibility and fewer “dead head” trips where pilots are shuttling empty aircraft between locations.
From the beginning, Taylor looked for ways to turn circumstances into a competitive advantage, such as using the increased regulatory scrutiny over commercial aviation to drive business for fractional ownership.
But it hasn’t always been easy. With business booming, EAS moved to buy a newer fleet of better light jets just before the recession hit. The value of certain aircraft dropped approximately 60 percent from 2007, and the company had to sell excess aircraft for a loss.
Taylor and his fellow shareholders had to step up time and time again to invest in and keep the company moving forward. Their belief allowed EAS to avoid downsizing.
Today, the company has grown to be the largest operator of Phenom light aircraft. EAS maintains a fleet of 26 aircraft, while maintaining another 16 for other owners.
In the future, EAS plans to expand itsPhe core region into additional Texas and other markets.
How to reach: Executive AirShare Corp., www.execairshare.com
Private Equity/Venture Capital Backed
Zachary Boca and Dan Ushman were chat room buddies on AOL at age 13 — little did they know then that they would later collaborate on a cloud computing startup company, SingleHop.
They shared interests at that young age and continued to stay in touch as they worked toward developing their own businesses. Later as partners, they put their heart and soul into the success of SingleHop.
SingleHop is a leading global provider of hosted IT infrastructure and cloud computing. Over the last decade, clients all over the world have been choosing SingleHop for its speedy blend of automation and service.
As a result, both men have seen triple and double digit percentage revenue growth for SingleHop since inception. But maintaining these record-breaking benchmarks is no easy task. They are also cognizant of growing too quickly for their own good and have focused on sustainable growth going forward by expanding their customer base but staying true to their original concept of highly automated cloud computing services.
Hiring the right people for the right teams allows Boca and Ushman to let go of the reins a little when it comes to managing the company. They believe that they have allowed their employees to have a vested interest in the shared success of the company. They both have made an effort of employing highly qualified individuals that keep the hosting process at the forefront of changing technological advancements.
With teams that are a good mix and balance of seasoned professionals who bring insight from other experiences and new talent that has innovative vision and hunger for success, the recipe is bringing positive results.
Boca and Ushman construct a yearly plan for SingleHop, which is built from the bottom up and requires each department to contribute its own ideas for continued growth. This culture allows everyone to contribute to the entrepreneurial efforts and encourages ownership and transparency across all levels of the organization.
How to reach: SingleHop, www.singlehop.com
STL Ernst & Young Entrepreneur of the Year
founder and CEO
Coolfire Media, LLC; Coolfire Originals; Coolfire Solutions
A leading television production company in St. Louis, Mo.? Unheard of, until Jeffrey Keane started three media companies and found a niche producing shows, including “Welcome To Sweetie Pie’s” on the Oprah Winfrey Network, “Fast & Loud” on Discovery and “Mom Friends Forever” on Nick Jr.
With his family’s support, in 2002 Keane launched Coolfire Media, LLC, a production/post production company. As CEO, he attracted top talent and grew the company into an organization that works with the country’s top agencies.
But the vision didn’t stop there.
With the aid of a few likeminded employees, Keane broke into the television production world in 2009 with Coolfire Originals. Using their skills to produce short clips, they laid out story ideas in such a way to grab the attention of the television networks.
So far, the company has sold six projects with two more anticipated to launch this year. Keane is working to get a scripted division up and running to be able to produce a feature film.
In that same year, 2009, Keane created Coolfire Solutions. Self-funding two start-ups during one of the worst economic downturns speaks volumes to the success, leadership and drive of their founder.
After an unplanned meeting with an employee’s relative, Keane became intrigued with how the company could make a useful tool for the military. Coolfire Solutions focuses on research and development to provide mobility app solutions to military and enterprise customers.
Employing approximately 100 people, Keane strives to maintain productions within the city to the extent possible. In fact, all five of the company’s scripted television shows are based on characters that live in the city of St. Louis.
That love for St. Louis more recently led Keane to create the Coolfire Foundation, which will help underprivileged children obtain the right education to work and excel in the media industry.
How to reach: Coolfire Media, LLC; Coolfire Originals; Coolfire Solutions, www.coolfire.com
It was the late 1980s, and companies were adopting the practice of just-in-time (JIT) inventory management. However, the model for the staffing industry did not address the complex service requirements of JIT clients.
Michael Miles took notice of the situations and co-founded The Seaton Cos. in 1988 with fellow Arizona State University alumni and entrepreneur Hugh Farrington. Miles recognized that to be competitive, companies needed to change their workforce strategy and move toward a permanent staffing solution embedded in their infrastructure.
The business model revolutionized the staffing industry by providing for hands-on management of a client’s flexible workforce. It also supported decision-making with ready access to program data and analytics.
“Our company has always had in its DNA a real appreciation for process and execution: for achieving operational excellence, building systems for scale and automating when others are not,” Miles says.
He later launched the company’s Staff Management division when he partnered with one of America’s largest food and confection companies to support a staffing surge in its Chicago facility.
Today, Seaton has two other business lines, PeopleScout, a recruitment processing outsourcing business launched several years ago; and StudyScout, a business aimed at getting better qualified students applying into Seaton’s for-profit college clients.
Embedded in the company’s culture are a high level of employee engagement and a self-driven organization. Miles believes the key to attracting and retaining staff lies in belief in the company’s product. The ability of the company to consistently achieve tangible gains and improvements for its client base is a testament to the company’s offering and why the message is willingly embraced by staff.
Since its inception, The Seaton Cos. has achieved consistent, organic growth. The organization has grown a remarkable 38 percent over the last couple of years, but in reality the growth story began the day the business was established.
How to reach: The Seaton Cos., www.seatoncorp.com
Family Business Award of Excellence
When the recent recession came around, Jim Sartori and Jeff Schwager decided not to participate. Rather, at their company Sartori Co. they continued to emphasize customer focus, cheese quality and reinvestment, all of which have enabled Sartori to prosper.
Schwager considers the significant growth of Sartori, including its retail presence, to be one of the more significant future challenges as well. Devising and installing the infrastructure to match the company’s growth has been and will continue to be a challenge, but the pair has plans in place to invest in quality, team development, leadership training, and modernization and expansion of key facilities.
Sartori believes strongly in leading by example and in employee empowerment rather than the controlled direction of his team members. This enables him to work with his teams in pursuit of their mission to make the “best artisan cheese in the world.”
The concept of “family” permeates throughout and is the key driver of the core values maintained at the company – family, integrity, ingenuity, commitment, authenticity and humility.
Sartori encourages his team members to suggest and pursue opportunities, which has enabled the business to grow.
The retail segment is flourishing at Sartori. The cheese needs to be of a high quality, requiring an aging schedule anywhere from one to two years and a highly innovative team of master cheesemakers. In addition, there needs to be a strong marketing and branding campaign led by a top-notch sales team.
These efforts require a highly risky and significant capital outlay as the team tries to estimate retail cheese demand at least one year or more in the future.
When it comes to specialty cheeses, the risk is amplified by the lack of an outlet market that classic cheeses such as parmesan and asiago enjoy. Needless to say, the investment has proven to be the lucrative opportunity that Sartori and Schwager envisioned.
How to reach: Sartori Co., www.sartoricheese.com
STL Ernst & Young Entrepreneur of the Year
John H. Kramer Jr.
President and CEO
Cambridge Engineering, Inc.
John H. Kramer Jr. earned his way to the top with more than 20 years at Cambridge Engineering, Inc., including establishing successful sales in some difficult regions in the U.S. He has worked in nearly every area of the company that was founded in 1963 by his father and uncle.
With his overall company experience and ability to draw people together, over the past eight years as president and CEO Kramer has driven the organization through the economic downturn.
The company that set standards in the heating industry was very dependent on industrial and commercial building starts. So, during the recession, Cambridge’s core market, warehouse new construction, dropped by more than 90 percent.
With Kramer’s leadership, the company has rebuilt to prerecession revenues and profitability. By focusing the core sales and marketing team on retrofitting existing commercial infrastructure, Kramer has launched four new companies to build additional markets.
He envisions a growing and stable company that is shielded from the ups and downs of the commercial construction market.
Thus, Kramer is always looking for opportunities to use Cambridge’s products in new ways, such as when he traveled to China last year to explore expanded distribution.
During the recent recession, Kramer also had to make difficult downsizing decisions that affected employees and their families. However, by treating the people with integrity, respect and care, he was able to keep the relationships with these individuals strong so they were willing to return as the business recovered.
Kramer’s investment in people development is significant. He regularly sends his leadership team through training and supports an internal coach — the vice president of quality, keeper of corporate culture.
Cambridge also has an employee recognition program, an online CambridgeU that provides more than 3,000 training courses to employees, and a variety of team activities.
How to reach: Cambridge Engineering, Inc., www.cambridge-eng.com
Early in his life, Jason Beans suffered a broken nose which received inappropriate medical treatment. In addition, the medical billings persisted over an extended period of time, and the situation nearly bankrupted his family. This experience drove Beans to research and develop a system for patients and companies to benefit from improved quality of care and decreased medical costs.
At age 29, Beans founded Rising Medical Solutions to provide medical cost containment and care management solutions. He is dedicated to developing a system which provides patients with quality health care, medical providers with faster payment, and insurance carriers/payers with proper billing information.
Beans says he will not quit until he “fixes health care.” His determination to leave a positive impact on the world is his greatest passion. All his employees matter, and what keeps him up at night is the idea of dying without having a significant impact on the health care industry.
While the numbers for Rising clearly show its success, Bean does not measure success on revenue, but the tangible impact he makes within the health care industry and on each person.
Whether it’s his one-on-one coffee chats (“Beans with Beans”), weekly anonymous employee polls, an online portal for continuing education and leadership training (Rising University), or the numerous other avenues for team bonding and personal growth Bean has established at Rising, the emphasis that he instills within the culture of Rising to promote leadership and focus on building strengths creates a formula for success.
Beans ultimately envisions developing a tool in which patients can shop for a doctor or surgery based on price and quality. Through his focus on technology and top talent, he hopes to lead the consumer-based health care initiative to create complete transparency within America’s health care system. By removing the worries about money, Beans believes this will help everyone focus on what’s really important: the patient and treatment.
How to reach: Rising Medical Solutions, www.risingms.com
STL Ernst & Young Entrepreneur of the Year
Transportation & Logistics
The partnership between Artur Wagrodzki and Tomasz Tokarczyk, current presidents of Artur Express, started when, at a young age, they became neighbors in New York. Their families had emigrated from Poland and both men didn’t know any English.
Today, they’ve acclimated and thrived through hard work and refusing to give up with things get tough.
First working as black car service phone operators and dispatchers, Wagrodzki and Tokarczyk used their knowledge of the logistics of the transportation industry to start Artur Express in 1998. They had one company truck and a trailer.
Initially, the two focused on providing and managing drivers and freight rather than trucks. But in 2006, the company headed in a new direction to accommodate customer requests and invested in company-owned trailers and driver education. This embodies their leadership and management style of controlled risk-taking.
By focusing on providing quality customer service and timely deliveries, the company’s reputation has grown at an astonishing rate. In the 15 years of operation, Artur Express has not experienced a year where the company did not outperform the previous years.
The company has an operations team of more than 60 that works out of its St. Louis headquarters and five satellite offices to field a fleet of 375 trucks.
Another key to success has been employing the right technology to help the company simplify and streamline processes to better serve customers and the drivers, often by developing its own software.
Wagrodzki and Tokarczyk maintain a philosophy of treating their drivers with care and providing employee benefits that create a competitive advantage in an industry with high turnover. That treatment crosses over to the corporate employees, who can receive increased payouts as the company exceeds expectations and benchmarks.
Their idea of running a successful company has always been to keep everyone involved by working through failures and achievements as a team.
How to reach: Artur Express, www.arturexpress.com