He was on the Chrysler-AMC merger team in 1987. He was at Metaldyne for a series of acquisitions in the early years of the new millennium. He worked on merger and acquisition teams with assorted companies in the late ’90s.
But there is being a part of a merger team, and then there is being one of the main characters in the process. That’s what happened to Grimm last year, when Citation Corp. which he led as CEO began the process of purchasing Grede Foundries Inc., which Citation acquired through bankruptcy proceedings.
The merger, completed in January, resulted in a new entity: Grede Holdings LLC, a metal component supplier with 3,000 worldwide employees. Grimm is now the chairman, president and CEO of the new company.
As the head of the newly combined company, Grimm has been in charge of facilitating communication, combining cultures, setting standards and making sure that the process of merging two companies into one goes as smoothly as possible.
It’s a lot easier said than done. Even for a leader who has been on the buying and selling end of mergers and acquisitions as often as Grimm has.
“The biggest thing was continuing to convince customers, banks, employees and everyone else from the beginning that this was the right thing to do,” Grimm says. “It’s constantly getting in front of people and taking them through the rationale of the business case, why we brought these companies together.”
Grimm and his leadership team laid out the case to all of the parties involved: employees keep their jobs in a tumultuous economy, Grede’s suppliers receive a more reliable customer and Grede’s customers receive a more reliable supplier on their end.
But talking everyone through the merger was only the first step. Employees, in particular, needed to see the plan in action if they were ever going to support it. Grimm couldn’t just preach to his employees he needed to open a dialogue and give employees throughout the company a hand in forming the new Grede enterprise.
“Everyone in this economic environment over the past couple of years is very skeptical as change happens,” Grimm says. “So it’s constantly giving them the messages that you want them to hear, and that takes some time.”Build integration teams
The merger of Citation and Grede Foundries began in earnest about 10 days before the transaction was announced on Feb. 5. Grimm brought leaders from both companies together to begin mapping out a plan for how the new company would look, both during the merger process and afterward.
“We brought together the top 80 people along with the board of directors, and we set out the vision at the beginning,” Grimm says. “We had integration manuals for each person there and set up integration teams comprised of people from both companies, and we put people in charge of those teams with a set of expectations as to when things should get done and if they can’t be done, get back to us on why you can’t meet a certain expectation and what we need to address.”
The integration teams were central to Grimm’s strategy and a way in which he put the future of the company in the hands of its people. The teams were set up by function within the company ranks, including account managers, sales, engineers, finance and IT. Grimm and his senior leadership staff helped formulate a set of area-specific goals for each integration team, designed to find the best practices between the two companies and implementing that practice in the merged company with as few roadblocks as possible.
“We wanted to figure out what we should be trying to accomplish,” Grimm says. “For example, in sales, the legacy Grede company was a sales-oriented company that had direct employees. The legacy Citation company used a combination of sales representatives in the field and direct sales reps. The integration team decided that we were going to use more direct sales reps. So we went from 18 manufacturing reps down to three.”
Bringing both sides together not only helped to identify best practices, it created a sense of familiarity among employees from both merging companies, and it helped speed along the process of familiarizing each company’s employees with the background and processes of the other. And, above all, it gave employees a way to make their opinions and input heard as the integration process picked up steam.
“The biggest thing in a situation like this is to get people involved,” Grimm says. “That is why I was trying to stay away from third-party consultants. You need people to take ownership in the integration, so that when you start to implement ideas, it’s their own ideas.”
To prevent complicating matters, Grimm and his management team laid down one additional ground rule for the integration teams: pick an existing process from either Citation or Grede. Combining processes, or re-writing the how-to book, was prohibited.
“Don’t create a new process pick one or the other,” Grimm says. “Half the company is from either legacy Grede or legacy Citation, so if you pick an existing process, you only have to train half the company. Once you’ve picked a process, you can work together to improve it. But that’s the big key you’re all working together by that point.”
Grimm says that in 90 percent of the cases, it will become quickly apparent which legacy company’s process you should use. It will cost less, you’ll be able to train employees with greater ease or it will fit your organizational structure better. However, whether the decision on a policy or process is easy or more difficult, you should always look to your metrics and benchmarks.
“You look at metrics and see if one company was doing a lot better in a set of metrics versus the other, and if that’s the case, you can see what path you need to take,” Grimm says. “You also see where you can get the most value. If it’s cost related, are you going to save more money by going from being centralized to decentralized in a function?
“Legacy Grede had more of what I’d call centralized cash management, where legacy Citation was more decentralized, but centralized it at a top level. It was kind of a hybrid model, where books were kept at the individual facilities, but the checks were written at the corporate level.”Set a cadence
When you integrate two companies, you need to move fast. You need to set ground rules, communicate them, and get your people busy on integrating systems and practices early in the merger process. If you let things progress at too slow of a pace, you run the risk of ending up with, essentially, cliques. One legacy company’s employees will stay on one side of the gym and the other company’s employees will lean against the opposite wall. No one will dance.
To solve that problem, Grimm accelerated the overall cadence of the merged Grede company.
“You have to set that cadence,” he says. “Things we did quarterly in the old set-up, in the new company, we started doing those things monthly. Things that had been done monthly we started doing weekly. Weekly things we started doing daily. The whole cadence of the company accelerated, and that created faster decision-making. Make a decision and move on it. It might not be perfect but keep working on it so the productivity moves in the same direction.”
It all comes back to establishing a new culture. A culture needs to take root soon after the merger is announced. In many cases, you need to plant the cultural seeds well before an announcement is made. You have to get your employees to think and act like a member of a new organization, not a member of an established organization that has been forced into a partnership with another company.
“I can tell you, having gone through seven mergers and acquisitions, being on both the buying side and the selling side, I’ve been a part of processes where changes were made the day of the transaction,” Grimm says. “I’ve seen them done where changes have taken two or three years. My experience is that it’s better to move as quickly as possible, without causing a lot of disruption.”
With the economy still lagging and business slow, Grimm and his team decided to take advantage of the situation by spurring more change in the short term, while the merged company has more space to react.
“It’s not as if we merged the businesses when all of the plants were running at 90 percent capacity,” he says. “Two months ago, plants were probably running at 40 percent capacity, and now they’re maybe running at 55 percent capacity. Things are getting better, but we still have some time on our hands.
“That’s why you need to get more of these things done now, pick some of the easy fruit off the tree, make the changes and let’s keep going. That is how we picked what we needed to do, and you want to do it quickly because it sets the pace of the culture in the organization. If you set the cadence, set the pace, people begin to move to that pace, just like in sports. If you play hockey or football, if things start to move quicker, everyone is moving quicker.”Deal with stragglers
Despite your best efforts at team building and integration, there might be some stragglers. You might find employees who are loyal to a certain process or department or to the old, pre-merger company name. You might not want to part ways with them, but sooner or later, either they’re going to make a change or you’re going to have to make a change.
It’s a situation where compromise really isn’t an option. Either they’re on board with where you want to take the company or they’re not.
“First off, make sure they understand why you’re trying to change,” Grimm says. “The rationale has to be there, and that goes back to communication. That is why the integration teams have been important for us, because it’s not just me saying it. It’s Joe and Susan and Mary and all the people putting the plan together. They’re the ones who are saying, ‘This is where we want to go.’
“Maybe you have to educate them, but after awhile, it’s change the people or change the people. If you’re all moving in one direction, and 90 or 180 days later, certain people can’t get on board, it’s probably time to make a change. You have to set the tone at the executive level and the macro level, but how we go about accomplishing what we’ve set out to do, a lot of that is going to depend on the team you’ve assembled and how they do their jobs.”
HOW TO REACH: Grede Holdings LLC, (248) 522-4500 or www.grede.com