But not Eugene Martineau. He sees in the concrete industry not only an opportunity to be a consolidator, but an opportunity to start competing against other building materials industries.
Martineau, president and CEO of Houston-based U.S. Concrete Inc., has made accommodations for its acquisition-oriented growth strategy from the beginning, starting with a clear vision of being an industry consolidator and creating a solid foundation to build on.
“Unlike a lot of consolidators or rollup-type companies, we have been building infrastructure almost from Day One to support a much larger organization,” says Martineau.
The acquisition strategy is straightforward: Assemble a leading position in as many target markets as possible. This leading position is vital, because besides added buying power, it gives the company a platform from which to educate consumers about how concrete can be used in new ways, all in an attempt to try to take market share from other building materials, such as wood and steel.
“We are competing against other building materials,” says Martineau. “If you get into a market and start competing against other concrete companies, you are not as focused as a company. We want to be the leading player and consequently offer the customer the best value.
“Everybody nickels and dimes on price, and the customers ultimately suffer because they do not get the advantage of the different types of concrete available.”
The strategy of being the leader in any given market helps U.S. Concrete avoid having its products become nothing more than commodities.
“We want to be sure we can execute a leading position,” says Martineau. “We believe the real opportunity is to help the industry stand out. We have a valuable product that is not being marketed and sold at levels that it could be.”
The company was formed in 1998 and went public in 1999. In its relatively short history, U.S. Concrete has made nearly three dozen acquisitions and increased revenue from $395 million in 2000 to $576 million in 2005.
U.S. Concrete’s management evaluates potential targets on market share and a host of other factors, such as construction activity in the market, projected population growth in the region and other trends.
But one of the most important factors is people.
“Our process is to really understand if there is a good reason for these companies to get together,” says Martineau. “Is there a cultural fit? Can you change the culture if necessary? There’s a real need to understand the culture of the company one is thinking of acquiring.”
To analyze a company’s culture, Martineau and his executives talk with the sellers and find out what they want from the sale and where they are coming from. It is also important to get a feel for key managers.
“You want to have people that have somewhat of a common philosophy to you in doing business,” says Martineau.
Martineau looks for people who have similar views to his on the concrete industry or who are trying to execute a similar strategy on a smaller scale.
“Maybe they are frustrated by the fact of the fragmentation in the market and that somebody is always wanting the market as a commodity,” says Martineau. “One of the other characteristics we look for is for people that are progressive and thinking outside the box in how they use the product and how they compensate people.”
In one case, Martineau found two brothers running an operation in California. They were very progressive in their marketing and sales, focusing on educating customers on ways to save money, while making investments in customer service and product development. It’s a philosophy similar to his own, which makes the integration process much easier.
“Fly out personally,” says Martineau. “If you are a growth company and have a vision, you better make sure they understand the vision.”
Once the acquisition is made, integrating the new company into U.S. Concrete becomes the next challenge, and is critical to have a plan for the early stages of the integration.
“You have to know exactly what you will do during the first 90 days,” says Martineau. “The way you start will have a lot to do with your ultimate success.”
He says that if you don’t have a plan for the first 90 days, it is hard to implement one later because people start developing their own plan.
One of the gains from acquisitions is being able to apply best practices at every location to maximize potential, and it’s something that’s implemented as soon as possible.
“The business lends itself to standardization,” says Martineau. “We find the best mousetrap and then we try to duplicate it everywhere.”
But integrating a company goes beyond machines and processes.
“The biggest challenge is people,” says Martineau. “You have to make sure people understand that things are going to change. Things are not going to be done exactly the way they were before. A lot of people will listen and nod their heads, then when something changes, they go ballistic. You have to continually reinforce the message and not just change for the sake of change.”
During that initial period, employees of the acquired company who aren’t willing to follow the new best practices should be removed from the organization.
“Find out who will buy in to the ticket and who won’t,” says Martineau. “It’s a process that takes time. Start with everybody. You have to talk to them, lay out your plans and talk to them some more. You keep communicating and answering questions.
“Some people I’ve told the same thing to 20 times before they started believing it. If you find one person that will not get on board, even though they nodded their head, then you have to figure out a way to move along without them. Try to do it in a manner where people know you made the effort, but remember that a lot of other people will be looking to see how you react. You have to be consistent.”
To get the message across, U.S. Concrete uses slogans to communicate complex ideas in simple ways.
Slogans such as, “We drive out fear of the unknown” and, “We are they” are easy ways to reference the company’s commitment to answering questions so that everyone knows what is going on and its emphasis on teamwork.
Martineau says most of his slogans are variations of things he’s picked up over the years from other sources and put his own spin on.
“Go to outside sources and find something that you really believe in and excites you,” says Martineau. “Then apply it to your situation.”
In addition to the slogans, the most important communication tool is face-to-face contact.
“Don’t be dependent on computers and e-mails,” says Martineau. “Try to get face-to-face with the people. I think in today’s world, we have lost an awful lot because we don’t understand what people are trying to communicate. There’s no personal contact, so you miss body language and other cues.”
U.S. Concrete has become the largest independent purchaser of cement and aggregates in the United States. That increased buying power has obvious benefits, but Martineau says the company’s size also means that suppliers are willing to work as partners to solve problems.
“The way we do it is you start out with trust,” says Martineau. “We sit down and look at things strategically. What are the opportunities for both companies?”
Building a trusting relationship means sharing intimate data with the supplier so it can fully evaluate the opportunity.
“We put all the parameters out there, and a blueprint is laid out of how everything would work,” says Martineau. “The other things you have to do are stay in constant communication and have leadership from the top. We pledged an alliance that would be supported by the top levels, and it would take the involvement of the CEOs and other key executives to make sure it wasn’t watered down.
“People find reasons not to make things work. Stay involved. We meet on a quarterly basis with the companies and make sure there aren’t any issues.”
The end result is a solid relationship and a situation in which both companies come out ahead.
“We can lower our costs and their costs, rather than us just trying to beat them up for a low, low price,” says Martineau.
Acquisitions are always a challenge, but Martineau and his team have shown that having a clear plan and a commitment to communication can dramatically improve the success rate of an acquisition strategy. But he says it’s important not to forget to have fun.
“There was a lot of excitement here after the first deal, and there still is today,” says Martineau. “You have to keep people excited, have some fun and don’t forget to celebrate your victories.”
How to reach: U.S. Concrete, www.us-concrete.com