Stan Hasselbusch always looks for the next way to keep his company growing and expanding its presence. L.B. Foster Co., a manufacturer, fabricator and distributor of products and services for the rail, construction, energy and utility markets, acquired Portec Rail Products last year as a way to improve its product line. Part of the company’s strategic growth plan is to grow through acquisition and Hasselbusch made good on that strategic goal.
“We looked at a half-dozen different companies,” says Hasselbusch, president and CEO. “We looked at companies that were primarily related to the rail industry, and we weren’t going to be foolish and we did a lot of due diligence. We were looking for something that was going to make a sizeable contribution to our organization.”
Portec Rail Products was a company that fit all those requirements. A $100 million company also based in Pittsburgh, Portec is one of L.B. Foster’s biggest acquisitions. Hasselbusch knew it was going to take a lot of hard work and time to integrate the organization, but it would help continue the growth of a company that saw revenue of $475 million in 2010. Here’s how he did it.
Plan your acquisition
Acquisitions can’t be taken lightly. They can allow your company to grow, offer new products or reach new customers. They are a crucial step in growth, and they need to be given the time and effort to be done right.
“You have to really do the due diligence and have patience,” Hasselbusch says. “Having patience is something that if you’re going to have a growth strategy, you’re just not going to grow for the sake of growing, you’ve got to have patience.”
Planning out the various stages of an acquisition will help you navigate through what is often a very long and difficult process.
“Plan for what you need to do,” he says. “Make sure you have a very strong strategic plan. It’s got to have how you’re going to go through an acquisition, your diligence plan, your integration plan and your plan going forward. There’s a lot of planning and then it’s following through with strong execution.”
Hasselbusch and his team referenced the plan and kept patient while looking at companies that were going to benefit them and fit well within their organization.
“We’re not going to step out of our wheelhouse,” he says. “We’re not going to go out and do something that’s not familiar to us. We are basically in three products. About 45 percent of our business is in rail, about 45 percent of our business is in construction products and about 7 or 8 percent is in tubular products. But really our focus is in the rail side of the business and in the construction side of the business. So when we go looking for acquisitions and growth in our company, that’s what we’re looking for.”
You want to look for companies that will be a good compliment to your existing business and help continue your growth.
“Our strategic objective in the railroad side of our business is to strive to become a premier distributor of products beneath the wheel,” he says. “[Portec] had a couple of products that really played into that very well. They had a large presence in what’s called friction management. Friction management is lubrication of the wheels and the rail to minimize friction and slows down the wear of the wheel and the rail. That’s an up-and-coming market.”
Having an understanding of your market is a big part of the planning process, as well. Hasselbusch knew what part of the rail market they wanted to expand upon, and Portec was the company that offered those products.
“You need to know the market you’re going to serve,” Hasselbusch says. “You have to understand the markets that you serve if you’re going to be successful in the first place. You need to be able to know what you can do internally from an organic standpoint or what needs to be looked at outside of your current organizational set up.”
Portec fit the plans Hasselbusch and the company had to move forward with for growth in the rail industry.
“Looking at Portec, it really looked fine,” he says. “We liked the size of it. We liked the fact that it does have a global presence or at least is a springboard to get into the global market. They do a lot in the service sector, which compliments what we’re doing. They have good research and development and engineering, which compliment some of our efforts very well. They have products that we can use in our bag of tricks of rail products and we liked their people.”
Finding a company that matches up with your own is the most important part of an acquisition. The company you acquire has to be complimentary in the things they offer or make.
“You have to understand how they are going to compliment or strengthen your business,” he says. “You want to look for companies that would be accretive. You’re going to look around a lot. You have to ask yourself how the product will complement what you’re currently doing.”
It is also critical to find a company that has a similar culture. If cultures are too different, the acquisition will be extremely hard to make work.
“You have to look at the people,” Hasselbusch says. “You have to look at the people so when you buy an organization it’s going to come in and you can grow together. You can’t lose focus. One of the big things we are seeing during this integration is how the cultures match up.”
Communicate growth plans
Communication plays a big role in growth and especially in mergers and acquisitions. Hasselbusch constantly communicates the company’s plans for growth to his employees.
“We’ve always … expressed to them the importance to grow,” he says. “One of the areas of our strategic plan to grow is to grow through acquisition. They know that that’s always going on, that we’re looking at people. [Our employees] know that we are always looking for ways to grow the company. You have to communicate this all the time.”
During an acquisition process there are a lot of moving parts and a lot of variables that constantly need to be addressed. Communicating often is the only way to keep things going smoothly.
“You have to over communicate,” he says. “You have to make sure everyone in the company is aware of what’s going on.”
L.B. Foster has town hall meetings twice a year where everyone in the company gathers to hear what’s been going on in the organization. At the end of those meetings they have a Q&A session where employees can comment on what things have been happening throughout the year.
Integrating two companies together takes a lot of hard work and dedication. The process can’t be rushed. Nothing good will come out of an integration if it is forced or rushed.
“It’s very time consuming and you have to be prepared for that,” Hasselbusch says. “There’s just a lot of work to do and it doesn’t stop. It doesn’t stop in the diligence phase, it doesn’t stop as you go forward and you close and it doesn’t stop through the integration. It really steps up and you’ve got the deal down and you take a deep breath and it’s not over — it’s just starting.”
Patience and communication are extremely important while trying to successfully bring two companies together.
“Communicate on both sides with your company and theirs,” he says. “There’s a lot of hard work and a lot of patience that’s going to be required and you can’t over communicate. You’ve got to be prepared for that. If you’re going to do it and do it right, you’ve got to put the time in and it’s got to be quality time. It’s not going to start by itself.”
Nothing is more important than communicating and getting to know the company you have brought in.
“When you bring in a company that’s 20 percent of the size of your current organization, it can be a challenge,” he says. “You have to stress communication. You can’t overdo communication. You have to take the time and put forth the effort to get to know them. That’s the only way you can do it.
“You have to communicate with them and try to understand them and where they are coming from. You can’t spend enough time with the troops. You have to be out with them and press the flesh. That’s the ultimate communication. You have to do that a lot.”
Integrate your teams
When it comes time to integrate the newly acquired company into your own, you have to be willing to take time and plan how you want to make the process work.
“There’s got to be a very detailed integration process,” Hasselbusch says. “You’ve got to be able to nail that. If you lose that, you’re going to take a long time catching up.”
For Hasselbusch and his senior executive group, the first step of integration was visiting several of Portec’s facilities around the country and internationally to get a feel for the operations and people.
“It was very important for me and my senior executive group to spend some time visiting each one of those facilities because at the end of the day, it’s about the people,” he says. “You can have ideas and you can have approaches and you can have plans, but it’s about the people.”
Throughout all the hard work and planning that goes into an acquisition, you also have to create buy-in for the future of the two companies.
“The integration has been a lot of hard work, but there’s been a lot of buy-in on both sides and there’s been a lot of working together,” he says. “There are certain compromises that you have to deal with, and it’s a give-and-take process throughout. That’s the big thing — bringing people together for a common cause.”
Another aspect of compromising during an acquisition is finding the best practices between the two companies. It is very easy for the acquiring company to keep doing things how it always has. However, that won’t improve your company and it won’t help the integration process if you don’t consider all avenues.
“We’ve spent a lot of time trying to better understand their operations at their plants,” he says. “We really looked at this and we’ve told the people at Portec that we’re looking for best practices. It’s not our way. We’re going to look at you, we’re going to meet you, we’re going to try to understand you and we’re going to try to meld the best practices.”
It takes full understanding of each company in order to decide what practices can be improved and what practices to keep. It takes careful consideration on both sides.
“We’ve not gone into this integration like it’s our way or the highway. It’s looking at it from both sides. They do some things in engineering and research and development that we can benefit from. We do some things in operations that they can benefit from. You’ve got to dig in. You’ve got to really understand the cultures, you’ve got get to know the people, and better understand the products.”
The willingness and ability to keep your mind open and listen to what everyone involved in the process has to say will help you make the integration a better and quicker success. “You’ve got to go in there with your eyes wide open,” Hasselbusch says. “You have to open up and listen. We’re not saying that our way is the right way. Sometimes you’ll agree and sometimes you’ll disagree and all you can do is reach a middle ground. At the end of the day, at some point you’ve got to come on board and you have to move forward and you have to move forward together.”
HOW TO REACH: L.B. Foster Co., (412) 928-3505 or www.lbfoster.com
The Hasselbusch File
President and CEO
L.B. Foster Co.
Born: Cedar Rapids, Iowa
Education: Attended the University of Dubuque in Iowa. He went to work for L.B. Foster straight out of school. He started in 1972, and it’s the only place he has ever worked as a professional.
What was your very first job, and what did you learn from it?
I delivered newspapers. I took away from that experience how important people are.
Who is someone you admire in business?
Warren Buffett. I really like his approach. It’s a very wholesome and down to earth approach and he has been very successful. I find him very interesting.
If you could invite any three people to dinner, who would they be?
Babe Ruth, John Kennedy and Michael Jordan. My wife would have to be there, as well.
If your day is off to a bad start, how do you turn it around?
I go in my office, take a deep breath and start all over again. We are really fortunate here. There is a light attitude throughout and there is a lot of humor in the office. There are always going to be good and bad days and you just have to be tolerant and try to work through them...