A look inside the world of M&A from leaders who have seen it all

John D. Rockefeller was a pioneer in the oil industry. He took such an aggressive approach to building and growing Standard Oil Co. in the late 1800s that the federal government felt it had to respond and prohibit monopolies.

He switched gears during the second half of his life and devoted himself to philanthropic causes, giving more than $500 million of his wealth — a lot of money today, but even more in the early 1900s — to help his fellow man.

Rockefeller revolutionized the oil industry and shortly thereafter, Henry Ford gave us cars that could be fueled by that very same oil. Walt Disney created “The Happiest Place on Earth,” Phil Knight helped transform the way we look at shoes and Jeff Bezos created a website where consumers can buy just about anything.

Each one of these business pioneers had a dream and an idea to change the world and refused to stop until it had been done, no matter how many challenges arose along the way. It’s the mindset that another wildly successful entrepreneur, billionaire Mark Cuban, has followed in his journey through life and business.

“I don’t care if you’re working a counter at McDonald’s or as a bartender like I did or as a doorman like I did, when it fails, whatever it may be, you’re going to learn,” said Cuban, in a 2011 cover story in Smart Business. “You’ve got to take that positive orientation to it and develop your skills.”

Cuban applied the lessons from his failures to co-found HDNet, buy the NBA’s Dallas Mavericks and become a TV star on ABC’s “Shark Tank,” among countless other accomplishments.

Every entrepreneur has a different approach and a unique way of viewing the world. But at the end of the day, they all understand the power of relationships when it comes to making things happen.


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“It’s the ability to sit down and talk, whether it’s breaking bread at lunch or dinner or just taking an opportunity to get to know somebody,” says Umberto P. Fedeli, president and CEO at The Fedeli Group. “Get to know their background. Get to know how they built their business and how they make decisions. How they decided to do this and how they decided to do that.

“Initially, it may not even be about the business or the transaction. It could be about family, a hobby or something that you both have in common. You build rapport, get some common ground and that’s how you arrive at a deal that becomes a win-win.”

The Fedeli Group is one of the largest privately held risk management and insurance firms in Ohio. Fedeli the individual is an active investor who has achieved tremendous accomplishments, both in business and in philanthropy in Northeast Ohio. He knows how to bring people, and companies, together.


Umberto P. Fedeli, president & CEO, The Fedeli Group

He also understands that as you’re building that foundation, you are thinking about the end game the goals for both you and the person you’re negotiating with. One skill that all good entrepreneurs bring to the table is the ability to ask a lot of questions and get something useful out of every conversation.

“You should have a whole discovery process where you ask a lot of questions and find out what’s important to this person and what their goals are,” Fedeli says. “Try to find out how they process information, how they think, how they make decisions, what their concerns are. As much as you can, ask appropriate questions, and then do a lot of listening, that’s what you want to focus on.”

The art of decision-making may boil down to assessing your instincts

Editor’s note: Mal Mixon, former chairman of Invacare Corporation and a well-known entrepreneur, will regularly share his business advice and experience with Smart Business readers. Ask him a question at [email protected], and your inquiry could be the inspiration for his next column.

Q: When deciding on a business matter, did Mal ever proceed with his gut feeling rather than data? Do his experiences ever trump data?
A: When making investments, the gut feeling has to be there. If you are looking at investments, has anyone ever shown you projections that go down instead of up? No, they don’t. They all go up, and that is my point.
But if you don’t have a good gut feeling about the opportunity, if you don’t feel right about it, if you don’t sense there is an opportunity, it won’t work. Most of the time, if you have a good gut feeling, it will work out. But if you don’t have that, the opportunity rarely works out.
When I was running a business, I looked at data a lot when it comes to business decisions. The same principles apply. You should also have a good gut feeling about business decisions.

Q: What about someone starting out? Are you born with the ability to sense your gut feeling or can you develop it?
A: Well, I think it is a collection of life’s experiences. Like Warren Buffett says, “Never invest in a business you don’t understand.” I don’t like to invest in businesses I don’t understand, so I stick with basic businesses as opposed to software or computers. I’m not an expert in these areas. Most of the investments I have made have been in the likes of medical products, vacuum cleaners and banks.
When I was talking with physicians about developing a sterilization company — that has become Steris — my gut feeling was, ‘Hey, this is a good opportunity.’ It had nothing to do with looking at data or numbers. I just felt we could do it.
Steris is now a $1.9 billion global company with 8,000 employees focused on the health care, pharmaceutical and research markets. Steris is merging with Synergy Health plc, which will add even more to its value.
When I bought Invacare, the numbers made sense. My gut feeling told me I was ready to run this thing. We grew from $19 million to $1.8 billion.
Numbers are helpful, but if you don’t feel right about it, don’t do it. Even when everything seems right, you’re going to be wrong once in a while. Timing is important as well. Nobody had flown before the Wright brothers. But they believed; their gut feeling was that they could fly.
Sometimes you have to make a decision before you get the data. A lot of small companies can’t even publish the previous month’s results until a month later. They say, “Well, I’m not going to make any decisions about December until I get November’s data.”
Well, you don’t until the end of December so sometimes you have to make decisions without perfect data.

Finding capital to fund growth might mean going public

Editor’s note: Mal Mixon, former chairman of Invacare Corporation and a well-known entrepreneur, will regularly share his business advice and experience with Smart Business readers. Ask him a question at [email protected], and your inquiry could be the inspiration for his next column.

Q: What is the greatest challenge you faced while having the least resources to face it?
A: By far, the greatest challenge I ever had was cash availability. Invacare in the early days of my leadership was growing so fast that I was constantly trying to get enough cash to keep growing. Inventory and receivables take cash, and the more you grow, the more money you need to sustain yourself. So I did two things — I went public, and I added a second bank to do business with (to share the risk). I really never had to look back.
When you are a private company, the availability of cash is crucial. Invacare made a profit but also improved the collection rate by 10 days, increased inventory turns and made capital investments that had a rapid payback. Our sales grew five times over, from $20 million to $100 million, without having to go to the public or the venture capital market for funds.
It is much more difficult today to borrow capital because there are stricter regulations for banks. If I were an entrepreneur running a company today, I would have to get a venture capitalist to invest or look at going public at a time much earlier than I did.

Q: What are your thoughts on automation? Isn’t it a clear decision to automate if it means saving money?
A: The issue is not labor vs. automation. The issue is increased productivity. You can get increased productivity by better methods or in some cases, through automation. But then you may necessarily eliminate associates.
Most of the ideas for improved productivity, either by an improved method or machine, likely will come from associates who have an idea. Let’s say you put in some automation equipment that improves productivity but eliminates 50 jobs. You will never get a second idea. If you let people go in favor of automation, you’ll never have any ideas submitted.
At Invacare, we told associates that if we improved productivity through automation, they would not lose their jobs, but they would be assigned elsewhere. We would locate them in another department or another plant — and we kept our word.
We always considered investing in an automation process if it had a payback in less than a year, meaning if I spent $1 million on the machine and I can earn an extra million dollars in the first year, then I am even. You calculate whether the payback varies from one year to four years, or six months to four years. You obviously have to cut it off at some point to control your capital budget. Thus, you might say if the payback is not 18 months or less, we’re not going to do it this year.
I’ve known some companies that blindly fell in love with automation, and they almost went broke. Automation is not necessarily the answer because it soaks up precious capital and improvements in methods might also increase productivity — and that also helps keep employees thinking of how to do something better.
In the end, if you get productivity improvements, share the improved profits with your associates by increasing wages or benefits and you will get more ideas.

Mal Mixon is the former chairman of Invacare Corporation and a well-known entrepreneur. A complete story of Mal’s rise from rags to riches is told in his book “An American Journey,” published by Smart Business Books. It can be found at www.anamericanjourneybook.com and on Amazon.com. Visit www.invacare.com


Commodity or not? Avoiding an unwanted label takes a review of why customers buy a product

Editor’s note: Mal Mixon, former chairman of Invacare Corporation and a well-known entrepreneur, will regularly share his business advice and experience with Smart Business readers. Ask him a question at [email protected] and your inquiry could be the inspiration for his next column.

Q: We are a manufacturer of precision custom springs and wire forms that are considered commodities. How can we set ourselves apart from competitors? We all promise competitive pricing, quality and fast deliveries. Why should a customer choose our company?

A: I encouraged all my associates to differentiate their products and not make them a commodity. I hate that word. Invacare was even able to differentiate products that you would think you couldn’t really differentiate.

The most impressive example in Greater Cleveland of how to market a commodity product is how Jack Kahl, CEO of Manco Inc., created Duck Tape®, instead of duct tape. Customers think his duct tape is better than other brands of duct tape.

Kahl made a brand. He developed a list of things that you make with Duck Tape® and enter them into contests. That’s brilliant marketing.

The most commoditized product I can think of is salt. Yet, buyers think of Morton Salt and truly believe its salt is somehow better. Few entrepreneurs have enough capital to build a brand. It’s a long journey, not a destination.

If you set price and brand aside, there are really four other reasons that people buy a product.

The first one is really the product itself. Can you make it different? If you can’t differentiate the product, you risk staying a commodity. Sometimes differentiation is very simple. If not function, try styling. Keep trying; brainstorm with your team.

Another reason is relationships. Customers are reluctant to buy from Avoiding an unwanted label takes a review of why customers buy a product from an unknown face. If you have high quality sales representatives, customers will buy from your company based on trust in the person representing your company. They are buying from Joe or Alice.

A third reason people buy is availability. You have it just when I need it. As an example, if I am in the desert driving my car and the fan belt breaks, I will walk 10 miles to a service station. It could be 50 miles to the next one. I will pay $75 for this fanbelt, but if I were in Chicago, I could buy it for 79 cents. But I am not in Chicago, and I don’t want to walk 50 miles to try another place. I need it, and I need it now.

Another example is if I don’t have a certain part, that situation could shut down my whole assembly line and plant. I need it now.

The fourth reason is convenience. While in line at the grocery store checkout, you notice on the check stand some razors. It’s more convenient for you to buy those razors than to drive another 10 blocks to a drugstore. That convenience is a reason people buy from you. If you have a warehouse near the customer, it makes it more convenient for the customer to buy something he or she would otherwise have to drive across town to pick up.

Mal Mixon is the ormer chairman and CEO of Invacare Corporation. A complete story of Mal’s rise from rags to riches is told in his book “An American Journey,” published by Smart Business Books. It can be found at www.anamericanjourneybook.com and on Amazon.com.

To solve problems for the customer, it starts by going out into the field, Mal Mixon advises

Mal Mixon always enjoyed selling.

“You learn more about your company selling. But I can guarantee that if you think your company is good, let me go out and sell, and I will tell you 10 things you are not doing that you should be doing,” he told an audience at the inaugural Friends of the Cleveland Public Library Executive Speaker Series in June.

“In the field, people will tell you they want things for say, less money, at a lighter weight or in a different color.”

The Executive Speaker Series was established to bring together champions of industry and state to the Cleveland Public Library campus to share philosophies, insight and experiences gained throughout their careers. Andrew Jackson, president and CEO of Elsons International, moderated the discussion.

Mixon, the retired CEO and chairman of Invacare Corporation and author of “An American Journey,” spoke about the opportunities he was able to take advantage of during his career.

Known for his “can do” attitude, Mixon took a big risk and bought his first company, Invacare, in a leveraged $7.8 million buyout. He grew the company’s sales from $19 million to almost $2 billion.

Mixon said at Invacare he went into the field every month for 40 years. The face time with the customer was important not only to maintain the relationship but to determine if there was satisfaction or dissatisfaction with the company’s products. He cited an example to illustrate his point.

“We were having some quality problems at Invacare, and I went to see this guy in Phoenix. He chewed my tail out for an hour,” Mixon said. “I said, ‘You’re right, you’re right.’ I answered all his questions and told him what I was going to do.

“Then he took me down to meet the purchasing agent, and he told the purchasing agent, ‘From now on, I don’t want you to buy anything but Invacare.’” What brought about the happy ending was Mixon taking responsibility for the problem.

“If you’re wrong, admit it. Don’t sweet talk the customer to tell him you don’t have a problem. Be a problem solver,” he says.

Mixon, who holds a master’s degree in business administration from the Harvard School of Business, said he moved from a marketing position into sales at his first job after Harvard.

“I said to myself, ‘I could never lead this organization if I don’t learn how to sell.’ So I asked for a territory. I did pretty well. I was making more money than where I was before,” he says.

He credited his boss, E.P. “Pat” Nalley, who taught him about selling and put him in circumstances where he was able to learn.

How to reach: Friends of the Cleveland Public Library Executive Speaker Series, www.friendscpl.org/executive-speaker-series

Be patient and wait for success to arrive; do what is necessary to win

Editor’s note: Mal Mixon, former chairman of Invacare Corporation and a well-known entrepreneur, will regularly share his business advice and experience with Smart Business readers. Ask him a question at [email protected] and your inquiry could be the inspiration for his next column.

Q: You write in “An American Journey” about the opportunities you took advantage of. What if you were graduating now with your master’s degree in business administration? What trends do you see?

A: I’ve been on the Harvard Business School advisory board the last few years, and today’s graduates want to work on Wall Street where starting salaries are phenomenal — much higher than industry. Fewer graduates want to work for a company. One of my classmates runs a huge company and says he doesn’t even recruit at Harvard Business School anymore because he can’t compete with Wall Street.

I think if you go into business, you start at a certain level and work your way up. A lot of the graduates today want success a little too fast. But there is not much I would change about my life. Every job I took I tried to be the best I could be, I learned and then I got promoted. I performed, but had to strike out on my own to be a CEO.

I was good at sales and marketing, and my superiors did not want to take me out of it. If I had to do it all over again, I\ wouldn’t do anything differently.

Q: I am in sort of the same situation you were in at 36 years old. I have a family business. I look for companies to buy that I think would add value, too. It’s a very difficult environment. I don’t have a lot of money. What sort of advice would you give me if I were to try to do what you did today?

A: A lot of people say they want to buy a company, but I am not sure they want to do the things necessary to complete a transition. It’s more difficult today; there is more competition. You have to let lawyers and accountants know and talk to everybody you see. I would say it generally takes a year, unless you are lucky, to find an opportunity.

Here’s a story I’d like to tell you: I once bought a company with zero money. I was walking my dog on a Sunday afternoon, and I ran into my lawyer friend Bob Gudbranson. He told me about a deal, I later put together a finance package and received a spectacular return.

It looked like I was required to invest $3.3 million. I was able to do a sales-leaseback for $2 million on the property. Secondly, $1.5 million in receivables (from highly reputable companies) could be purchased for $1 million. So I borrowed $1 million secured by the receivables. I paid back the loan, took the profit on the receivables after tax and invested it in the company.

You never know from where your next deal will come. Just be on the lookout and let people know you are seeking an opportunity. Also think about putting your investment group together. If you find an opportunity, you’ve got to be able to put it all together financially.

A complete story of his Mal Mixon’s rise from rags to riches is told in his book An American Journey, published by Smart Business. It can be found at www.anamericanjourney.com and on Amazon.com

Mal Mixon offers answers to readers’ questions on turnarounds and joint ventures

Editor’s note: This is the first installment of “Ask Mal.” Mal Mixon, former chairman of Invacare Corporation and a well-known entrepreneur, will regularly share his business advice and experience with Smart Business readers. Ask him a question at [email protected], and your inquiry could be the inspiration for his next column.

I have an opportunity to acquire a company and bring it out of bankruptcy. Can you give me some advice on how to turn it around?

A: If you feel strongly that the company still has a heart, the first thing to do is to try to restructure it. Cut the fixed costs to the bone and look at improving cash flow.

But many people live in a dream world, and if the sales don’t supply enough margin, you really have to adjust your fixed costs to the level of business you are in. Banks will generally be supportive with lending if you are in a positive cash flow mode. Even though you may be losing money, if your EBITDA is positive, you can generally find financing to get you through the crisis.

The one principle that I would tell you about turning around a company is achieving positive cash flow. The point is, cash flow is more important than profit. Lengthen your payables and shorten your receivables. When you try to lengthen your payables, you don’t want your vendors to get too nervous that they cut you off. But generally, you can get another 15 to 20 days.

Look at a sale-leaseback on any property or buildings you own.

If you’ve got a plant, sell it and lease it back. That will give you some cash. You would be renting instead of owning a building or facility. With your sales representatives, if they have a high salary and low commission, you need to put them at a high commission and low salary.

Q: What do you think about joint ventures as a means of taking a company global?

A: When I was a young man, the company I worked for was trying to do some joint ventures, and I was never impressed because, first of all, you argue about who is in charge. If it is a 50-50 arrangement, nobody is in charge. That is even worse than having somebody in charge. Let’s say you make $100 million in this country — you only get to keep half of it.

Today the world is becoming one community. There are different languages and different cultures, but people essentially have the same challenges worldwide.

People should embrace it and accept the way it is. It is fun to compete in the world market. I have done business in virtually every country in the world.

You can sell in any country. You don’t need a factory to start. All you need are receivables, inventory, salespeople and service people. Later on, if your business gets large enough, you can build a factory or buy an existing one.

Mal Mixon is the former chairman of Invacare Corporation and a well-known entrepreneur. A complete story of Mal’s rise from rags to riches is told in his book “An American Journey,” published by Smart Business Books. It can be found at www.anamericanjourneybook.com and on Amazon.com. Visit www.invacare.com


Consider a leveraged buyout as a faster, easier way to own a company

The vogue in today’s business world is to start a business, and you may hear how an idea was fostered out of a garage. The chances that a bank will support such a venture are zero. The chances you will find a venture capitalist interested in funding a garage startup are slight. You really must hope to find an investment angel – your only real choice. Sure there are exceptions, but you are looking for a needle in a haystack.

Instead, let me make the case for a leveraged buyout. I maintain the road to riches is easier and much faster via the leveraged buyout route, especially if you are talented and still have little money. Here’s how it works.

The scenario

First, you must find an asset-rich business, preferably a business run by a second or third generation. In many cases, the company is no longer run by the founding entrepreneur, and is in a harvesting or maintenance mode. In other words, the company is just bouncing along with little injection of new ideas, innovation or capital.

Secondly, you must determine the approximate price the seller is asking for the business. Let’s say $5 million. The company’s value is usually determined by a multiple of earnings. A slow growth or zero growth company will usually sell at a low multiple, and a growth company will sell at a higher multiple.

Beauty is in the eye of the beholder. The ideal company for a leveraged buyout is to find a no-growth company that you can turn into a growth company. That is what we did with Invacare Corporation and Royal Appliance Manufacturing Co. (manufacturer of the “Dirt Devil” vacuum cleaner).

In both cases, we made millions of dollars for investors.

Back to the $5 million company. Next, go to a banker and determine how much the bank will lend on the assets. They will usually lend 85 percent on receivables, 50 percent on inventory and 50 percent on the quick sale value of plant equipment.

Getting a loan

Let’s assume the bank will loan you $3 million. Now you need $2 million and then you will own a company. Maybe the plant is worth $1 million, so you sell the plant and lease it back.

One million dollars to go. Maybe you can talk the seller into holding a note for part of the purchase price. Say $750,000. Now you only have to raise $250,000 in equity to buy a $5 million company. But you don’t have any money.

Usually the jockey, or the person who will run the company, gets what is called a “carry,” which can vary from 10 to 20 percent of the company for free for putting the deal together. All you need to do is sell the bank that you are worthy of getting the required loan and convincing investors that you are worth investing their $250,000. If you have any money at all, invest in yourself.

I am always more interested in what percentage of your liquid net worth you are putting in the deal more than the absolute amount. All you need to do is to sell the bank and investors on you and your plan.

Mal Mixon: Become a capitalist — no matter what its size, it’ll be your business


Few Americans really understand capitalism. They think mostly about getting a job someday and think capitalists are the rich guys who live in New York City. When I was growing up, my teachers would ask me what I aspired to be — perhaps a doctor, a lawyer, a teacher — but never once did they tell me I could own a piece of the rock and become a capitalist.

My teachers never spoke to me about owning or starting a business. I knew absolutely nothing about how to start or run a business. It was always, “Who are you going to work for?” or “What do you want to be?” It was never, “Do you know how to start or run a business with only a little money?” My school never brought any guest speakers into my classroom to teach me about business. 

Focus on your approach

The closest I ever came to running a business was my childhood lemonade stand at my Aunt Eva Jane’s house, where I spent my summers as a youth.

Even after I graduated from Harvard Business School, where I learned the principles of running a business, I still focused on employment in my early years. I had little money and never realized I could own something. After I had worked for 10 years and made money for others but little for myself, I began to question what I was doing. Then I began to learn about leveraged buyouts and sale-leasebacks, and how I could use a bank’s money to purchase a company with very little equity.

This thinking led me to purchase a small company called Invacare Corporation with $19 million in sales for $7.8 million with only $10,000 of my own money — I was 39. Today the company has grown to $1.5 billion in annual sales. Some 100 deals later, here I am at 73 still looking for my next deal. Once I learned my first lesson of capitalism with Invacare, I repeated it many times over. 

Own your piece of the pie

The lesson I learned, which I wish had occurred earlier in my life, is to own something as soon as you can — no matter how small. Become a capitalist! There are very few people who can accumulate wealth based on salaries. Learn your skills while on someone else’s payroll and then when you have your own company, you will have the positive outcomes that only your ownership can bring.

The lack of learning about entrepreneurship really needs to change in America; we have to change the mindset among those teaching our youngsters.

Believe in capitalism

Capitalism is the freedom to create something new and reach one’s self-realization.

I believe in this so strongly that I work every year with Richard Osborne, a professor at Case Western Reserve University’s Weatherhead School of Management, in a course he teaches on entrepreneurship.

I am one of the subjects for his class to do an in-depth study of my life experiences and professional career.

Some of those who have been invited to participate in the class include entrepreneur Dan T. Moore III and former Cleveland Clinic CEO Floyd “Fred” D. Loop.

Each student is expected to write a 3,000-word article that captures what he or she has learned about entrepreneurship. This assignment accounts for a big portion of their grade — so they are highly motivated to do a good job. 

Mal Mixon is the chairman of Invacare Corporation. A complete story of his rise from rags to riches is told in his book “An American Journey,” published by Smart Business Books. It can be found at www.anamericanjourneybook.com and on Amazon.com. To contact Mixon, email him at [email protected]. For more information, visit www.invacare.com.