Just over a year ago, SDC Nutrition and Reaction Nutrition merged.
While SDC was primarily a powder manufacturer of nutritional and health supplements, Reaction manufactured capsules. The deal aligned five major brands and contract manufacturing under SDC, which was about 30 percent larger.
“What that’s done for us is to be able to offer both capabilities to our customers and their previous customers, as well as fill capacity of our new facility,” says CEO and Co-founder Sean Marszalek.
He had only ever done a small brand asset acquisition, which included five employees, so he wasn’t sure what to expect.
Combining the two cultures into one was a challenge. Both companies had similar headcounts of about 40. Today, SDC has about 90 employees.
“It took more time than I expected to feel like one company,” Marszalek says. “We had similar businesses in the same industry. I didn’t think it would take as long.”
His initial thought of six months turned into 11 months before it felt like one company, with people working together, and fluid teams and departments.
“We did bring in some consultants initially to help with the integration, from an operational side,” Marszalek says. “It was a lot of training. It was a lot of management being involved hands-on.”
SDC’s SOPs and quality systems were ahead of Reaction Nutrition, so it took effort to get the new employees up to speed on those standards. But the new company did adopt Reaction’s enterprise resource planning system. SDC was planning to upgrade its ERP, but Reaction’s custom-built system slowed that process down, which he says has been a big help.
Reaction had two facilities, while SDC had one. Since the merger, one Reaction location has been shut down and the other is being used as a warehouse.
While the employees were hesitant when the merger was first announced, Marszalek feels they handled the communication well. Both management teams set meetings with each department at all three facilities to share information and answer questions.
“We let them know, and that way they heard it from management’s mouth, of what we were doing and why we were doing it,” he says. “We knew that there wasn’t going to be much reduction in headcount prior to the merger, so we were able to rely on that. There weren’t going to be a lot of redundancies because we had two different types of operations that needed the people there.”
Overpromised, under delivered
One surprise, though, was the influx of business when SDC could sell its customers capsule products and Reaction Nutrition’s customers powder products.
“We were surprised at the amount of business that came in all at once, post-closing, and that caused us some backlog issues and exposed gaps that we had in our operations or capacity or equipment,” Marszalek says.
If he had to do it over again, he would have taken more time to look at all of the potential business and structured a timeline around bringing that business in.
“We knew what our business was and we knew what their business was, but the synergist business, we didn’t realize what that could do by trying to bring that all in at one time,” he says.
