Oh, the Humanity of Acquisitions
Mergers and acquisitions are significantly reshaping the competitive landscape, and they will continue to do so. With manufacturing facilities, the big story surrounding a new negotiation typically concerns increased capabilities, enhanced efficiencies and greater profitability. But, it takes a village to produce printed business products, and the human resources arena is where a lot of the action takes place.
Keith Walters, president and CEO of Ennis, Midlothian, Texas, explained that company owners usually will have approached Ennis about being acquired. “We have been approached by some companies where, for one or more of many possible reasons, we choose not to engage in discussions. The potential acquisition must meet certain financial standards for us to consider the opportunity.” The employees of the acquired company are, understandably, very nervous. “The first thing they ask is whether or not they will be able to keep their jobs,” said Steven Osterloh, director of marketing. “The desired scenario is for the employees to remain, but each acquisition is unique,” he said. Added Walters, “Most of the acquisitions over the last eight years have been individual facilities and haven’t had large support staffs.”
Ennis typically looks for companies where the existing management team wants to stay and manage the business. Previous owners often become general managers of the acquired company, as in the case of Bob McAleavey at Specialized Printed Forms, Caledonia, N.Y. In other situations—such as with Richard Miller at Calibrated Forms, Columbus, Kan.—a long-tenured manager may ascend into the general manager position. “It is not our intention to eliminate positions, but the facility needs to be profitable. If it’s a struggling facility, there may be changes, but they don’t always involve headcount reductions,” said Osterloh. “There may be changes in the cost structure or in the way things are done to gain efficiencies. Planned changes could be as minor as changing from a weekly to a bi-weekly payroll. Even then, the strategic plan includes options for assistance to employees during the change over.”
Another concern for employees are potential changes to their existing benefit packages. During due diligence, Ennis’ human resources team goes into the location to research factors such as insurance coverage, 401Ks and pension plans, and comes up with a game plan for integrating the new company. In some instances, Ennis’ benefit package ends up costing less and providing more to employees. In other cases, particularly in areas where insurance is more competitive, a company may have a great, cost-effective insurance plan the employees are happy with. Sometimes, a plan can be cost effective, but it may not be working well. “The key is to find a solution that works well for all parties,” commented Osterloh.
A few Ennis plants are union shops, including the Leipsic, Ohio, plant of the former Crabar/GBF, acquired in 2004. “When a union facility is involved, it adds another layer of complexity since there are negotiated contracts to consider,” said Osterloh. “Ennis has maintained a good relationship with its unions over the years. Our last work stoppage at a union facility was in 1971.”
When the deal is finalized, the newly developed strategic plan is implemented by human resources, which could involve a team or a single individual depending on the size of the acquisition and the number of facilities. The transitions have been very smooth for the most part, but difficulties can develop if paperwork has not been properly maintained by the company being acquired. In one case, improperly kept retirement plan records had tax implications that could have caused serious problems after the completion of the deal. “All issues were identified prior to closing. The proper paperwork was completed and now the legal guidelines are being adhered to,” explained Osterloh. “At the end of the day, these employees are better off since the acquisition is part of a more stable company.”
Ennis developed a mergers and acquisitions team consisting of representatives from all the essential business functions, including executive management, as well as sales and marketing, human resources, IT, credit and accounting. The team conducts an in-depth analysis of each potential acquisition to determine what is necessary to make the deal successful. The issues dealt with are different for each acquisition; perhaps there needs to be more IT involvement for a particular company, more sales and marketing input for another. “We look for companies that fit or complement our existing business model or that bring us complimentary products which our distributors currently sell,” said Osterloh. “For example, Calibrated is very large, has a great brand name and is also considered a low-cost producer. There were some immediate concerns from distributors that we would change Calibrated’s quoting process, but that hasn’t happened.”
Said General Manager Miller, “Not only did Calibrated gain the buying power of being part of a much larger organization, but we also gained the operating efficiencies fostered by the support from the different departments that exist in a larger corporation. The acquisition has been a positive for the employees of Calibrated,” he added, “and we feel we have made Ennis a stronger company overall.”
At present, Ennis reports that it has 41 manufacturing locations and six distribution centers throughout the United States and Mexico. “Our recent acquisitions of Specialized, TBF/Avant-Gard and two of the former Crabar/GBF plants have added significantly to our integrated products offerings,” said Walters. “Recent acquisitions have also added jumbo rolls and increased color capabilities. In addition to products, the acquisition of Specialized now gives Ennis a presence in the Northeast.”
Of the more than 17 companies the organization has acquired, Osterloh explained that some of the original names, such as Crabar/GBF, are no longer out in the marketplace, but have been dissolved into Ennis. But, while some names have been dissolved, others, such as Calibrated and General Financial Supply, have seen stronger branding campaigns since the acquisition. “We continue using an acquisition’s brand when it fits our marketing strategy,” said Osterloh. “Although Ennis is nationwide, we still operate regional facilities, and keeping select brand names in certain regions makes sense.”
Looking forward, Ennis believes that further industry consolidation is inevitable. “Companies throughout our channel are consolidating,” commented Keith Walters, CEO. “From raw material suppliers to distributors, consolidation is happening and will continue as our industry continues to evolve. Ennis will continue to follow its strategy of acquiring companies that complement the products our customers sell.”
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- Ennis, Inc.