LOS ANGELES — It was before his time in plastics, but Trend Technologies Inc.'s Bill Hobbs said an experience trying to merge operations at steel factories has stayed with him, even as he now tries to meld new operations into fast-growing Trend.
Hobbs was running two companies for Britain's Bridon plc, in charge of more than 150 steel-related factories and distribution centers, when the company needed to turn around a German steel wire plant it had bought.
The German firm was not profitable, so Hobbs' company began sending over managers from the United Kingdom who made detailed suggestions to the Germans. Six months later, it was still "losing all kinds of money," Hobbs said.
So Hobbs halted the advice trips. Instead, he simply told the German managers what he wanted, gave them resources and a deadline. Nine months later, the German operation was profitable.
His lesson: be wary of imposing your own "best practices" on someone else.
Hobbs, now Trend president and chief executive officer, addressed a wide-ranging panel discussion on managing mergers and acquisitions at Plastics Encounter, held April 10-12 in Los Angeles.
John Mack, CEO of U.S. Business Exchange, a mergers and acquisitions service in Santa Monica, Calif., said the slowing economy is not likely to slow M&A activity all that much.
Across all industries and sizes of companies, mergers and acquisitions are down from a white-hot 2000, but the levels still are well above even those of the mid-1990s.
"We are seeing a downturn, but we are not back to sea level yet," he said.
In the plastics industry, M&A activity is even less likely to slow, he said. That's because the industry is still very fragmented — the largest processors account for only 15 percent of the market — and because original equipment manufacturers continue to boost outsourcing and reduce suppliers, he said.
"That will drive consolidation for years to come," he said.
James Swartwout, chairman and chief executive officer of Summa Industries in Torrance, Calif., said it's important to trust your judgment — not just the financial statements — and to understand the motivation of the person selling the company you want.
Summa has grown in the past 12 years from $3 million in sales to $150 million, and has acquired 11 plastics processors since 1993. Drawing on that experience, Swartwout also recommended hiring a lawyer skilled in M&A. And, he said, you need to be prepared to walk away from the deal at any time.
Both Hobbs and Swartwout said the Internet plays a surprisingly strong but low-key role in M&A. Hobbs said a Web site says a lot about how a company views itself. Swartwout said a small company he is interested in buying responded to his inquiries — after ignoring many others — because Summa's Web site intrigued the would-be target.