For two companies that rode the investment roll-up boom of the late 1990s, the real work - and the real pain - began long after those deals closed.
United Plastics Group Inc. was an acquisition dynamo, buying five major injection molding companies in a year. Founded in 1999, UPG recorded more than $400 million in sales by September 2000.
But along the way, it hit some speed bumps that slowed its ride and reshaped the company. Now, it is running all its companies - doing business in several end markets - with a more hands-on, centralized approach, a move started last year when new Chief Executive Officer Shannon White joined.
``We had five different cultures, five different information systems, different policies and procedures,'' said Chief Financial Officer Richard Harris.
``Some of the businesses had strong manufacturing technology, processes and know-how. Some were a little bit weaker.''
Robert Alvarez served as UPG's vice president of technology from its founding until this spring, when he left to work independently in product development. He said UPG's visions of harmony among its purchased companies differed from what actually happened once the deals were done.
That led to UPG's current reorganization, which includes a decision to close four plants and lay off several hundred people.
``The interfighting that happened [at the plants] was beyond my expectations,'' said Alvarez, who spoke May 16 at the Injection Molding Financial Symposium in Chicago. ``It was a management nightmare. The integration didn't always happen as quickly as we had hoped.''
Those same hard decisions now face Titan Plastics Group Inc., another company building a shared corporate culture from the remnants of several companies it has purchased.
The victim of a weaker economy, Titan has laid off some 700 employees, or about one-third of its workers, since forming under a new name in October, Greg Botner, president and CEO, said during the same May symposium.
The roll-up strategy practiced by Titan and UPG, in which an investment group buys sometimes-unrelated companies, aiming to create a unified whole, is well past its salad days of the late 1990s. Today companies are more concerned with lean thinking and downsized costs than with acquisition fantasies.
Botner now calls the fallout from those days ``acquisition indigestion.'' Companies must pay the piper to manage costs coming from the processors they purchased, he said. The acquisition mind-set has turned 180 degrees.
``Everything had to do with speed,'' Botner said. ``But the time of wide-eyed speculation is over now. It's gotten back to looking at companies that make money the old-fashioned way. Otherwise, don't forget to include the cost of Rolaids in the acquisition.''
Some of those who made deals for a good price have found them not be bargains after all. Hidden costs, especially for improving the company culture and making those operations run more smoothly, eat up both time and profit, Botner said.
Titan, an injection molder with sales of about $200 million annually, knows that problem intimately, Botner said. The company is cleaning house to lower costs, he said.
``We've seen more pie-eyed performers in the last two years that I'd care to admit,'' Botner said.
Titan, owned by equity firm Charter Oak Capital Partners LP, had purchased molder Wollin Products Inc. of Stevensville, Mich. Added to the mix was its purchase last year of Plastic Engineered Components Inc. and several other processors.
Since then, the Portage, Mich.-based company has shifted plants, capped by the closure of Wollin's Stevensville facility in August. About eight customers, only accounting for about $2.8 million in annual sales, were shed, Botner said.
In the past year, the company has shifted more than 40 of its 400 injection presses to increase capacity, he said. Titan also has eliminated people who did not buy into its new policies. The company identified managers who could improve cooperation among plants and follow standardized work rules, he said.
Botner also warned that due diligence does not always reveal the secrets under every rock. That is where a central management approach has helped, he said.
``The knowledge of local people and the volume of customers is generally overrated,'' Botner said. ``You can't run an acquisition business like a tall hierarchy. Some unhappy key people or a costly quality problem can be devastating, and you have to eliminate that with great speed.''
UPG also has to control operations centrally from its Westmont, Ill., headquarters. That has meant a major change in how UPG is managed, Harris said.
``Everyone marches to the same drummer, and everyone reports into a centralized functional head,'' he said.
The company has rolled out a lean-manufacturing plan across all its plants and started cross-pollinating sales people across end markets. Harris said that centralized vision is not for everyone. Some executives and plant managers would rather have more responsibility, and some have elected to leave UPG, he said.
``This requires a lot of teamwork and coordination,'' Harris said. ``For those who have chosen to leave, that's OK. Most people are excited about having an orchestrated vision and strategy. We had too many heads in some areas and not enough in others.''
Among the changes during the past year have been the appointment of White as CEO; Bruce Smith as president and chief operating officer; Harris as CFO; Charles Villa Jr. as executive vice president of sales and marketing; Thomas Cho as vice president of program management; and Matthew Langton as vice president of sales support services.
Alvarez, a former vice president who left UPG, warned in general terms that moving to a centralized approach can be a ticklish situation. People are a company's best resources and can be disrupted by such moves, he said.
``You just can't shut down parts of an organization or you'll cause mass exodus,'' said Alvarez, targeting not only UPG in his remarks. ``It's a delicate situation, and people can go into a tailspin unless it's handled correctly.''
For all its changes, UPG is in good shape financially and better shape organizationally, Harris said. The company just opened its first Asian injection molding plant, in Suzhou, China, and is forecasting market-share gains in existing businesses, Harris said.
With several roll-up companies still finding their way, do not expect a quick return to the buying sprees of several years ago, said Jeffrey Kolke, plastics marketing manager for GE Capital Commercial Finance in Danbury, Conn. A bank consolidation has meant fewer investors, and prices for leveraged buyouts have returned to pre-``new economy'' levels, Kolke said.
``In the late 1990s, there was too much money in the marketplace,'' Kolke said at the Chicago symposium, organized by PennTar Consulting Inc.
``A lot of that money is not coming back.''