(May 1, 2006) — Step2 Co. founder, Chairman and Chief Executive Officer Tom Murdough has sold his second company, taking a distinctly different route than his 1984 sale of Little Tikes Co. to Rubbermaid Inc.
Murdough had a simple, four-word answer when asked what lessons he had learned from selling Tikes. “I learned a lot,” he said.
This time, it was going to be different.
We've chronicled Murdough's frustration with how Rubbermaid, now Newell Rubbermaid, handled Tikes. Newell has changed management several times at the unit, based in Hudson, Ohio, and consolidated plants, as it worked to improve shareholder returns and fight against mass-merchant demands. Murdough at first stayed on with Rubbermaid after the 1984 purchase, but he retired as president and general manager in 1989 after complaining of certain “incompatibilities” with Rubbermaid.
He didn't agree with how his creation was being handled. By all accounts, staying on would have gone against the very principles that helped him build the company in the first place. He waited until his noncompete clause expired, and he started Step2 in 1991 with five employees.
Now 67 years old, Murdough has to be realistic about the future of the second company he built, which last year ranked as North America's No. 1 rotational molder in terms of sales. This year, Step2 celebrates its 15th year in business, with three plants in the United States and 800 employees.
Murdough could have sold Step2 to a strategic buyer. Potential suitors mentioned included Mattel Inc. But remember that Mattel in 2002 closed its last U.S. injection molding plant and moved the work to Mexico. That closing followed the shuttering of Mattel's rotational molding plant in Georgia. Mattel's first priority isn't maintaining U.S. operations.
Murdough may have had a deep concern that a strategic owner would interfere with the Step2 culture, affecting employee morale and breaking down leadership and trust that he feels are paramount to maintaining a successful corporation.
No doubt Murdough has made a lot of money on these deals, but he's also managed to build a reputation as a boss and owner who cares about his employees, and who tries to get the best “deal” for them. Twenty-two employees partnered in the deal with Murdough and Liberty Partners LP, and all have a vested interest in seeing the company grow.
Murdough still will be in charge. For when he retires — which isn't likely to happen soon — the firm has in place a young, energetic management team. It includes Bill McCallum, 45, vice president of marketing and sales, who worked his way up from the factory floor at Tikes and has been outspoken about his loyalty to Murdough.
Only time will tell if the choice to sell Step2 to Liberty Partners will pay off, but it was a predictable outcome after watching Murdough's frustration with Tikes. If Liberty Partners' history with manufacturing firms is any indication, Step2 will be active in acquisitions and continuing to build brand equity without affecting its U.S. manufacturing operations or its cherished culture.
The approach may be critical in maintaining one of the most recognized consumer brands when globalization, mass merchants and resin prices have made the world of toy and consumer products manufacturing anything but child's play.