Naples, Fla. — Global and economic growth can provide its own set of challenges to plastics processors.
Three industry pros tackled the ups and downs of those types of growth at the 2016 Plastics News Executive Forum, Feb. 15-17 in Naples, Fla.
Global expansion didn't come easy for Evco Plastics Inc., an injection molder in DeForest, Wis.
“I started visiting China in the mid-1980s because we wanted to get into mold building there,” President Dale Evans said. “We ended up opening a tool shop in southern China. But you have to be aware of cultural differences. At one dinner I ate too much because in that culture if you cleaned your plate, that meant you wanted more. So they kept bringing me more and more food.”
Evans would recover from this culinary catastrophe and later lead his firm to winning the Plastics News 2015 Processor of the Year award. Other challenges of international growth, he said, are language gaps and the fact that Asian businesses “have more than one set of books.”
Internationally, both Evans and Don Dumoulin, owner and CEO of mold maker Precise Mold & Plate of Columbus, Ind., learned to pay attention to those local customs. In Mexico, Precise is expected to provide food for its workers at every meal. While in China, Evco provides a dorm for its employees to live in.
But in the end, Evans said that successful growth “comes down to people — every business is a people business.” But even a people-centric approach can have challenges. In Evco's case, the firm eventually started its own Asian business from scratch after Evans decided he couldn't trust the people he had been working with.
Economic growth can take the form of a merger or acquisition, according to Rick Weil, managing director with Mesirow Financial in Chicago. Weil has worked on more than 100 M&A deals in his 16 years with Mesirow.
“Not a week goes by without M&A activity in this [plastics processing] sector,” he said. “There are a lot of competitors being acquired, and private equity is the driver of that.”
But doing M&A the right way also takes some work, said Dumoulin, who bought Precise in 2013.
“The challenge with any M&A is due diligence and making sure you're doing the right thing,” he said. “Until you run the company, you're not sure what you have.”
At a previous career stop, Dumoulin's employer bought a Swiss company that made insulin pumps. But the buyer wasn't aware of a regulatory issue with the company. As a result, the buyer couldn't sell the company's insulin pumps in the U.S. for two and a half years.
Evco has found success in Asia, but Weil said recent M&A trends have European and Asian buyers now looking at the U.S. for acquisitions.
“The U.S. and North America are, by comparison to the rest of the world, safe places to do business,” he explained. “A lot of foreign companies are pounding down the door to have a beachhead here.”
Recently, Dumoulin has been contacted by four private equity firms — two from the U.S. and two from Japan — about selling his company. Just before the Executive Forum, he was contacted by a buyer representing the Saudi royal family.
“The world is becoming one big market,” Dumoulin said. “It's pretty challenging.”
Private equity firms have provided a steady flow of capital and flexible and abundant financing, Weil said. But there still remains an imbalance between buyers and sellers in plastics processing, with more interested buyers than willing sellers.
