Industrial Automation Companies

The Role of Private Equity

Posted on May 5, 2021 by

Clayton & Mckervey

Clayton & McKervey

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On this episode of The Sound of Automation, we talk to Rich Grajewski from Huron Capital to discuss the role of private equity in growing and transitioning your business.

Podcast Transcript

Announcer:

Welcome to the Sound of Automation brought to you by Clayton and McKervey, CPAs for growth-driven businesses.

Denise Asker, Director of Mkt. & Practice Growth:

Hey, Bryan.

Bryan Powrozek, Sr. Manager, Industrial Automation:

Denise.

Denise Asker:

How are you?

Bryan Powrozek:

Good, good.

Denise Asker:

Good. I understand that today you’re going to be talking with Rich who’s Polish name I cannot pronounce.

Bryan Powrozek:

Rich Grajewski from Huron Capital. Yes.

Denise Asker:

[crosstalk] Yes, him from Huron Capital.

Bryan Powrozek:

That is the man we’ll be speaking to.

Denise Asker:

And we’re going to be talking about the role of private equity in a closely held business.

Bryan Powrozek:

Yes. A very exciting role of private equity.

Denise Asker:

Yeah, well, I think I was telling you this before, but when I think of private equity, the first thing I think of is the movie pretty woman, because I think everyone knows this, but in case it’s been a while it’s been 30 years, the main character bragged about buying companies up and selling them off into little bitty pieces and making a big profit. So we’ve inherited some of this negativity in our minds, at least from Hollywood.

Bryan Powrozek:

Exactly.

Denise Asker:

Are you going to dispel some of those myths today?

Bryan Powrozek:

We are going to try to and I do have to thank Denise because I was unaware of this and probably one of the few people who haven’t actually seen the movie.

Denise Asker:

Come on, Bryan. We’re not that far apart in age.

Bryan Powrozek:

No, but my wife has tried to get me to watch it and I’m like, no, there’s a sports game on, I got to go watch.

Denise Asker:

We can compare notes later.

Bryan Powrozek:

Exactly. I’ll let you and Rebecca discuss the plot.

Denise Asker:

Sounds good.

Bryan Powrozek:

But, no, I do think there is, from the outsider’s perspective who doesn’t really understand how the machine works when you’re talking about succession planning and business transactions and things like that, you hear enough in and ritual, we’ll touch on this and we went over it when we were preparing, but you hear enough bad stories, right? All it takes is one bad story and now everybody thinks private equity is just looking to buy this up and strip the company down for parts and sell it off, which there probably are companies out there like that, but there’s also a lot of good companies similar to Huron.

Bryan Powrozek:

They really look for areas where they contribute value. Of course, everybody wants to do something and make a profit, right?

Denise Asker:

Sure.

Bryan Powrozek:

It’s not like they’re…

Denise Asker:

For-profit entity, yeah.

Bryan Powrozek:

Exactly, but part of that is we’re not just going to rush into any business that we think we can turn a quick buck on, we want places where we’re going to be able to add value, sustain that growth, maybe even supercharge that growth so that the owner profits off it, we profit off of it. In a way it’s kind of like their skin in the game, right? They’ve got motivation to make sure you succeed because they’ve invested in your business. Rich has some really good insights and hopefully for the business owners out there listening to this, it’ll give them an idea of what the private equity side sees and thinks about when they’re evaluating a business, because it’s just another tool in the toolkit, right? You could use private equity investment to grow the business, you could use it as an exit strategy. There’s lots of different ways or reasons why you might want to get them involved. Rich will talk about some of those and also just give you some ideas about the general process and what are they looking for.

Denise Asker:

Well, I’m eager to learn. I was going to ask you as a CPA, what makes a good private equity firm, but you kind of answered that in your setup there.

Bryan Powrozek:

[crosstalk] Hopefully.

Denise Asker:

So I’m going to pay attention.

Bryan Powrozek:

[crosstalk] I’ll let you sit in on this one so you can learn from Rich.

Denise Asker:

Sounds good, then we can talk shop later.

Bryan Powrozek:

Excellent. We’ll talk about Pretty Woman.

Denise Asker:

[crosstalk] Bye-bye.

Bryan Powrozek:

Thanks, Denise. Joining me today is Rich Grajewski of Huron Capital. Rich is a is it VP of operations?

Rich Grajewski, VP Business Dev. Huron Capital:

VP of business development.

Bryan Powrozek:

Business development with Huron Capital. Tell me just a little bit about, for folks out in the audience listening to this who may not be overly familiar with Huron, what do you guys do?

Rich Grajewski, VP Business Dev. Huron Capital:

So Huron Capital, we are a lower middle-market private equity firm based here in Detroit, have been for 21 plus years. What we do is focus on founder-owned companies in the business services, specialty manufacturing, specialty distribution, specialty industrial type businesses, as well as consumer industries.

Bryan Powrozek:

Okay.

Rich Grajewski, VP Business Dev. Huron Capital:

And what we like to do is we like to partner with good operational teams, good management teams, and those founder owners, and bring a lot of our resources to bear that we’ve been able to accumulate over our 21 plus year existence and help those companies grow, and then ultimately invest our investor’s capital and then be able to have a good outcome for all investors, including the founder owners, the management team, as well as the firm itself.

Bryan Powrozek:

Excellent. As we were getting ready for this, I think that’s one of the interesting things, if you look at the target audience for this podcast, so that same small to mid-sized industrial automation company that they’ve grown up in engineering. They started there, they grew the business, they built it up, and so a lot of these different things, the accounting concepts, finance concepts, things like that, they’ve had to learn as they go along. So I think if you’re an outside party, you hear private equity and there’s this potentially connotation or a little apprehension about private equity, but can you just give me a little bit about what makes Huron different in how it’s actually a good way supplement the growth strategy and maybe even turbocharge the growth strategy for a business owner.

Rich Grajewski, VP Business Dev. Huron Capital:

Yeah, absolutely. So, don’t Google private equity with the mindset that you’re going to find all good things, just like anything out there. They’re always have historically been bad actors in any case, but what differentiates Huron is that we focus on growing the company. So one stat that I like to tell our business owners when we meet with them is don’t be surprised if in the first year the EBITDA goes down, because we will be filling out that management team, we will be adding more FTE, more headcount, more resources, more infrastructure to that business in order to get it to a spot where it can support that rapid growth. That’s something that’s a little bit different with us.

Rich Grajewski, VP Business Dev. Huron Capital:

We’ll be very transparent to the business owners and let them know what our goal is, what our strategy is, but not only will we just be transparent, we’re going to ask for them to be able to help us formulate what that growth strategy looks like. We’re not going to come in and tell them this is what we see the growth plan to be. This is what we’re going to do. We really want them to have a hand in it, just like anytime you’re creating a partnership, you don’t want any type of seller’s remorse there. You want to be able to make sure that everybody is working together to achieve the same outcome.

Rich Grajewski, VP Business Dev. Huron Capital:

It’s hard to do sometimes from a private equity perspective, just because the business owners are so unaware of what we’re going to do, so transparency is always the key. A big thing with us is our Midwest roots. We invest heavily in the Midwest. We do invest in the US and Canada, but if you look through the 211 now transactions that we have partnered with, a large majority of them actually fall within the Midwest and I think that’s just a cultural fit. It’s very much so people that we like to work with and they look at us and they say this is what we’re thinking of doing, and they mean what they say and they say what we do, and we like to reciprocate that as well.

Bryan Powrozek:

Yeah. I think that’s the interesting thing from my perspective is that really, a lot of people think of their accountants as the trusted advisor, because we’re that unbiased third party. We will do your taxes, we’ll do your financial statements, but we get to see this cross-section of a lot of different businesses and give them some ideas of this worked well here, this maybe didn’t work so well over there, but you guys have a lot of the same thing, because you’re focused on those industry niches like you talked about at the outset, you can come in with your experience behind you and say these are the types of processes we need in place. You talked about adding headcount, things like that. So that’s really part of the value of getting involved with private equity, right?

Rich Grajewski, VP Business Dev. Huron Capital:

Yeah, and one thing I’ll note as well is all of our members, we all have experience within this both from an operating perspective, a lot of our founding partners had came from corporate America where they had P&L responsibilities of $500 million running, divisions, corporations, or entrepreneurs themselves that were CEOs of their own business had a good exit and outcome. Through that, not only do we have just the deal team partners, but we actually have three individuals that did not come from private equity. They are certainly well versed in the terms of what they do, but we’re not ever just investment bankers or private equity sponsors. So we actually have three people that focus on what we think are three key areas, which are pretty unique to a firm our size that focuses on the smaller end of the spectrum of the lower middle market.

Rich Grajewski, VP Business Dev. Huron Capital:

One is the strategy. So, head of strategy development, that’s Brian Walker. He’s actually a former CEO of Herman Miller. So anytime you can go into a small business or a lower middle market business and say we have an individual on our team for strategy development to help lead the CEO and be that mentor and be that sounding board, and make sure that strategy having already done that at a large corporation, a publicly traded corporation for 15 plus years, a CEO in 30 years, his whole career essentially there. Brings a lot of firepower. It brings a lot of credibility to the firm. Then on top of that, one thing that a lot of businesses struggle with is human capital. We actually have Julia Kellogg. She’s a partner of human capital, have held responsibilities at Smith & Nephew and other large organizations where she headed up the entire human resource department.

Rich Grajewski, VP Business Dev. Huron Capital:

She’s very adapt to designing the management team, executive payout, understanding how to do sales, commissions, payout, hiring, really standardizing any type of scope. We’d like to invest in more of the technical human capital type businesses just like systems integrators and other ones that you like to work with through the automation and Automation Alley, and the other places that you guys are involved with. Those are really technical individuals that you need to find, and they’re not easy to find. It takes a lot of time. While you’re working on doing whatever it is performing under that contract or chasing new business, it’s hard to be able to find the people to do that. So what we like to do is bring in that individual because it is an accumulation of people trying to work together to create a common goal, and you got to have the right people in there.

Rich Grajewski, VP Business Dev. Huron Capital:

So human capital is a big part of what we can actually help, and also sometimes take off their plate a little bit more. Again, if they have an HR person there, help train them or help them get them ready for what’s going to come, which will be your rapid growth path. Then on top of that, we have a partner of performance enhancement or performance improvement. This is a lifelong consultant road lawyer, worked at Alvarez, Marcel, Deloitte & Touche, worked with private equity companies, held positions at PE-backed companies as CEO, COO. So very much the technical individual there will implement supply chain or lean manufacturing, vendor concentration, purchasing programs, everything on both sides of the balance sheet from just a technical operation engineering aspect as well.

Rich Grajewski, VP Business Dev. Huron Capital:

So that person is Gab Mesanza. So when you can come to a lower middle market company and say that’s great, you have us, we’re good at finding other companies to be able to talk in and integrate into you, but how do you really do that? Well, we have these three individuals that keep us honest and help us to be able to round out our team so that you have more resources to bear.

Bryan Powrozek:

It’s interesting with my background, an engineer turned accountant, private equity is not exactly my forte. I’d heard the term before, not really understanding exactly what it is, other than that last term equity. So you think about they’re coming in providing capital and they’re going to want ownership as a result of some of that capital, but really with what you talked about there, you guys bring a lot more to the table than just the money you’re looking to invest. So, you’re able to help in a lot of different areas, especially that as a small to mid-sized business owner. Their expertise is that automation system or that control system or the thing that they’ve developed and built the brand around.

Bryan Powrozek:

Now you can help round out that management team and fill in some of those other areas with people who are equally experienced in the other aspects of the business. Something we’ve been talking a lot about lately is transactional activity, businesses looking to buy, businesses looking to sell and when you’re on the sell side, a lot of times it’s all part of your succession plan. What’s my exit strategy to get out of this. So PE really can be a part of that succession plan, but also could be just part of your growth strategy in general, given some of the resources you guys can bring to bear. When is a good time to start talking to someone like yourselves to see how it might fit in?

Rich Grajewski, VP Business Dev. Huron Capital:

I think the earlier the better. Not every conversation is ever going to turn into an opportunity, but we like to be helpful and if somebody’s going to come out to us and ask an honest, open question of what can I do or how can I maybe put myself in a better position for a better outcome? What are you some of the weaknesses you see? What can you help me identify? We love meeting with the business owners. Not that we have anything against investment bankers, that’s where we see most of our opportunities, and we actually do partner with most of our companies through an intermediary form, but being able to meet with the entrepreneur one-on-one is just something special for us because we all really like being able to work with them.

Rich Grajewski, VP Business Dev. Huron Capital:

Also if they’re willing to go out there, that’s already one thing we’ve identified, they’re already thinking of the future, right?

Bryan Powrozek:

Yeah.

Rich Grajewski, VP Business Dev. Huron Capital:

So they have the long-term vision and we can come in there really any time. We’ll help them look at whether they’re too concentrated in a customer. It’s hard to turn away good business, especially if that customer’s growing. If that customer is Amazon, you’d be crazy to say no.

Bryan Powrozek:

Exactly.

Rich Grajewski, VP Business Dev. Huron Capital:

Right. There’s countless other ways that can be illustrated, but really any time we can come in there, we can help them, guide them. Whether there’ll be a transaction or not, we’ll return that favor in spades just by saying these are five other people that you might want to be able to talk to, just to get an idea of what it would be like.

Rich Grajewski, VP Business Dev. Huron Capital:

Really just the main thing is just having an open and candid conversation. We’re always happy to do that.

Bryan Powrozek:

[crosstalk] Go ahead.

Rich Grajewski, VP Business Dev. Huron Capital:

We do have minimum investment threshold. So for everyone out there, we look for companies we’re investing out of two funds. So for our flagship fund, which focuses only on majority buyouts, we need a minimum of 8 million of EBITDA.

Bryan Powrozek:

Yeah.

Rich Grajewski, VP Business Dev. Huron Capital:

And then for our structured equity fund, we need a minimum of 4 million of EBITDA.

Bryan Powrozek:

Okay.

Rich Grajewski, VP Business Dev. Huron Capital:

So those companies, those where we’ll likely transact, where we get much more interested and maybe the conversations will accelerate at a quicker pace than they would otherwise, but even companies smaller than that, we’re always looking for add on acquisitions. We’re happy to have those conversations myself and my colleague, Heather Madland. That’s what we do all day every day.

Rich Grajewski, VP Business Dev. Huron Capital:

So really anytime is a good time to talk to us, and even if you’re thinking five, 10 years down the road, you don’t even know. It’s good to just think about that. Think about your exit strategy and then really think about your succession plan around that and what advisors do you need. They need individuals like yourself, like Clayton McKervey, their law firm, tax accountant, everything else around that, because when you do a transaction with a financial sponsor, there’s going to be a lot of diligence. Everybody loves diligence, but the more that you can surround yourself with those professional network service providers, the easier that’ll become, because it’s going to be like pulling teeth, but if you can at least get a little Novocaine in there, it won’t be too bad.

Bryan Powrozek:

Exactly. Well, and it’s interesting that you mentioned sitting down and talking to the business owners, because I know in our profession, I talk to clients all the time. I was talking to somebody at the golf club or I know another guy that owns a similar business and they did this and is there any way I can do it? And really that’s part of the benefit of bringing in someone like yourself is that not only do you understand if that specific strategy is a good fit, but you might look at it and say that one’s not, but there’s these other two or three things you could do here that are probably going to advance you closer to your goals than what you’re thinking about does. You get into conversations like that with folks?

Rich Grajewski, VP Business Dev. Huron Capital:

We do constantly. A lot of times it does happen at the country club or whatever club, the DAC. Somebody just had an exit and they’re talking to their friend. That does spread a lot of conversation around that. We would be happy to have those conversations with anyone, but really it’s just come talk to us. If you’re concerned, talk to your advisors and then they’ll give you an idea of what we would ask or what we would look for. But again, we have no dog in the fight when you guys come and talk to us, if you’re doing it under good faith.

Bryan Powrozek:

Yeah.

Rich Grajewski, VP Business Dev. Huron Capital:

We’re happy to sign an NDA and obviously be confidential about any information we share, both you share and we’ll share, but really just any type of conversation we’re happy to have.

Bryan Powrozek:

Sure. I feel like you you’ve touched on a few of these things, but if I’m looking at the potential options for getting investment in the business or an exit strategy, what are some of the reasons that a business owner might choose private equity over say a private sale to a third party or something like that?

Rich Grajewski, VP Business Dev. Huron Capital:

Yeah. So that’s that falls along the lines of capital as a commodity. It’s twofold. What are your end goals? Are your end goals to 100% exit the business? You’ve been through maybe two down cycles, 2008, and now what we’re experiencing and you’re just like, I’m done. I don’t want to do this anymore. I want to focus on sailing my yacht around the world or do something else. Strategic might be the best option. If you’re looking for someone to really help accelerate, generate growth and grow that business, grow that business that you’re tied up in. Your identity is tied in there. You you want to maybe step back from the day-to-day, but you don’t want to be completely out of the business because a lot of times we run into that with our business owners. It’s a very emotional decision.

Bryan Powrozek:

Yeah.

Rich Grajewski, VP Business Dev. Huron Capital:

Their identity is tied up in it. They don’t really know where they end and the business begins because they started it. This is the only place they’ve ever been.

Bryan Powrozek:

Yeah.

Rich Grajewski, VP Business Dev. Huron Capital:

They’ve never been somebody else’s subordinate. They’ve always been the boss. So that’s something that you have to go into and understand any type of transaction you’re going into. These entrepreneurs have typically been out on their own for 30 years, so there’s a different way that you have to interact with them as opposed to somebody that maybe has been an employee their entire life. You can’t tell them how things are going to go. You have to ask them and you have to work with them. More importantly, we want that input. We want to partner with the people that want to grow the business, because if we’re going to make an investment as a platform, that’s the business that we’ve chose to partner with to be able to grow, whether it’s a regional geographic product line, whatever we’re going to do, we’re going to grow that business through the ad-ons, and so really just anytime those business owners want to come talk to us, come talk to us.

Bryan Powrozek:

That’s the other challenging part, as you mentioned, they’re personally invested in this business. It’s something they’ve grown, they’ve developed. I was talking to a friend of mine who is a financial advisor and he’s been on the other side. After the transactions happen, the client comes to him with this big pile of money and says, here, I need you to do something with this, and there are so many soft-skill personal issues that come with that.

Bryan Powrozek:

Beyond being able to manage this person’s money, make sure you get a good return for them, but they went from having total control over that to now they’ve got to trust you. So it’s a similar thing for you guys because you’ve got they’re entrusting you with this transaction and especially if you talk about a majority sale, where you buy 51%, they keep 49. Well, now they’re trusting that you, with your 51%, are going to do what’s in the best interest of the business they spent their life building. So you almost have to have that interpersonal soft skills development as well. It’s not all just business of numbers and here’s the units out the door and that’s what we’re focused on.

Rich Grajewski, VP Business Dev. Huron Capital:

Yeah, absolutely. A lot of times for us, you can evaluate. You can quantify the numbers, you can quantify a lot of things, you can create as many KPIs as you want, but the hardest thing that we have to do is really understand and make sure that there’s a good cultural fit. You could have, and a lot of times we discuss this, we go through our pipeline every Monday morning, today was Tuesday because of the MLK holiday. We look at a lot of businesses. To give you an idea, we look at 1500 transactions a year. We might do 25 total. So that’s a pretty low hit rate on quite a large funnel. So we’re looking at a lot of different things all the time, and the biggest thing with us is understanding, is this going to be a good fit?

Rich Grajewski, VP Business Dev. Huron Capital:

They have all the intangibles, they have maybe backable IP, they have strong growth, they have got a good management team, but is that really going to be a cultural fit for us? A lot of changes when it’s really hard, a big thing that we struggle with and all private equity firms struggle with is what happens on day one of you guys actually becoming the majority owner? You just gave that entrepreneur or that family or that founder seven, eight, nine, a lot of zeros in the bank. So it’s really hard to understand where their motivations will lie once they see that, right? A lot of these businesses already had very good lifestyles, but this is life-changing, this is generational wealth that we’re bringing to the table for these families or entrepreneurs.

Rich Grajewski, VP Business Dev. Huron Capital:

So our biggest thing is understanding the cultural fit. We expect that a lot of the founder owners, their reason for sale is succession planning. They do want to step back, but they want to be involved to some extent. So what falls on us is being able to identify that next level of management and where are those strengths lying? So to any founder-owner, business owner out there, it’s obviously, you have to invest in your team, you have to invest in your management team, but also helping that management team grow too and give them responsibilities. What we like to see are some of those companies that say, and it’s again always hard to quantify, but the founder-owner is not involved in the day-to-day. Started it 20 years ago and it runs like clockwork.

Rich Grajewski, VP Business Dev. Huron Capital:

He’s done these steps over the last five years to essentially go back and maybe only handles a couple of key relationships. We want to be able to understand that key man risk there, but more importantly, we want to be able to understand and culturally fit with that next level of the management team. So if that person’s over those five years realize saying 2027, I want to be able to be done with this business and be completely out, and they start hiring, they start hiring maybe a VP of finance, or they start hiring a VP of engineering or whatever their businesses is in. They start filling out that management team so that they can do that. Seeing those types of investments in there will gain returns on the way out, when you come to a financial sponsor like us. To a strategic, it’s a little bit different because that business is typically a competitor of yours and they will be looking to acquire essentially the product, the service or the customers.

Rich Grajewski, VP Business Dev. Huron Capital:

A lot of times when strategics will come into a process, not all the time, but many times they’ll talk about the operational synergies and their operational synergies while it can be a lot of times duplication of headcount. So that’s something that founder owners should be aware of when they’re looking at a strategic versus a financial sponsor exit is again, we’re going to be adding FTE. We’re going to be growing that business. Typically, we’re going to be taking it from a lower middle market to a middle-market or larger business. Two ways that helps your employees is one, typically there’ll be an equity incentive program that are put in place for the employees, but two, it gives them long-term growth and understanding of where they can go and what opportunities lie ahead within a larger entity or a large organization.

Bryan Powrozek:

I think it’s interesting when we were preparing for this and talking about the cultural side of it that is a really hard thing because you can have two companies with the exact same balance sheet, the exact same P&L and just looking at it and saying we know we’re going to be able to work with this team, we know they’re ready to take that next step, whereas this team over here isn’t quite ready for that jump yet. So if you had to ballpark it and maybe you don’t know the number here, but you talked about the 1500 deals you evaluate, the 25 you do, are most of those skewed on the numbers and the financials that you say you look at this isn’t going to be a good fit, we’re not going to be able to add the value, or is there a decent percentage of that, that it comes down to the culture side and you say we can tell in the initial conversation’s probably not going to work?

Rich Grajewski, VP Business Dev. Huron Capital:

Yeah. We typically won’t get to the cultural end of the spectrum until we get to a formal management presentation.

Bryan Powrozek:

Right.

Rich Grajewski, VP Business Dev. Huron Capital:

Typically, in a non-COVID world that involves dinner the night before, full-length management presentation the next day, and then typically some type of conclusion at the end and you’re spending a day and a half, two days possibly with that management team. You get a site visit taken care of. You want to make sure that that company does exist, you’re walking whatever it is, the plan for the office. You’re getting a feel for the culture there. It’s a little bit more challenging actually in a COVID environment. To go back to your question there, I would say most of the deals fall out because of it doesn’t meet any type of our financial perspectives. I would say probably about 80% of the deals will fall off because of that.

Bryan Powrozek:

Okay.

Rich Grajewski, VP Business Dev. Huron Capital:

But the reason why is because for us to get to that cultural perspective, you have to go down the funnel process, so those are the ones that will be later down the funnel where they’ve checked off the boxes.

Bryan Powrozek:

Yeah. They’ve already been eliminated at a higher level.

Rich Grajewski, VP Business Dev. Huron Capital:

Yeah.

Bryan Powrozek:

Okay. So, I guess focusing in on that then, because really those non-cultural issues, the financial performance, all those things are things that business owners, if I’m a business owner listening to this and I’m thinking maybe five, 10 years from now, I want to be in a position where I can engage somebody, they can start working on those things right now and getting them cleaned up and fixed up right now. What are a couple of the things that you guys prioritize when you’re looking at a business in terms of what are the key things you’re going to evaluate to see if they check the boxes?

Rich Grajewski, VP Business Dev. Huron Capital:

So we have a four pillars approach on what we evaluate, and that’s commercial excellence. What does this company do? Why do they exist? Are they better than their competitors? What niche do they have where they are not competing on price or maybe the product or service that they give, what are the regulatory demand? Are there regulatory drivers there other than just it’s an enthusiast market? So really understanding, let’s understand the external commercial market. What is the addressable market? Then from there, we’ll go into financial excellence. What kind of financial disciplines do they have built in? Is it been run strictly off of P&L or are they actually completing all three financial statements and closing them in a monthly basis? By the way, that latter part, that would be very odd if a company was doing that at this stage of the game. Typically we’re coming in and helping them do that.

Rich Grajewski, VP Business Dev. Huron Capital:

The more financial disciplines that you can gain by working with Clayton McKervey’s of the world, the better, because that’s the crux. That’s where it’s all going to start. Then from there, the technological excellence, and I don’t mean technology meaning the IP or whatever else they have involved, but really their IT infrastructures too. Something that’s often overlooked. A lot of these companies might not have an ERP system or a true CRM built in They’ll have a job costing system or an engineering system and then they’ll have QuickBooks or some other accounting system. So being able to show how you’ve integrated all three of those or whatever else you’re using in terms of an integration system to be able to run your day-to-day and be able to run it both in a non-COVID and a COVID environment.

Rich Grajewski, VP Business Dev. Huron Capital:

It’s not a shocker as to why a lot of the companies that have continued to perform are service-based industries because they can do whatever they need to do anywhere. They’re not an onsite manufacturer. They’re not distributor that needs to physically touch, ship, pack, play, assemble, whatever it is. So look at the technological aspects. Then the biggest part, human capital. Comes down to human capital. So those are the four areas that we like to evaluate. Then we encapsulate what’s the strategy. What’s the growth strategy? Does that fit? Is it something that we are very good at? What we do is not unlike very many others in our end of the spectrum is where the by and built. So we’re not going to be the people who do the turnarounds.

Rich Grajewski, VP Business Dev. Huron Capital:

We’re not the fixers, we’re the buy and build. So we’re going to find that company, we’re going to invest in that platform and make sure that it is the industry leader within their respect or within their service or product or whatever they do, and then we’re going to build around that either through a geographic standpoint. We’ll go start knocking on the doors of their smaller competitors and then integrate them in, or we’re going to be able to do it from a product. They do roofing, right?

Bryan Powrozek:

Yeah.

Rich Grajewski, VP Business Dev. Huron Capital:

Well, if we talked about doing gutters, is there a company that does gutters where they’d be a natural fit? There’s a lot of synergies based on just the labor, the individuals that you have to use, the contractors the actual customer acquisition model, the advertising concepts around that. That’s how we think about when we’re looking at building these companies.

Bryan Powrozek:

That’s great, and I think that especially that strategy piece of those five things you talked about, the four pillars and then what you guys bring to the table, you guys only really control that strategy side. You’re the ones that can see, how can we do this? Those other four are all things that business owners can look at their business and say I can do more to differentiate myself to try and focus my business. I can do more with my technology, with my people. So those are all things that they can take on themselves to start try and really focus in on and develop, knowing that it’s just good business. It’s going to help you be more successful, but B it’s going to pay dividends down the road when you go to get involved in some sort of a transaction, whatever it may be, that you’ve already got that established.

Bryan Powrozek:

I would imagine even if I’m acquiring somebody, if I have no systems in place and the company I acquire has no systems in place, it’s just making a bigger mess verses we’ve got the way our business operates and now we’re going to integrate you into that and that really helps. Well, Rich, I really appreciate the time and I think especially those four areas. If business owners can take that away and think about how can I improve in these? Well first, how do I rate myself in these four areas? Where can I improve? What are some areas? That’s some real actionable insights that they can take away and utilize. So hopefully by now, everybody listening to this podcast knows how to reach Clayton McKervey’s website. They can reach out to us and we can put them in touch with Rich. Also, Rich, if someone just wanted to try and contact you on Huron Capital, what’s the best way to get ahold of you?

Rich Grajewski, VP Business Dev. Huron Capital:

Huroncapital.com. You will not mistake it. It is in Detroit. You’ll see some iconic buildings on our website and you can go to the team’s page. Myself is on there. All of our contact information for any member of the firm is on there. On there, you can also get a couple of our marketing slicks to show you what our investment criteria is, and then you can actually see our current platforms, which we have 21 right now. We closed one last week.

Bryan Powrozek:

Congratulations.

Rich Grajewski, VP Business Dev. Huron Capital:

Yes.

Bryan Powrozek:

Awesome. Very good. Well, Rich, thanks again for coming in.

Rich Grajewski, VP Business Dev. Huron Capital:

No, thank you.

Bryan Powrozek:

Thank you for tuning in. Don’t forget to like us, subscribe, and share on social. Learn more about Clayton and McKervey. Visit us@claytonmckervey.com. That’s C-L-A-Y-T-O-N-M-C-K-E-R-V-E-Y.com. We thrive on finding the opportunities and solutions you deserve.

Clayton & McKervey

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The Sound of Automation Podcast

The Sound of Automation Podcast

Industrial automation businesses are the driving force behind Industry 4.0, and Clayton & McKervey is here to help.

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The Sound of Automation: Looking ahead to CSIA 2022

In this episode we talk with Lisa Richter, Director of Industry Outreach and Growth at Control System Integrators Association (CSIA) . Lisa and Bryan look ahead to the CSIA Executive conference taking place in Denver, CO on June 27-30, 2022 and share with listeners what to expect, who will be there, and the discussion panel topics focusing on this years’ theme “The Future of Work”. 

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