Q&A (Interview with Taylor-Dunn's CEO, Arthur Goodwin)

would make many shy away from such deals. He purchased the commercial and industrial vehicle company, when it was on the verge of bankruptcy in 1990 — a year when this country was entering one of the worst recessions since the mid-1930s. "It got pretty bad," Goodwin recalls, "but once again, we focused on servicing the customer and being solutions-oriented as opposed to product-oriented."

In a recent interview with GSE Today, Goodwin explains the how and the why of Taylor-Dunn's past deals as well as some of the strategies involved with those slated for the future.

How it is that you've decided to go ahead with the acquisition strategy to build your business?

We basically looked at the industry we're in, the personnel / burden carrying industry as it relates to GSE on the tarmac and as we were entering that business, we found out that it had a high growth potential. Of course, this is aside from 9/11 because I think that's a temporary setback. There was a lot more growth on that side of our industry, which we only operated on the periphery of. So, we made a conscious decision to focus on the GSE business and grow in that direction. Our strategy had to have these acquisitions happen in a certain sequence — not just to go out and buy some companies and throw them into a pool and say, "what's next?" We actually sat down and created a written strategic plan — what we were going to do, how we were going to do it, and in what sequence, which is what we felt was the most important.

Why is the sequence the most important?

About two years ago, we did our first joint venture with a company in the Midwest that provided tow tractors to give us further entry into the GSE market — A&G Mercury, which has the Mercury-Pettibone line. They're doing the manufacturing we're doing the sales, service, and distribution.

We went through that process and understood how valuable it is to have a service and parts operation in place to service the customer immediately. So, we lined up those acquisitions, or types of acquisitions that we wanted to go after, and put a servicing company first — parts distribution and an in-place, eloquent system of people who knew how to take care of the GSE market. We had a number of candidates and we ended up acquiring Metro Crown International, which was about a $10 million company based in Kansas City, MO — right next to the airport. This gave us a central location, and offered the capacity to double its size, which we've done in about six months. And, they had people in place. The acquisition strategy was to keep 100 percent of the people, which we've been successful in doing. Even the selling principal stayed on as a consultant to help us over the next three years to learn much more about the business and make sure we keep that customer focus.

Can you run down the order of your strategic buys?

First was the A&G Mercury, which represented manufacturing, then, service and support. What this provided was not only did it service the products we had, but serviced those items almost across the board of anything that runs on the tarmac that is ground support equipment-related. Metro Crown had a significant infrastructure and material databases, but also had inventories as well as very knowledgeable people who knew the products and could help mechanics and service people solve problems. It's parts and parts support and intellectual support — we don't physically do the work, we support the mechanics that are working for the airlines.

The third in the series was United Tractor, which we've just completed. United Tractor had three facets — one on the industrial side that fits our selling system and our selling channels very well. It had ground support side, which was a full line of pushback tractors. And, the third line they had included belt loaders and baggage tractors. We're just now in the process of assimilating that. The next deal is 100 percent in the ground support equipment industry exclusively and will happen this year. We both bring significant things to the union. This particular company has one of the best reputations for their type of product and they more or less lead the pack for their market niche. This deal has been going on for close to a year but the timing wasn't in the right sequence. 9/11 hurt their business a little bit, but it wasn't all that significant. Nor did the economy. We knew that this was one to bring into the fold to complete the strategy. It is a good, solid company.

Do you ever get approached by companies or do you pretty much find the companies you want to pursue?

Both ways. These deals were a mix. Those that are on the table today are also a mix. We went after two of them and three of them came to us.

Do you acquire these businesses as Taylor-Dunn or as part of a partnership with other companies?

Strictly a Taylor-Dunn deal, we're a private company and an under-levered company so we've got a lot of 'dry powder.' We're not the kind of operation that goes out and borrows a bunch of money or take money out of the company — we're here to grow.

What makes for a good acquisition?

It's really a number of things. One thing we look at is installed base. The second is how well can we service the customer and does the customer have a need and a desire for that product even though the company we're acquiring may have made some errors along the way? We take on the damage control problem to try to resurrect the name. The way we do that is through the best service we can offer — rapid delivery of parts, answer their questions and get their problems solved. Third, the people. We try to keep as many if not all the people through an acquisition. The people have the knowledge base, so our objective is to not come in and replace people, but to buy the company intact.

This is the time to do strategic buys. There's always financial buyers out there and bottom fishers and we're neither of those two. It has to fit our strategy. As the economy ebbs and flows, it may change pricing one way or the other, but we're not using that as a form of leverage. We have a situation where we're going to go in with win-win deals for everybody or we're not going to do them.

Do you acquire the assets, liabilities, or stocks? How does it work?

We've done both. We've done stock purchases and we've done asset purchases. It depends a lot on the seller and their tax position. It depends on the amount of goodwill we have to acquire because the laws have recently changed in how to deal with goodwill. Even though we're not a public company it still something I have to contend with.

What will make you walk away from a deal?

An exorbitant expectation by an owner. That does happen now and then. Others are excessive liabilities or contingent liabilities that can't be reserved for adequately. We look for a relatively clean company, not a perfect company, but we need to be able to add value. If we can't add some kind of value and bring this into our strategy then we're not going to buy something just to have it. That's for the financial buyers to do.

Have you had to walk away from a deal?

Yes, we have had to — in fact, we had to walk away from a couple last year. Also, a lot of things come to us that really don't interest us and very well could be good deals, but we're not really in the 'deal' business - we're in the vehicle business, the ground support, the industrial business and that's what we focus on.

Any more M&A advice?

Most acquisitions have to be looked at as 1+1=3. That extra 'one' you pick up has to be shared between the seller and the buyer. If it's one way, it normally doesn't work — especially for the customer. So, if we've got the customer as the end result and we have to satisfy that customer then everybody ends up winning. If everybody wants to take whatever they want off the plate day one it normally is not a good deal because what we're looking for besides products and capacity and capability is the people. That's where the real value of companies come along is those people who know how to take care of a customer.

What we're trying to do is not offer a product, we're trying to offer solutions. Just about anybody can build these things, it's a matter of how do you solve the customer's problem and satisfy his needs and do it very reliably.