Building the OTC Strategy after an M&A

[0:00] Marinko Marijolovic:

Now just throwing that payphone bit by the way, because that was the last place I was thinking of finding the phone period, let alone a payphone. You know, it’s like, why is the government running phone lines, electricity, and all this stuff down here? But they have everything from running water to a payphone on the bank servers. So it’s kind of interesting. So anyway, just a little bit by myself. There I am with ShurTech brands. And most you folks probably have never heard of the company, but we are located outside of Cleveland, Ohio. And so I worked for short brands, but I also represent Shirttail Technologies, which is a tape manufacturer in North Carolina. And we make a variety of packaging, duct tape, painting tape, masking tapes, things like that that we sell within North America and across the globe. And so we have two different businesses, our parent company ShurTech, they sell primarily on the industrial side and then sure tag brands up in Cleveland. They sell to the retailers. So people that would sell to customers like us. All right, so this is a pretty kind of general overview, I guess. If you’re involved in a merger or acquisition, you know, we’re not going to get too much into the weeds. It’s kind of like the big picture thing. And if anybody has any input to offer, please chime in. We have a pretty small group that I think every person will look at here, you know, even without a microphone. But like I said, we’ll kind of address just an order to cash strategy. You know, we’ll do it step by step. And then as far as key considerations, I guess just before you start, like how many people have been involved in a situation where the company has merged or acquired somebody and you’ve kind of had to do some work.

[2:15] Marinko Marijolovic:

Okay. So everybody’s kind of pretty much been there, done that kind of stuff. So, all right, so some of the things that consider, the thought process when the company is acquiring somebody emerging and so, you know, we represent accounts receivable. One of your probably top three, maybe top two assets of a company. What kind of business you have, So it’s a highly valued asset. Companies spend a lot of time determining the validity of that asset and ensuring that it’s good before they pay full price or whatever. But in a lot of instances, the AR function itself is a low priority because everybody assumes we’re currently doing it. You know, it will be fine. And then when you implement it, everybody says, don’t worry, there’s any hiccups or any issues, you’ve got time, we’ll take care of it at that time. But as soon as that happens a couple of months later. They’re all over you. If you know, if the results are not there, they’re looking for improvements. Things of that nature, all of a sudden, everybody forgets what had just happened. And now there is a learning curve that you know, that the whole process in place. So some of the things, I guess in general that can go wrong and that’s probably something you have experienced. Can you meet the customer’s needs? That’s point one. That’s the biggest demand and by that, it’s obviously the customers we’re selling to, but also our internal customers. And if you have not had an opportunity to familiarize yourself with the acquiring business, that’s a problem. Like in some instances, I’ve been involved in the front end and I’ve kind of had ample opportunity to at least gather some information on the company, you know, check out the receivables and all that stuff. But another instance and brought in very late into the process and it becomes a problem.

[4:30] Marinko Marijolovic:

And then the question is, do you have the knowledge within your team or yourself to cover your basis, If the other business is different or in a different industry or a different geographic area, you have the skills, you need different people for that. And then as far as you know, you’ve got to make sure that there is no loss in business and that you are meeting all the demands of that business and of your existing business as well. So a lot of times what happens is you can’t put more effort into the company that you’re acquiring. In the meantime, the existing business starts slipping a bit. So one of the things to look at is usually in these situations is that we leave everything alone. We centralize it. You know, what do we do? Because obviously, if you’re the acquiring company, you can still be in charge of the receivables that you don’t have at that location. So like in my situation, I clean the whole company in North Carolina, but we handle all the credit and collections up in Cleveland. So it’s a little different. Basically, each company kind of needs to decide what’s on your own, what they’re doing. So some of the things to consider obviously is a number of business units. If you’ve got, you’re acquiring a company that’s got one business unit, maybe just easier to slap it all together and you move on. But if someone’s got 20, 30 business units, that’s not going to work. You know, work for all. The other thing to keep in mind is you don’t have to centralize everything or leave everything out there. You can’t create regional pods or similar industries.

[6:33] Marinko Marijolovic:

You can centralize and merge into one function. The other big thing is work. You know, if they’re doing work on your building, that’s a problem. But the other thing to consider is IT. So if you know you are using an ERP system, and the other company is in the same system, great. But if they are not or they got a home ground home system, that’s gonna be a problem. I’m at a site where there is their own customization ERP system, and also no customization system. So if you’re the company that does not have any customization and then you’re bringing somebody in and they have everything customized. Those people are going to be too happy if you flip them just over automatically in your system. And then obviously you need to understand those systems as well and then to pick those up. The other part is just the industry type of customer base. So in my case, I’ve got an industrial side and I’ve got a retail side. Those aren’t that different, the widget kind of thing. But it is a big difference. And just in the mentality of the way we operate in the way we go to market. But if you’re in a service environment, for example, and you’re acquiring like a manufacturer or parts or vice versa, that’s a big learning curve, the whole organization in the way you’re operating. So you need to be very versed in how the business is operating and make sure that you can kind of have a clear understanding and explain that to the rest of your vision, because if issues crop up, usually the bottleneck kind of gets pointed to your area. And then just as I said before, with the AR processes, different businesses or different industries do things differently. Someone customizes someone who doesn’t, but the other issue is just that everybody’s kind of gotten used to doing things one way or the other. They’ve kind of built it for the existing businesses that like special billing of some sort.It won’t be you’re willing to do that for a specific customer. And those customers are used to that. People are used to doing that. And all of a sudden now, you acquire that business, you are no longer able to provide that service or you didn’t even know that it was required. It’s a big job. It becomes a big, big problem. Likewise, if you just had a few accounts and now you’re inheriting thousands of accounts, that’s a big learning curve because you have to shortcut some of your basic processes that used to have touched everything. Now you gotta start automating things becomes a big problem. And then the last one is pretty basic. It’s cultural. And if you’re buying somebody in California, you’re in New York. Not that big of a deal, though. Learn to live with your rudeness, but outside of that, you know, it’s not that big of a deal. But if you’re dealing with other countries, regions, the culture, different currencies, things like that, time zones, all those things could be an issue. So, you know, you might say, well, we acquired the business and they’ve got a facility in Europe and the air reports to you. Not a big deal. But on the other hand, you also have to make sure you make yourself available because you just have nothing else than the time zone. And then you’ve got to be willing to travel to these places and kind of got to be upfront with that if you know if you don’t want to do that. He had to speak up right out of the gate. Otherwise, you’re going to be pretty miserable, I guess.

[10:20] Marinko Marijolovic:

So just a little bit about me. So I’m with the company that got acquired. So, sure, I got acquired by ShurTech Technologies about 10 years ago and I was out there actually at the time of the acquisition, but so we had to decide like where are we going to put the accounts receivable? And most of our finance group is down in North Carolina, but ultimately the decision was made that we need to work closely with the sales folks on the retail side. So we’re going to be up in Avon, Ohio, in Cleveland and for whatever reason, we most of our salespeople are from the Cleveland area, not the best place in the world, by the way, to have salespeople because of threat. flights are tough to come by. But we just felt that that group with sales or marketing was there. We needed to have a close relationship. Where it is on the industrial side, most of our salespeople work their homes across the country. So it’s not in one spot. And the biggest thing for us. You know with the salespeople is that. Since the acquired company was in retail and the existing company was an industrial, I was not familiar at all with the retail side and just kind of interesting. They even had less interest knowing anything about the retail side since they acquired, I was almost like they’ll go away. But we are in the same time zone. So that kind of made it easy that there wasn’t a big deal for us. And then also just the workforce. We find that it’s a lot easier to hire people around the Cleveland area because it’s just a bigger metropolitan area, whereas in North Carolina we’re like an hour northwest of Charlotte and a town called Hickory. And sometimes we have to hire people out of Charlotte. That’s a long commute. People that want to live in a smaller rural area. So we just figure that the Cleveland area was better for us in that situation. So some other things that we kind of, you know, considered are. To our existing, there’s our existing workforce that has the skill sets that they need. And even though the way we did it is when we botched the. We were owned by Henkel Adhesive prior to that. And so for the first year, Hinkle handled all of the credit collection work for us still after the acquisition. So you think we had plenty of time to kind of shore up and get out, get ready and kind of learn the business and all that stuff? So I actually started right after they stopped doing all the work for us. And to my amazement, the company was not prepared. They were not ready. It was almost like they didn’t believe that it really happened like it was gonna. You know, I was gonna go away for some reason, which was bizarre because like I said, for a whole year, you knew. And things started getting really bottlenecked. And one of our biggest complaints was getting back to the wholesaler thing. Salesforce was like, we’re not hearing anything from your group. We don’t even know if there’s a problem. But you guys are telling us the air is going out of control. And then the air group is gone. We never hear from anybody in sales. SALES is not responding. And so there was a major, major disconnect there. And so that we needed to work through. And then just from a. You know, as I said before, the support, we just fairly get more bang for our buck. So we have two customer service teams, one in North Carolina, one in Cleveland. And so we still have a little bit of a disconnect from the times from the ads. I try to kind of visit both on a regular basis. Obviously, I’m at the one buddy and this is the other one on a regular basis. And then if sales are having any kind of meeting or anything like that, I try to attend those as well just to kind of keep the, you know, the visibility and all that out there and to make sure that if there are issues because no one ever talks about the issues until you need deep in it and then all of a sudden is like, well, we’ve got this problem. So just that whole communication, I find it that I’m spending more time trying to keep the communication going internally, you know, versus what our customers are, you know, outside of the business and stuff. And then, you know, what kind of strategies do we develop? Should we, you know, tweak the functionality so far? In our case, we had a pretty simplistic process from the industrial side.

[15:03] Marinko Marijolovic:

And, you know, we had a lot of accounts, but it was kind of just your steady eddy kind of accounts receivable, just, you know, you kind of grind through it. Where on the retail side, it’s a lot different. It was a lot more time. And getting digging deeper into the accounts and especially the big thing was with the deductions, obviously, you get pounded with deductions and fines, compliance issues on the retail side. You don’t have that with the industrial side. And the company faced a lot of challenges early on, with that. And then just, you know, how to get the workflow going. How do we make sure that everything is moving around and that’s when we realized we needed to improve our systems. So some of the things we had that were homegrown just weren’t working anymore for us. And, you know, we use AP But we basically use the base SAP at that time. And when we decided that we needed to soup it up and that’s kind of how my brand into HighRadius we were looking for somebody to help us add SVP modules and stuff, which just for the record to this day we still have not added the modules, you know, so we don’t know everything, but we’ve kind of moved on past that and we just use the HighRadius tool. So the next point is, you know, lift and shift or lift, transform, you know, which one do you want to do? So the keys are. You know what each one is. What are you trying to accomplish, I guess? You know, you got to evaluate the situation, your existing business, the acquiring business, and then decide, you know, obviously it always gets down to costs. What can you do and so forth? Or even whether or not, you know, whatever you want on your job out of it or you don’t have all of that, it will get you to get more opportunity to be online. You know, you see it and hope you’ve had to deal with it. You know, in this situation. So we had time to take advantage of that. We did a poor job of it. But that’s also good. I mean, I’ve been into certain situations where we’re acquiring a company, the same cities I drive over. Kind of talk to the people that really helps out. I actually see the whole process. And that’s where you kind of get the nuances and stuff in that situation is a little more comfortable because. Even if you bring it all into one house, everybody kind of feels like, OK, I’ll still have a job because, you know, we’re just I just have to drive a little further for work. That does help. And then the big thing is, you know, make sure that you try to hire in advance if you can. You know, that’s always a benefit and allows you to if you know the skills that you’re going to need. You can, you know, look at what you have in your team and then hire new skill sets and then whatever you change or whatever. You know, if you’re going to try to do any transformation, make sure that you can scale up because that’s our, you know, the company makes an acquisition. They’re not going to that’s not the only back. They actually just stop with one. Usually it kind of gets bigger. And then hopefully the reason you made it grow sales and all that stuff that, you know, you’ll need to increase it.

[18:39] Marinko Marijolovic:

So basically, if you’re just. Lifting and shifting, just like it says, you’re basically just moving things around that a big deal. But if you’re trying to transform, you know, make sure you’re very clear about the results. You know, I’ll look at the K.P. eyes and then even if you’re not sure of the acquiring company, like what their results were and stuff, you can at least base. Your metrics on your current business and say, well, this is what’s acceptable. Currently, I need to figure out a way to, you know, to replicate that within with the next business, or at least you’ll say – hey, it meets what, even though it might be a different industry. But at least it meets these requirements here. And then make sure you document anything that you read the design because it probably may need to be tweaked or undone later. So that’s a big issue. And then just, you know, make sure that you’re aware of the risk. You know, the changes and anything that goes wrong. I said, you know, the fingers were pointing at you and then train, train, train and train some more and make sure everybody’s and try to make some simple changes at first. Don’t do it all at once. Well, you people get used to it.

[20:03] Marinko Marijolovic:

So just some basic steps to look at. So, you know, evaluate the business, like I said, of the acquiring, I mean if you can visit them, it’s great. You know, I’ve had to do that in some places. And then, you know, see how the operation the key to me always is if you understand the operations, because obviously you are part of the order process and you need to know the pinch points and what they’re looking for. So in my case on the retail side, when I get an order, it’s not a code red because usually, the order has to be staged. There’s a lot of lead time. You know, if there’s a promotion or anything like that. So we know, well, I had, you know, the orders. But on my industrial side, it always seems to be a code red. That’s like, you know, the orders got to go out today, a product. So make sure you understand the nuances of that. And then the other thing is, you know, design your strategy so you can meet that, you know, take that next step and then make sure that you can figure out if there are any functionality gaps in your current process and what the demands of that new business are going to be. And then. You need to know, what is it that your company, you know, what their demands are and what guidelines that they’ve set for you. As far as what they want to do with the way they do business and then they implement your plan of action.

[21:40] Marinko Marijolovic:

Just make sure that everybody’s aware you’re a team. Be it sales, customer service, warehousing, logistics, whatever. Make sure that everybody’s on the same page. So any kind of change? Be upfront with them. Kind of say, hey, I know there’s gonna be some issues, but here’s what we’re gonna do. All right, so. Some best practices. Basically, you know, evaluating the scale and operations was kind of like a little summary here. As I said, the more you know about business, the easier it is to make the changes and drive the change for you to make sure that everybody is comfortable with it. With anything that you’re changing with the systems and then it’ll offer opportunities to your existing team, see if you know if you’ve got the right talent. And, you know, utilize them. And then if you don’t, you have to be practical with yourself. Don’t try to kind of put a square peg in a round hole and hire the people that, you know, they can come in and help you out.

[22:50] Marinko Marijolovic:

And if you can do it, as I said, the best part is if you do it a little bit in advance. It’d be great if they have a little time to learn if nothing else, about your current business and how you do things. And then if you can get them involved, You know what the acquiring company is. And don’t underestimate the, you know, the value of the people that you’re acquiring. And a lot of instances, there are still people that are willing to help, even though they know that they maybe, you know, displaced due to this. But a lot of people take pride there. Like, you know, I make sure my customers are getting the benefits and the service that they were used to. And usually, you know, they’ve got a bonus to stay on until the end and stuff. And so, you know, for all the ones you have to say, like, you know, I’m not telling anybody anything. You will have the opposite as well. And just identify those people and try to, you know, try to use them and then, you know, measure your performances. And like I said before, even if you don’t know what you know if you don’t have data. Excuse me. You don’t have data from your old company, at least try to get compared to your existing system.

And then just some basic thoughts. Usually. You’re making an acquisition because it’s either going to drive sales or it’s going to reduce costs operationally. So, you know, that’s kind of the key there. Yes. And then you will impact sales operations, the whole order processing cycle, even if you intend to or not you will end up doing some of that. And then also it’s really you’re the point person. If it goes wrong, you can get replaced. In a nutshell, that there’s easy to better put that in there. So some key considerations, some, you know, questions to ask. So I run I.T., you know, you got to decide, hey, the other town, you have the expertise. If you don’t, you better find them or educate yourself very rapidly. You know, don’t underestimate the needs of a small business or a small acquisition. Usually, some of those are the hardest ones to adapt to because they’re used to doing things the specific way. And then just put the whole stakeholder and make sure your teams clear, managements clear, you know, what to be expected and also what you think you’ll be able to do.

[25:28] Marinko Marijolovic:

So if you have limitations, then they’re putting pressure on you to take over the acquiring company. They are, you know, be upfront and say, I think I’ll take a little longer. I don’t think we’re ready. I think, you know, we got to leave well enough alone for six months. You know, there’s nothing wrong with that. And then, you know, build up the relationship, if you can, with the acquiring company. That’s always key. And then just the demands of the customers, make sure that you can satisfy those demands and look for unique accounts or unique business models. I guess that they may have. And make sure you can cover this. And then just the whole matrix thing. What do you need to change here in your current system? What do you need to change in your process to get the metrics or the results that you are seeking or that the company had promised to the shareholders? Things like that and then the whole time frame. As far as if you’re tasked with reducing costs or improving results, you know, you’ve got to be cognizant of that. And then just the clarity one size, as I’ve said before, doesn’t fit. Also, if you get a small business or a large business, one of the problems that we had in my current business is the business that we acquired was a lot bigger than the existing business. So that created some pressure. No one from the ownership and the fact that it paid a lot of money for it and the employees was overwhelmed with the value they just had. They had trouble with that. And there was a lack of leadership from the top on down and kind of say what we’re gonna experience. These are the pressure points. And then just, you know, what’s the priority of the company makes sure that you’re aware, so even if you’re brought in, you know, they tell you, by the way, we just buy this company over the weekend. You know, make sure they lay out here like, what are the expectations of your team and, you know, the whole credit and collections position.

[27:35] Marinko Marijolovic:

So at this point, anybody has any questions or anything? I guess maybe the better statement would be any experiences that you’d like to share that you ran into that may have been different. So, yeah, so for me as my father, my current place, I’ve not done that before. But at our current place; So the company’s culture update acknowledges the reasons called culture tech brands up here is a playoff on words and things like that. So one of the things that some of the business that the industrial side used to handle, now the retail side handles well, just one of the basic points. We have to have two sets of invoices. One says tape on it, one says ShurTech. Now you’re not really paying attention. You’re assuming the system doing whatever it needs to do because we ask for an invoice. You just send it out. Turns out that there are all kinds of outputs. And if you don’t use the right output to generate your invoice autism, they get an invoice for the wrong name. Now, some of the customers don’t care. They’re just like, I got to Bill. I’m good. Other customers are like, who are you and why am I getting the bill from you? But the biggest issue, sales & marketing would get very upset because they’re like, no, you know, these guys are still on this brand.

[29:16] Marinko Marijolovic:

To your point, and these guys are under this, we need to keep them separate. And so we were running into problems with that. The funny part is over time. Now, people know us as both companies and even internally. The difference no longer matters as much, but originally, yeah. You would think like, wow, you know, you just ran somebody over because it was a big problem because each side was trying to hold onto their brand labeling in their brand position and they were concerned that there would be deterioration or some customers would change their mind. Because now you’re representing a different brand. You just want the invoicing standpoint alone. So like even on my signature line and I have both short tape and short tag and sometimes people like which one of my dealing with and it’s like it doesn’t really matter. You didn’t look both and stuff. But that’s an excellent point. That’s like the thing that you think might stand out by marketing you.

[30:31] Marinko Marijolovic:

Right. Well, that is just so if you get accused of fraudulent comments and all this stuff. you know, in my case if someone is paying a bill for ShurTech but there P.O. was to sure tape and they should go bankrupt, it could cause problems, you know. You know, the bankruptcy. Someone can say, well, wait. They didn’t have the right to pay this. Even though they got to produce their correct invoices and all that stuff. So just even that kind of thing is an issue and stuff. But I think that’s where most of this stuff is a problem. You know, everything we went over here, there wasn’t anything like, oh, my God. Like, I don’t know what’s innovative, but it’s the little things that, you know, we get kind of caught up. Like, I got to make sure that the order comes in. I release it on time, that I have proper credit limits sets and then I’m collecting the money. And I’ll let you know we kind of get wound up in that. It’s all these little things that you did you kind of lose sight of. I mean, one of the biggest headaches is if they’ve been doing special billing for people. So then you got to try to replicate that one. Oh, it drives me nuts, you know. But one thing to keep in mind is there are only two things that you really have to do. So if you’re putting in a new system or if you’re a crank, call me whatever you got to be able to build on when we should produce because customers hate getting the product that they can’t match up to. They have lost any appeal. So there’ll be pressure on you for that. And then when they send the payment in that people post the payment, if nothing else, to their account, just reflects on it. Those are really the only two things. And that’s it. Everything else. You can ignore the credit. You know, you just open it. Open up the door and just let orders flow and stuff. Yeah. There’s a risk, obviously, there. But as long as your company is aware of that, hey, these are the pitfalls that we have. And we’re going to take some losses. But that’s all right. At least we’re not going to interfere with the business model and with the sales side of things, but everything else you can kind of work through. But it’s all these little things that just kind of crop up and usually, you’ll have people in your organization that don’t feel that they should acquire the company or they shouldn’t merge it all into one or something.

[30:38] Marinko Marijolovic:

And they’re going to point out all the things that you missed or they may be pertinent or they may not be in charge. And it’s like, well, thanks. You know, but tell me something I don’t know. Like. Help me. You know, instead of giving you helpful hints and positive things, that’s kind of the other way around. But, you know, some of them are good experiences as well. I would caution everyone I know from my own experience, the ones I’ve been involved in. When you leave it alone, even though it kind of reports still under you. And then you’re going to bring it in later, that ends up actually being more of a headache later than they feel just, you know, kind of the pull the Band-Aid off slowly or they just kind of rip all at once because everybody kind of gets a little comfortable. And then also the like. Oh, so your guys are going to be taking their work there and that’s what people get. Don’t get upset. And so that’s if you’re going to do that, make sure you entrench yourself or some key people from your team, at least you can understand that because usually, those tend to go worse than the ones when you just acquire them immediately and stuff.

[33:43] Marinko Marijolovic:

Anybody else has any other questions or points they’d like to share? So right now, the acquisitions we’re making are really small. So I do not have anything active in the system, but if you are an active acquirer, I guess you should create a process, a strategy that you can kind of shift everybody in kind of. I guess the firing squad at that team. You know, a couple of people from your group to address all these different points that they kind of get overlooked. So you should really have something ready. Ready to go. It depends on your organization. I mean, sometimes I work that they’re very open to sharing that. We’re looking at companies and here’s what we’re you know, and if we’re close to one and they’ll share their financials even at my level. But other companies I work at, that’s like a top-secret until, you know, until it happens. And then you got to kind of dive in immediately. So, you know, it just depends on your plate. But I would imagine that, you know, if you’re making a couple of acquisitions every other year, you pretty much know it’s comments. So you probably need to need to be ready. And that’s when you also don’t want to take your staffing to the bare bones. You know, you kind of want to give yourself a little fluff so you can’t take people away from the team and help bring that in. Or even if you’re not going to merge it with your existing process so they can learn and get them involved. But nothing does that. You can’t have a couple of people on your team handling specific business units or functions within that business unit for them just to kind of entrench them a little bit in the business process of the acquiring company.