Essay About Service Supplier Decision And Chemical Industries

First M&a
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Personal History
Complementary skills
First M&A
Closed: 1984, Jan 31
18-month search
Texas Catalyst
50M catalyst handing market in the US
1.3M revenue, 300,000 pre-tax
1.4M LBO
paying 200,000 too much for the deal
no sales
The industry
highly fragmented – many small operators
require energy and hands-on management
customer-relations: service supplier decision is made at the local plant level
outsource nonunion laborers
relatively low capital barriers
financing available from the equipment manufacturers
low price
70% for refining and petro chemical industries
chemical companies: workmanship, profit center, requires quality service
oil refineries: low price, cost center
EnClean’s early years
true partnership – Tim: higher salary in the early stage, rational; Malcolm: highly equity, emotional
1st year: consolidate catalyst market by maintain high service level and expanding geographically, broadening capacities
fast response time
expansion to other locations – Huston, Beaumont/Port Arthur area
expansion of product line to larger catalyst handling projects and to residential fuel units
2nd service line: industrial vacuuming segment – dry vacuuming business
The Parkem acquisition
strategy: providing services to multiple industries
Parkem: 10.4M revenue, 15% profit pre-tax, 8 locations
Bought for 8.1M
Changed its name to Parkem, consolidate locations, employees acquisition
Cross-selling services for a one-stop shop for industrial services: both high quality and low price
Large capital investments – capital intensive
Large debt and tight cash flows – negative cash flows
The EnClean Board
John Matson – operation issues
Tom Delimtros – entrepreneurs, VC
John Jaggers – tech VC, public market finance
The Maintech acquisition
By 1987, positive cash flows and paying down debt
Saturated the market
Expansion: by service line/geographically
Maintech International: industrial services and specialty chemical distribution operation
Was losing money
Bought in liquid vacuuming (3rd service line)
Expand to 13 locations
Connect-the-dots: having service locations within a day’s drive of each other to better utilize people and equipment
1987, POI consideration but stock market crashed
Strategic Planning Process
1988, 16 locations
misinformation and miscommunication
division managers chase business opportunities that were too far afield
strategy
shifted