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Manufacturing is an incredibly competitive and complex industry. Businesses are constantly looking for the best talent and the most innovative paths to growth. Often, that means a merger or an acquisition. But how does a business ensure it’s making the right move, and how does it successfully navigate the potential pitfalls?
These ideas were the focus of the 2018 Manufacturing Outlook on December 5, presented by the Chamber’s economic development arm, the Springfield Business Development Corporation.
The keys to combining
A panel of local experts – Krisi Schell of SRC Holdings, Bill Hammitt of Amprod Holdings, LLC, and Jason Corson of BKD Corporate Finance, LLC – offered their own unique insights into the world of mergers, acquisitions, talent attraction and company growth.
Both SRC and Amprod have grown significantly in the past, due in large part to acquisitions and joint ventures. Hammitt said the key to a successful merger is making sure the organization being added is a good fit – and that starts with the people.
“What talents do they have, and how do they complement what we already do day to day?” he said. “There’s also leadership talent. You can tell right away which organizations have talent in their leadership – workforce talent is difficult to find as it is, and leadership talent is almost beyond imaginable at this point.”
Hammitt also noted the importance of matching company cultures, a point Schell said is especially important because of her company’s open-book management philosophy and SRC's focus on joint ventures.
“The people and the cultural alignment are keys,” she said. “With our need to be able to share that financial literacy, our partners know that drives performance. So being able to match that up is very important.”
But why do companies seek out a merger in the first place? Corson said there are several reasons that a company owner could be looking to sell – and many have nothing to do with the business needing help.
“Often the owner has reached retirement age and they may not have an easy transition option, so a third-party buyer is the best succession plan – in today’s environment, a lot of baby boomers are doing that,” Corson said. “Or it could be a growth strategy. They’ve done a great job, but they may have reached a ceiling with financial resources. Some clients come to us and see a growth opportunity in their market (by being acquired) and just need help executing the purchase.”
And one other potential driver for a merger is the same issue facing nearly every industry: the need for workforce. Both Hammitt and Schell said they look to grow their talent pool through both acquisitions as well as through recruitment and retention efforts.
“We’re partnering with educators at all levels, K-12, technical schools, universities,” Schell said. “We have a challenge to change perceptions about manufacturing. It’s about creating personal aspirations and career goals. And then when we find these key people, we have to make sure they enjoy what they do and find fulfillment.”
Hammitt echoed those thoughts, noting that the best recruitment tool for his company is already in his business.
“We had to start with the talent within and develop them, and to be honest we weren’t doing the best job of that,” he said. “We had to look in the mirror, take care of our own house first and know that our own people are our best recruiters – and then incentivize them to help us do that.”
How manufacturers survive
The Manufacturing Outlook began with a presentation from Dr. Sarah Low, associate professor of regional economics at the University of Missouri, who shared findings of her research about what makes a manufacturing plant resilient.
Dr. Low studied surveys of manufacturing facilities conducted in 1996 and followed those facilities over 15 years to see which ones survived that period – a time of significant economic turmoil, including major international trade changes and two recessions.
Overall, she found that about half of the manufacturing plants she studied survived the 15-year period. But not all were created equal:
Low said a single-unit facility would be more inclined to stay in business even during lean times, while a unit of a larger company might redeploy resources elsewhere during a down economy. And a plant in a rural facility might be more likely to stay open because of its importance to the community. “Small plants with local roots are more resilient,” she said, “so it might be prudent to invest in plants with entrepreneurial roots.”
And, she added, though urban areas offer advantages like economies of scale and centralized amenities, outlying areas counter with quality of life. “So think about that in terms of attracting workforce,” Low said. “Springfield is a thriving area, and with Missouri State here and the amenities here – the trails, the lakes – don’t be afraid to utilize those things to attract workforce and business to the area.”