Buying to Get Better

Growth is imperative for an in independent boxmaker. Pouring capital into your business, however, is not the only path to achieve it. Advances in digital printing, heightened expectations for precision engineering, shifts in customer preferences, competition from overseas, increasing demands for faster turnaround, shorter runs, and high-​quality customizations—the industry is constantly changing. Companies that want to be around for the next decade and beyond must grow and change as well.

For a number of packagers, growth is a result of acquiring other operations and not primarily a result of expanding organically by hiring more sales staff, building new plants, adding equipment, and increasing production. Inorganic growth, through acquisitions, generally results in faster expansion, quicker cash flow, and an immediately expanded customer base.

Englander dZignPak

Marty Englander, president of Englander dZignPak, which celebrates its 50th anniversary this year, has built the company primarily through acquisitions. “Englander Container started in 1967 in Waco,” he recalls. “Most of our market was in Central Texas. In 2000–2001, the economy took a pretty tough tumble, and at that point in time—for no other reason than the economy—Englander lost 25–30 percent of our business due to acquisitions, closures, and so on. About that time, I took over as president of the company, and I began trying to look at how we were going to replace that business.

“Our Waco-Central Texas market wasn’t large enough to replace it, so we began to look at where we were going to go. Our first acquisition was River City Paper in San Antonio. That was successful. So when the company continued to grow after that, we started looking at what’s next. We bought a small digital company in Fort Worth in 2007, then ventured deeper into digital and screen printing in 2009 with the purchase of a sign, banner, and in-store marketing company. Then an opportunity in Arkansas came up, and we acquired Stribling Packaging and Juiced Creative.” This acquisition expanded the company’s production and design capabilities as well as its regional reach. It also opened the door to opportunities with Wal-Mart.

Inorganic growth, through acquisitions, generally results in faster expansion, quicker cash flow, and an immediately expanded customer base.

Meanwhile, another Texas company called Hager Containers was on a similar path. Led by a trio of owners that included Carl Renner, Hager had recently acquired Shelby Packaging, which added graphic design, distribution, foam, and wood to Hager’s corrugated business. Such expansion deserved a name change, and Hager Containers became dZignPak, with an emphasis on POP displays, sign holders, literature racks, and trade-show displays.

The leaders of Englander Container and the newly branded dZignPak had known each other for years. Now, they looked at each other and “we asked if 1 and 1 could equal 3,” Englander says. The companies joined forces in 2011. Today, Renner is vice president of the merged Englander dZignPak.

When it comes to acquiring other operations, Englander says, the company’s market, product mix, corporate culture, and assets and equipment all play a part. “Culture is probably as important as anything,” he says. “If we’re looking for a company to acquire, we want to find the right people who fit our culture.” Culture is critical because the organization needs to be well-integrated, operating as one unit. “I’d be lying if I said it was all easy,” Englander admits. “Some things have been easier than others.”

Among the top challenges was integrating software systems among plants. “That plays into culture, too,” Englander points out. “X group is used to doing it this way; Y group is used to doing it that way. Integrating vendors also can be a challenge; you’re used to working with someone, and now you need to work with somebody different. It’s also challenging to make sure we have a consistent message going out across all the managers of the company.

“Looking back, I don’t think we were as fast as we should have been with our corporate communications,” Englander admits. “People need to hear a common message. There needs to be clear leadership, a clear path, and clear communication and goals across the new entity to ensure the most success. I’d like to say everything we did was perfect, but it wasn’t.

“You have your plan, you know what you’re trying to achieve. But inorganic growth might bring in a lot of new people. They need to understand what you’re trying to achieve, what you’re doing, and why you’re doing it. If not, all of those people are going to create their own answers. They’re better off hearing it from the leaders.

They need to understand what you’re trying to achieve, what you’re doing, and why you’re doing it. If not, all of those people are going to create their own answers.

“When that doesn’t happen, you can see the effects in morale, the way employees react to situations. Those are the things that let you know you should have done it differently. I think the thing I’ve learned the most through all of these acquisitions is that clear, concise communication with both internal and external customers is the key to success.

“We’ve been most successful when we’ve focused on our core competencies. We’ve learned you can’t be everything to everybody. If I’d looked a little deeper into the crystal ball, it would have definitely changed some things.” For example? “I didn’t realize how fast things would change regarding digital printing. Also, I probably wouldn’t have gotten into screen printing at all, and I’d probably have invested in different equipment. But through those acquisitions, we got some very good people who are still with us.”

Jamestown Container Companies

The situation is somewhat different at New York state-based Jamestown Container. Like Englander dZignPak, the company has a long history of growth through acquisition. Unlike Englander dZignPak, though, Jamestown Container is not so much focused on buying physical plants as they are in expanding their pool of customers and personnel.

Founded in 1956 by Glenn Janowsky, Jamestown Container Companies is a multiplant, full-packaging supplier offering corrugated, custom shipping boxes, wholesale packaging and shipping supplies, foam, POP cartons and displays, and contract packaging and fulfillment services.

For Joseph R. Palmeri, vice president and COO, the economy is largely responsible for driving Jamestown’s approach to growth. “I would say our growth is about 70 percent acquisitions and 30 percent organic. Our market here in western New York, part of the old Rust Belt, has really shrunk, so it’s tough to grow organically. Jamestown was once the furniture capital of the United States, where all the buyers came. This company started because of that. But that business has all moved out, and there hasn’t been a lot of growth. We hit our high-water mark in the late 1990s, and we haven’t passed it since. So, if you’re going to grow, you need to grow as much as you can organically and then do the rest through acquisitions.

“Our business model has been to buy companies and then consolidate them into our facilities. We’re not interested in buying brick-and-mortar; we’re buying their business.”

When choosing which businesses to pursue, Palmeri’s top priority is that the company’s customer profile fits with Jamestown’s book of business. “Then we look at the equipment they have, the culture. Are they similar to ours? Are they focused on taking care of customers? We look at potential growth within 200–300 miles of that company. All of that has worked for us.”

The challenges Jamestown encounters also differ from Englander dZignPak’s. “One of the big challenges is assimilating people,” Palmeri notes. “If you’re going to buy a company and then shut it down, you have to be aware of and follow the laws. It’s also a challenge deciding who you’re going to keep, and then making your pitch that Jamestown is the better company, so they’ll want to stay on. You’ve got to look at tax consequences, pension plans, commissions, 401(k). If you’re buying brick-and-mortar, you can also run into environmental .”

For Jamestown’s most recent acquisition, H.P. Neun, the biggest challenge was coming to terms with a different mentality about how to go to market. “Most of our plants, we bring in sheets in the front and ship them out the back. Neun was more of an inventory-based company.”

When it comes to offering advice, Palmeri says, “Don’t buy just for the sake of buying. Don’t assume you have to buy and keep those plants operating; ask yourself if you can bring the business in-house. Also, don’t be afraid of joint ventures. You don’t have to have total control if you have the right deal. But look at the equipment available and the people available.”

Before jumping in, it is critical to weigh the benefits as well as the challenges that accompany inorganic growth.

Weighing Your Options

Once you acquire another company, you’re suddenly larger. But you have also acquired many more parts to manage. There may be a steep learning curve as new employees struggle with new software and new systems. Existing staff must learn how to manage the expectations of new customers. Unless you are fortunate to have extensive resources, you may also be dealing with new debt. Before jumping in, it is critical to weigh the benefits as well as the challenges that accompany inorganic growth.

Benefits may include:

• Acquiring a product or service you don’t currently offer.
• Gaining a fresh and expanded customer base.
• Tapping into existing equipment and processes.
• Adding a variety of trained employees.
• Joining with an existing brand’s reputation.

Yet there may be downsides for every advantage:

• Products may be outdated or in need of refinement.
• Customers may be reluctant to shift allegiances.
• New equipment may mean new training for current staff.
• Existing employees may have morale or may not adapt to the new culture.
• You may need to rebrand to showcase new capabilities.

In the end, the effort required to reshape an acquired company—along with its current employee mix, customers, and products or services—might mean that profitability and organic growth may be delayed.

The question of how to grow is not an either-or proposition. Both Englander dZignPak and Jamestown Container use acquisitions and consolidations to strengthen their efforts while continuing to invest in new equipment, new staff, and new sales efforts. Neither approach holds the single solution for growth in a highly competitive market. The two approaches work best in tandem.

“Buying somebody is the easy part,” Englander cautions. “Merging the organizations and really growing the new company is where the hard work is.”

Robert Bittner is a Michigan-based freelance writer and frequent contributor to BoxScore.