Today, Tim Sullivan is dean of Carroll University’s Sullivan School of Business, Engineering and Technology. But for the first decade of the 2000s, he helped grow mining equipment maker Bucyrus into a nearly $4 billion annual revenue company before its sale to Caterpillar in 2011. Throughout the 2010s, Sullivan led Gardner Denver and then REV Group, in both cases bringing the company’s headquarters to Milwaukee. In a recent interview with BizTimes managing editor Arthur Thomas, Sullivan reflected on his experience with the Bucyrus-Caterpillar deal along with other business transition lessons learned from mergers and acquisitions over the years. This conversation has been edited for length and clarity.
BizTimes: Looking back on the Bucyrus deal, what stands out to you the most about the outcome, the process, everything involved?
Tim Sullivan: “For being a deal of that size, the process actually went fairly smoothly, but I think that’s because the initial communication between myself and (former Caterpillar CEO) Doug Oberhelman set that stage. … Those deals, at that level, they always start with the CEOs … He and I laid out a fairly simple but straightforward game plan that we were able to execute on and do it fairly efficiently and fairly quickly. The other thing in the public sector you have to be conscious of is you’re a publicly traded company. So you’ve got very clear and very robust rules that you have to follow, set out by the Securities and Exchange Commission, and confidentiality and really keeping things pretty tight early is also very critical because with publicly traded stocks, if things begin to leak or rumors start to flow and that type of thing, it really has a very big effect on stock pricing and the purchasing and selling of stock. So, you have to be very, very careful. We were experienced, we knew that he and I had done deals before, so it was pretty straightforward from that standpoint. We laid out a very simple plan. We kept the timetable and it went, for a deal that size, very smoothly. And I think probably because again, the experience on both sides of the table.”
In general, what are the kind of things that make themselves clear only after a deal, whether you’re on the buyer side of it or on the seller side of a transaction?
“The one thing that’s always difficult to assess is culture. It’s interesting, for me, it was always very important. I mean, numbers are numbers, dollars are dollars. The equipment is the equipment, but people, I think, discount to a great extent other things, other factors. They concentrate on the dollars. They concentrate on market shares, where the machinery is and so forth. It still takes people to make a company successful. … I think a lot of people, when they look at companies, they discount too much perhaps the human factor involved going forward. On paper, any company can look great, but you got to make it work after you’ve done the acquisition, and that means that you’ve got to be able to effectively deal with the culture that exists in that company. And then you have to decide too, can you bridge the cultures? Can you bring a commonality to the cultures going forward? I’m telling you, there’s deals that just have never reached their full potential because people discounted that whole element to it.”
In terms of assessing culture, how do you go about doing that? If you’re there and they’re giving you a plant tour or you meet a few folks, everyone maybe puts their best foot forward. Culture is kind of the day-to-day, and you don’t really see it until it rears its head. How do you try to assess culture?
“I think you do the normal thing, like you say you, do the tours. … The other element that I always have done, and it worked out as well, you assess the customer base, you talk to the customers, ask them pointed questions. You don’t disclose the fact why you’re asking the questions necessarily, but the customers will tell you. A guy may tell you one thing, but then you talk to a customer (and they say), ‘No, that’s not what they do.’ They do something completely different. … You also go upstream too and talk to suppliers, they will tell you how the people operate.”
What’s your advice for other business leaders or owners for navigating the period after the sale?
“Here’s a mistake everybody makes when they look to make an acquisition, there’s this nice little category that they refer to as synergies, which basically are staff reductions. … One thing that I’ve done, and it’s worked famously – and people don’t do this – I keep everybody. Whenever we did an acquisition, I made sure that everyone stayed. … We basically said, we’re going to make the assumption and we’re going to make the valuation and what we’re willing to pay on the fact that virtually everyone’s going to stay. Now, not every deal can do that. On mergers, it’s kind of hard because there are going to be redundancies in staff and those types of things. The problem is you don’t know who’s good and who’s bad. For instance, you may have a lawyer, they may have a lawyer, you only need one. Well, who’s the best one? I don’t know. You’re going to pick wrong if you pick right out of the blocks.”
Those things probably sort themselves out somewhat over time.
“They do. You find out who the more talented people are and those are the people that you keep, but at least you go through a transition period where you’re learning. The other thing is when we bought the German company (DBT Group in 2007), I sat down with the CEO and he said … ‘I know you’re going to get rid of me. … you don’t need me.’ The guy had 30 years’ experience in underground mining. I said, ‘No, you’re staying … I’m going to give you a role that I think you’ll be very excited about.’ … The thing that you don’t realize is that these people all have bits and pieces of knowledge, some more than others, but that’s knowledge you don’t have, and that’s incredibly valuable to make sure you have a smooth transition and that the money that you paid for the company is actually going to pay the dividends that you hope it will be.”
In terms of making that work, the CEO sticking around in a new role, are there keys to making that relationship work going forward?
“First of all, the person really can’t be seen necessarily even close to being a CEO going forward. I’ve always created roles that are strategic, but not in a way there wouldn’t be confusion over who’s making the decisions in the company. For instance, in the case of DBT, the CEO was incredibly knowledgeable on the underground mining equipment business. I knew very little about it. I did not keep him in the underground mining equipment. I moved him into the surface mining side of the business. … So, he was excited, he was learning something new that he didn’t know before; I was running the company, but he was a resource to me. He knew 30 years of history that I would’ve lost, and it paid huge dividends in the first three to four years after that acquisition.”
Are there any major blind spots you see for business leaders as they navigate the sale process?
“You’ll never find everything in diligence. You just never will. … What happens, I think, is people will spend six months to a year working on a couple of handfuls of things that they can’t quite decide on because they’re complicated. They’re things that are either legally related or financially related or filings that weren’t necessarily self-evident, and they lose market momentum. They lose market momentum because the competition, while they’re playing around trying to figure out these handful of things, the competition is out there making hay because they’re trying to drive the market. … We always got to close quick. Anything that was contentious, we parked it and we worked on it over a period of time and then came to resolution. Sometimes it took a third party to help us resolve some of those things. But people don’t do that, they want all their T’s crossed and I’s dotted before they closed. That’s a big mistake.”
If you think the deal is correct directionally for your company, better to get it done and move forward?
“Yeah, even on a $1.3 billion deal, say even if it’s $100 million or $150 million, you’ll lose that in the interim from potential market noise or market share or market consternation. So, in my mind, I said, ‘Look, let’s assume we’re wrong on all of it, and they’re right on all of it. I still want to close the deal.’ And as it turned out, it’s usually split anyway, but people get hung up on that. You’ve got to control the situation.
“I guess the point is there’s an art to doing deals, and the art has to do with things that are not self-evident. It’s examination and looking deeply into culture, knowing what you’re buying from that standpoint. Getting quick to close and the stuff that’s contentious just set to the side, close and figure out where those numbers really should land. There’s an art to it.”
