An Acquisition Story

Window and door manufacturer Soft-Lite shares lessons learned
Stacey Freed
August 20, 2014
FEATURE ARTICLE | Operations

In February 2012, Gorell Windows & Doors in Indiana, Pa., went into receivership. In March, Soft-Lite, the window and door manufacturer located in Streetsboro, Ohio, purchased several of its machines and product lines, including the Armor Max Plus and Armor Impact Plus hurricane windows. By Memorial Day, “only three months after we’d met with the receiver, we’d moved the production lines and set up our facility,” says Soft-Lite CFO Kyle Pozek. “We began producing the following week.”
 

The Soft-Lite manufacturing facility in Streetsboro, Ohio

The speed with which this turnover was accomplished was only one of the challenges Soft-Lite faced as it integrated the new equipment and products. “There’s a lot of upheaval [in this type of business deal],” says Tyson Schwartz, vice president, sales and marketing at Soft-Lite. “It was stressful on the Gorell employees and customers, and on the sales and marketing team.” Schwartz had been with Gorell for 17 years but had left the company in 2011 “before it all unwound,” he says. His insight was helpful during the transition.

COSTS: EFFECT

“You can’t just look at a purchase like this and say, ‘This will cost $1 million and we can recoup that in 18 months’,” Pozek explains. There are the monetary costs for machinery, travel and shipping; new letterhead and marketing materials; and new samples for dealers. But there are also the emotional costs felt by employees from both sides—“Will I have a job? Where do I fit in?”—and the costs of possibly losing dealers and end users along the way.

In the end, sales people, as well as two marketing people, did transition to Soft-Lite. There is still “a small operation in Indiana [Pa.] and maybe 10 employees there. Some in marketing, some credit, some IT, some customer service,” Pozek says. But no Gorell employees made the jump to the Soft-Lite plant.

Keeping dealers meant educating them about Soft-Lite’s offerings and deflecting negative impressions regarding Gorell’s demise. Keeping end users meant educating them about warranties—an ongoing challenge. “People don’t want to hear that you’re not Gorell and want to blame you for what ‘you’ did. Handling that comes with a cost,” Pozek says.

Soft-Lite did agree to help “defray” warranty costs for a period of time for customers that stayed loyal to the brand.

INTEGRATION

Soft-Lite’s quick turnaround from purchase to production was “a pretty amazing thing,” Pozek says. Soft-Lite used only internal machinery and maintenance people to disassemble the line, put it on a truck, drive it to Ohio and reassemble it. “We had never run that line and it’s not like we had thousands of square feet of capacity to set up spare lines,” Pozek says.

There was a big learning curve, Schwartz says. In production, the obstacles that might trip you up are not always readily apparent. He points to the “little nuances—we do this thing here or we make this cut there—that never get documented because the same employees do these processes over and over. It’s like learning a foreign language,” he explains. “You can learn it but your accent will still be off.”

“We were also trying to continue to produce for the Gorell customers who had gotten a notice from the receiver that Gorell was out of business. They had so many loyal customers, it was difficult.” Soft- Lite spent time getting customers used to the way it does business, for example, setting them up with a new ordering system. For the sales and marketing team, Schwartz says, “it took time to settle them down and let them know they were wanted. We had to break down barriers of ‘we’ [Soft-Lite] vs. ‘them’ [Gorell].”

Soft-Lite held regional meetings for sales people and had formal training in both Soft-Lite and Gorell products. “I was probably harder on the Gorell sales people than the Soft-Lite sales people when I came on board,” Schwartz says, but he worked closely with his predecessor and “after about three months, I felt like the sales teams finally came together. Now, sales people call each other to get advice. They aren’t living in separate ‘silos.’” Since adopting best practices from both sales forces, Schwartz says the company is now on pace to have the best year it’s ever had. “I have the key and they drive the car. The sales team makes all our jobs easier because they’re so talented.”

In the sales and marketing department, according to Schwartz, Gorell had done a nice job with YouTube, its web site, LinkedIn pages, Twitter, Facebook and Google Plus. “Soft-Lite had not fully utilized these sites to help with SEO,” Schwartz says. “We were able to consolidate sites and consolidate and increase followers, and also use their SEO expertise. We revamped the Soft-Lite website, and now we have a much stronger following and presence on the web for both our customers and our brand.”

CHALLENGE=OPPORTUNITY

 
 Armor Max Plus and Armor Impact Plus hurricane windows are two of the primary Gorell product lines that Soft-Lite now manufactures. Pictured is the Armor Max Plus hurricane double-hung.

There is, of course, a plus side to the challenges. But to be successful in this kind of transaction, a manufacturer has to do a lot of upfront planning. Despite the speed of the assets acquisition, Soft-Lite had researched Gorell’s financial performance as early as 2011, and there were a lot of similarities between the two companies: customers, production lines, truck routes, geography, reputation, the way in which they went to market (dealer-direct). Gorell also had an investment in impact-resistant windows, which would add to Soft-Lite’s product mix. “Having the opportunity to introduce an impact product and get into Florida was very attractive,” Pozek says.

Overall, the Soft-Lite dealers took the acquisition of product and marketing in stride. “The entire dealer base obviously got larger and, as a result, stronger. The Soft-Lite brand is also more visible,” Schwartz says.

BEFORE YOU LEAP

While doing due diligence on the other company or product, don’t forget the internal research: Can your company afford to take this on?

Pozek says Soft-Lite did a basic level of due diligence with its own attorneys, estimated the risks, acted swiftly with the receiver and paid cash. “It wasn’t such a financial outlay that we had to secure financing; nor did we do any sort of stress tests on cash flow,” he says.

It’s important to look at your ROI and determine if the purchase is worth the effort. For this deal, Pozek says, they determined the payback period would be less than a year and “it held true.” Then they figured in future business and the risk made sense.

You have to come at this from a position of strength. “We always keep ourselves in a financially strong position that allows us to be able to take advantage of these investments when they come up. We had cash in the bank and we felt it was good use of the money.”

Freed is editor of Window & Door. Write her at sfreed@glass.org