Features: July 2012: Five Decades, Six Owners, and Still Standing Firm

The Wholesaler

By Mary Jo Martin, Editorial director

The acquisition of the IPVF Group of HD Supply by a trio of investors, finalized in March, was one of the biggest — and most talked-about — transactions in the PVF industry in recent memory. This organization, now known as the Shale-Inland PVF Group, has such a unique story, and I recently spent time in Houston with key members of its management team to talk about where they’ve been and what this latest acquisition will mean for their future. Their faith in each other, and in this new group of owners, is so strong that more than 30 managers and high-level employees have invested their personal money into the new venture.

While many companies that go through acquisitions are dismantled and infused with new leadership and management, president Mike Stanwood has the unique distinction of holding the same position for the past 37 years through five ownership changes — and under his watch, the company has never experienced a quarter “in the red.” In fact, his skills were so respected that during the years he was part of the Hughes Supply and HD Supply organizations, Stanwood was named President of the Year three times.

Perhaps his biggest accomplishment, however, has been building a team of managers who have stuck together through it all, and whose loyalty is palpable. As Stanwood describes, “We’re all each others’ wingmen.”

As a boy from very humble beginnings, Stanwood learned early on the value of hard work. As a teenager, he spent three years working very labor-intensive jobs in construction and manufacturing. While in college, he went to work for the postal service. Along the way, he worked hard, watched and learned. And dreamed. He had a passion to get into the business world, build something and share it with others.

One day, he ran across a friend he had grown up with who mentioned that his uncle needed some help in his business. It was a great opportunity to help turn the company in a more focused direction. Stanwood was eager to dig in, learn the business and turn things around.

Stanwood credits the late Sam Brown with giving him the opportunity to grow and develop a business career at Southwest Stainless & Alloy. The two grew extraordinarily close, and Brown became like a father to Stanwood – who had lost his father at a very young age — in addition to a business partner. While Stanwood was, by nature, the more conservative of the two, Brown helped him learn to take some risks in growing the company.

With no formal business education, Stanwood learned from experience as he went along, and watched closely those he admired. Combining that with his natural gifts of persistence, tenacity, leadership and the ability to look at the big picture, Stanwood worked with Brown to rebuild Southwest Stainless and really put them on the map. A man of strong faith, he also has built a reputation of treating people fairly and with compassion, and doing business with integrity. Following is my interview with Stanwood, and be sure to check out the sidebars on excerpts from my conversations with other key members of the team, as well as Shale-Inland CEO Craig Bouchard — and even a few of their competitors.

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MJM: We have a lot of ground to cover today, but let’s go back and start at the beginning. Talk about how lean things were in those early days of building the business?Stanwood: I remember calling on customers and being terrified that they would actually want to come by and see our place. Of course, like any good outside salesman, I had really built up the company and our inventory to our customers, and in reality we had a little 8,000-square-foot building and very little inventory on hand. Let’s just say that some of the pictures in our catalogs weren’t exactly taken in our location. But anything our customers said they wanted, I told them we had.

You have to remember that at the time, there weren’t as many imports so competition for lines was much more difficult. We were a very small company with limited resources so it was tough to get lines. Domestic manufacturers were very loyal to their stocking distributors. But as we grew, manufacturers started to come around. The first big line we got was Armco Steel, thanks to Bob McKeon, who showed a lot of faith in us. After that, the lines began to come one by one.

Where we excelled and earned our customers’ business was our service. We had to out-service companies that had been established for years, and so we were there for them 24 hours a day, seven days a week, sourcing whatever they needed when they needed it. From those early years until today, we have grown about 80 times over, through both acquisitions and product offering. Today, the Group employs 1,200 employees at 47 locations in the U.S. and Canada. Our depth and breadth of inventory really sets us apart. No one else really has all that on the ground.

MJM: I know you must have countless interesting “behind the scenes” stories with a personal perspective from your years in business — especially from those early years.Stanwood: You might find this hard to believe, but coming from our very small roots, when we were acquired by Hughes — one of the largest distributors in the country — it was a whole different world. I remember not too long after we were acquired, they invited us to attend an event at their headquarters in Orlando to get to know some of their key personnel. A guy came up to us and said he was from HR, and our group looked at each other and honestly thought he meant Heating & Refrigeration. We really hadn’t been part of the corporate world until then!

MJM: Your story is such a unique one. Five decades in business, five ownership changes. Talk about what each acquisition has meant to your company?Stanwood: This could take a while!

  • Sam and I sold Southwest Stainless in 1988 to the Jemison Group because we had gotten to a growth rate that our financial position couldn’t fund. We saw so much potential, but we were cash strapped to continue diversifying the business geographically and product wise.

    They were a private equity company owned by an established family in Birmingham, Ala., that wanted to diversify their holdings. It just clicked. They gave us the resources and opportunity to prove that our strategy was a winning one. In the eight years we were with them the company grew eightfold. During that time, we bought two businesses — H&H Machine in Houston and Coastline Products in New Jersey.

  • In 1996, we were acquired by Hughes Supply and became the foundation for their PVF business. They had been strong in other market segments, but really wanted to get into industrial PVF. That was when we started really doing acquisitions, which got us into different areas of the market, as far as true product diversification. Under Hughes, we acquired Sunbelt Supply, J&J, Metals Inc., Stainless Tubular Products and Allied Metals.

    The companies we bought were the leaders in their business. I looked at my job as one of keeping them in the center lane and keeping corporate out of the individual businesses as much as possible. You have to treat each business individually to allow them to maximize their potential and participation in the group.

  • We were sold in 2006 to Home Depot. It turned out to be very short-lived; we were with them for just a little over a year. But they brought a very large balance sheet, which afforded us the opportunity to continue to grow.
  • In 2007, they sold their supply division to a new group of investors and renamed the group HD Supply. The biggest revenue year in our history was in 2007-2008 and then the financial debacle hit. During this time, we acquired Polar Piping in Edmonton. Last year, HD Supply decided to sell us because we were not in the core group of companies that they were trying to expand and grow — although we were one of the most successful ones they had. CEO Joe DeAngelo understood our business because he had bought commodities while working many years at GE. Unfortunately, the sponsors weren’t as well versed in our business.
  • In March, our acquisition by a trio of new investors — Towerbrook, Shale-Inland and the Stephens Group, as well as the Group’s management — was finalized. The new owners have a vast amount of market savvy, and with their financial expertise, they bring a strong vehicle for us with which to grow the company. I communicated this to our people as a very positive transition, and one that I believe in. I report to Craig Bouchard, the CEO of Shale-Inland, and based on his history and success in the steel industry, we are confident he will help us grow our business.
MJM: How has the transition been going so far, and what is next on the agenda?Stanwood: This is very unusual because it was a smaller company merging with a bigger company. Everything down to the last detail had to be addressed — from credit cards for outside salespeople to insurance cards, to e-mail addresses to looking at synergies.

Our goal is that within the first 200 days, we want to get the business to its peak performance as if the transaction never happened. We can accomplish this by utilizing and combining the strengths of each organization.

We need to get our arms around what we have and maximize the profitability of each group. We will be looking at bolt-on acquisitions that will strengthen our position in the market geographically and with product diversity.

MJM: Often, acquisitions lead to significant changes among the management team. But through it all, you have remained at the helm of this business. To what do you attribute that, and how gratifying is that to you?Stanwood: I believe the reason I have always been asked to stay on is directly related to how successful our group has been, thanks to our dedicated employees. As each company bought us, they were very clear about the value they placed on the management team and that they wanted to keep the team in tact. When you buy a company in this business, you’re truly buying the team. Anyone can buy a product. It’s the people that make businesses successful.

It amazes me to look at some of the people who have come up through the company and see what they’ve matured into. The gratification I feel is very much like a father seeing their children grow up. You always want the best for them. That’s the reason I stay. The people in this company are my family. I feel a loyalty to them and can’t walk away.

MJM: Who has been the biggest mentor in your career that helped you formulate your leadership style and business philosophy?Stanwood: Jim Davis, the CEO, and Corbin Day, chairman, of Jemison Group, were probably the most influential mentors I’ve had. They set a very good example as leaders and how they treated people. They are men of values and principles, great bosses and solid leaders who led by example. That’s what I strive to be. I was fortunate that in addition to our business relationship, they also became great friends.

I’ve always believed that you should treat people right, fairly and with compassion. No matter who our owners were, I’ve tried very hard to represent the best interest of our people and our companies. Our people really are the “secret sauce” behind our success.

MJM: As you look back on your long and very successful career, what is it that you are most proud of?Stanwood: I’m very proud that we’ve been able to keep most of our key management together through five transactions, keep them focused and reward them better than most in the industry.

And as I look forward, we are hoping to bring even greater efficiencies to the business and continue rewarding our people. I believe we’ll grow at a controlled pace and continue to be a major factor in this business.