Mark Mangan, president of Turf Care, worked his way up to where he is today by starting at a local fertilizer plant in Hatfield, Massachusetts, as a part-time employee, surviving an acquisition by LESCO and progressing to the director level at its Cleveland location, and then a sale of the operational side to Platinum Equity where he became its EVP of Operations, to his eventual purchase of the company with partners from the PE firm. Mangan then ran it for five years before an event happen and he and his partners sold the business to another private equity firm, Platte River.
At last year’s Cleveland Smart Business Dealmakers Conference, he told attendees that the most recent sale came about when one of the three partners looked to retire.
“He said, ‘Hey, I want to retire. This is what our company is valued at and I need a check from you two,” Mangan says. “We were like, ‘Wait a minute. Some of that money we wanted to put back into the business.’ And that's what made us go out to private equity, because they could initiate those funds into our business.”
One of the things that he says they could have done better was to create an exit plan when they first became partners. It would have meant they could determine their timelines, their horizons and their expectations at the time they exit. Still, as someone who has a large portion in the rollover, he says he’s glad the sale happened when it did.
“At the time we sold our business, the company was just taking off,” he says. “It was at the end of the COVID year, everybody was at home so everybody was working on their yards, everyone was putting down fertilizer. Business was grand. The timing was good. But I don't think I would have triggered the event, though, if he didn't.”
Even though they knew their partner wanted to retire, within his timeline to retire and get paid out were certain triggers within their agreements together that gave them limited time to act. And that was stressful.
“We were not prepared,” he says. “I was going off the edge. It's hard enough the three of us just talking normal business, but now we're talking selling the business, and you got bankers involved. I love my bankers. However, you never know what conversations are taking place with what partners. And then they're talking to the equity company, and what are they really saying to the equity company? Am I really getting the full story back? So, a lot of that just weighed on me. And I would call [his adviser] and be like, ‘Ground me.’ From that standpoint, there was no preparation and that's something that I think, talking about that exit planning, really just setting yourself up for success will help you better plan your business and get your business organized.”
As they considered potential buyers, he says a strategic buyer wasn't going to meet his goals, largely out of concern for what would happen with his team.
“Strategic buyers are typically looking for that consolidation. And that certainly didn't meet anything I wanted,” he says. “My team did a lot of work to help get me to where I was. So, I felt like I didn’t want to reward them by saying, ‘Hey, by the way, you're being consolidated and you got to move to Florida.’ The other one was just the amount of capital coming back into the business. So, from that standpoint, private equity was the way we had to go to get capital back into our business. We were under a little bit of strain with one of our partners retiring and having to pay him out. So, that equity money coming back in is putting us back on our growth path.”
When he met with different investors, he would tell them his plan to grow the business. Most of the firms were behind the plan and were encouraging. But one firm, Platte River, challenged his assumptions.
“They're like, ‘You don't have the organization, you don't have the capital, your IT system is not there. Like, we believe you, but you need money,’” Mangan says. “And that was really eye opening to me. And I said, ‘Well, what about my team?’ And they're like, ‘We're going to give your team incentive.’ And I didn't have to prompt them on that. They were there. And that was really important to me. If you think about it, as business owners, yeah you're the owner, but there's a whole bunch of people on your boat paddling, and you know the people that are paddling harder than the other people. That was really important to me to make sure that they're getting rewarded as well on that next bite of the apple.”
The transition from going from owner to an employee or a partner was a mind shift he says he was not prepared for. As an owner, he didn’t need to explain the moves he’s making. He can just move forward because he feels it’s the right decision. Now that there are other people that have large investments in the company, they’re asking more questions and need answers before a plan can move forward.
“When you think about that transition, I think for me it was a slow mind shift and I wish I flipped it more like a switch,” Mangan says. “I almost fought it a little bit. And I think as business owners, if you do that, and you're selling your business, and you're still going to be in there and still have a critical role within the business, you have to flip that switch. You have to say, ‘No, it's no longer all mine. I now have to work. I have to report. These are the rules, let's run by them.’ And that's the mistake I think I made was I tried gliding into it, and I'm not a glider. So, in that sense, I definitely think I should have switched — just flip that switch in your head and say, ‘No, this is who I am now and this is what I got to do.”
