Clayton Costello, vice president of corporate strategy at CK Power, sees acquisitions as a means of breaking through.
“We deal in a lot of mature markets and cyclical markets, so at some point you hit your ceiling with those products and services,” Costello says. “When we go out and look for a potential acquisition, we're looking for somebody that can build upon that market, introduce us into different customer bases, different industries, or we're looking for a product or service that aids in the current product or service that that we already have in the marketplace.”
Costello says CK Power had historically done very well at organic growth, but hit its ceiling about four years ago in certain markets. So the company went out into the market, talking with current vendors and even customers to leverage those relationships and those products to get the company deeper into to larger customer bases and diversify further into different markets within the industry.
John Dolan, president and CEO of PFI Holding Company, says the company grounds itself organically initially, working to discern what it does well and where voids exist given what the market demands.
“By starting there,” Dolan says, “it allows us to look at that acquisition strategy very strategically. It can be grounded in something as simple as this is an additional offering we can have in manufacturing, whether it's a different material such as a plastic or a metal if we don't have that and we feel that that's a good add to the portfolio.”
He says looking at your organic growth is also looking at what customers you want to acquire as well. By getting these different disciplines, you can sell more. But through an acquisition you may be able to add on a customer base to diversify your customer portfolio.
Dolan says a recent acquisition helped the company increase its current offerings but also bookend itself with two of the biggest customers in the industry. That, he says, takes the lumpiness out of revenue streams over the course of the year.
“It's the complement of organic to acquisition,” he says. “And as an operator, I usually try to ground myself in that organic side first before we get in the acquisition. But the combination is limitless. You can really grow your EBITDA and diversify your risk as well through the addition of not only the different disciplines but more customers.”
Costello and Dolan, along with Commerce Bank St. Louis President Tom Harmon, RSM US LLP Partner William Spizman and Capital For Business VP Tim Buening, spoke at the St. Louis Smart Business Dealmakers Conference, offering stories from the buy-side. Hit play on the video above to catch the full panel discussion.
