Merger and acquisition news continues to frequent the PHCP-PVF industry. Whether it be due to lack of exit strategy, financial reasons or just a desire to leave the business, making the decision to sell a company is no small feat. When these acquisitions occur, future plans and operational changes of the buyer are often disclosed. But what’s not discussed in detail is the seller’s perspective.
It’s likely these mergers and acquisitions will continue industry-wide, so diving deeper into the decision many PHCP-PVF distributors may one day face — the decision to sell or create a succession plan — can help understand the process and benefits that come with the former option.
The decision to sell
J.W. Wood Co., a plumbing, HVAC, industrial PVF and irrigation distributor based in Northern California, has been family owned and operated since 1954. Both John Wood, the most recent president of the company, and his brother Kellie Wood, vice president, worked in the business all of their lives; neither ever worked for another employer.
Wood explains the decision to sell was largely driven by the need for the company to remain contemporary and competitive. “We are both quickly approaching our 70s,” he says. “We knew we either needed to expand and grow into other areas, or seriously start looking for a buyer. We decided it was time to think about retirement.”
Having no heirs for the business, Wood lacked an exit strategy for the company and sought out a consultant to assist in identifying a potential buyer. Wood met with Brad Williams from Beringer Group, a privately held advising firm with expertise in succession planning and M&A advice.
“After spending time with Brad, I knew I found a consultant I could trust,” Wood explains. “Brad was there to market J.W. Wood Co. to the appropriate pool of potential buyers, facilitate the process and help conclude the transaction.”
Finding the right buyer
Wood notes when looking for the right buyer, choosing a company that instilled the same thoughtful practices and relationships with employees and customers was a high priority for J. W. Wood Co. “We believe family owned and operated businesses are different in that over the years the employees and customers become part of the family,” he says.
In January, it was announced that Rohnert Park, California-based PACE Supply had acquired J.W. Wood Co.
“While PACE is a larger corporation, it still has a ‘hands-on feel’ and operates with both employees’ and customers’ best interest in mind,” Wood says. “This was very important to us, so PACE seemed like a natural fit.”
As one distributor acquires another, they often benefit by expanding product offerings, gaining another strong employee base and more. Wood says J.W. Wood Co.’s diversity will be an asset to PACE Supply.
“We offered wholesale plumbing, retail sales, showrooms, irrigation, HVAC and industrial services, and all facets of the business were successful and growing substantially,” he says. “PACE was interested in further expanding its operation and we had a fully staffed turn-key operation in four strategic locations in northern California.”
J.W. Wood Co. owned four warehouses in northern California, as well as property ideal for expansion. PACE Supply now has new service areas as well as growth opportunity via the add-on services J.W. came with.
Employee reaction and retention
It’s no secret the news of a merger or acquisition can leave employees in an uncertain state of mind. Wood notes that while change is always scary, PACE Supply performed a proactive employee outreach plan and eased employees’ minds.
“Employees reacted as you would expect — concerned about what would happen to them, how they will manage the changes, salaries, benefits, etc.,” he notes. “We had many employees that had been with the company for 30 to 40 years and they were losing part of their family. PACE acted very quickly, so employees’ jobs were secured, and payroll and benefits were seamlessly transitioned to PACE’s offerings. We’ve had very little turn-over since the acquisition closed.”
Logistics of selling
When it comes to the selling process, Wood explains there is an emotional aspect. “The most important thing we learned during the negotiations was the obvious — no one is going to love the family business the way we love the family business,” he says. “We are proud of the business we’ve built, but the bottom line is you cannot embrace a defensive posture; don’t make it ‘personal.’”
Wood adds it was important to remember to separate feelings from the business aspect — as much as possible. “You must focus on the task at hand, put aside a defensive posture and understand this is a business transaction,” he says. “If you were the buyer of your business, you’d be asking the same questions.”
Working with Williams and his firm proved to be beneficial for the Wood’s as they navigated the logistics of the sale. “The best possible advice I could give is contract with a company like the Beringer Group,” Wood says. “They are pro’s at negotiating deals and marketing your business to a compatible company. They know what to look for when reviewing the numbers, how to defuse a difficult situation and most importantly, they have your back.”
What’s next for the Woods?
Reflecting on the many years spent in the family business, Wood says this selling process is a bit of an emotional roller coaster. “It moves along very quickly and all the safety signage is in a foreign language that you don’t understand,” he says. “We’ve watched this business our dad (Wes Wood) built grow from the humble beginnings of selling products from the trunk of his car and garage in 1954, to opening the first warehouse in Shasta Lake City, to acquiring land and building the headquarters while expanding into other communities.”
PACE Supply has asked both Kellie and John Wood to stay on during the transition, but after that, the brothers have some pretty great sounding retirement plans. “Both families are planning to do some traveling, enjoy our homes and a few margaritas on a beach somewhere,” Wood explains. “John’s wife is going to build him a ‘man cave’ over the garage with a recliner, big-screen TV, a microwave for popcorn and a mini bar for cold beer.”
So it seems the Wood family will be enjoying some well-earned relaxation after decades growing a family business, all while knowing J.W. Wood Co.’s employees, customer standards and product lines will be in great hands.