Volume 10, Issue 8 - October 2009

Anatomy of a Successful Acquisition
Kolbe & Kolbe and Point Five Windows – One Year Later
by Michael Collins

September 25, 2009, marked the first anniversary of the acquisition of Point Five Windows in Fort Collins, Colo., by Kolbe & Kolbe Millwork Co. of Wausau, Wis. The deal was very simply a case study in an acquisition done right.

If the success of an acquisition is judged by whether it met the expectations of the parties involved, then this acquisition has been a great success. However, most acquisitions don’t turn out this way, despite the fact that acquisitions remain an important avenue of growth in the door and window industry, as shown in the chart below. Accordingly, there is value in analyzing the elements that made the Kolbe-Point Five acquisition a success. By doing so, we may provide other potential transaction participants with a blueprint of how to ensure the success of the acquisitions they undertake.

Initiation of the Transaction
The sale of a company typically begins with one or more factors motivating the owner to seek a buyer for their company. In the case of Point Five Windows, former owner Dave Lundahl had several reasons for exploring a sale and he had considered the move for several years. In a recent interview, Lundahl explained that he felt proud of what he had built, but that he knew that another owner would be in a better position to take the company to the next level. Also, his children were too young to take over the company. A final factor driving the decision to sell his company was that he and his wife, who also worked at Point Five, wished to travel more and enjoy the value they had built up in their business.

By a coincidence of timing, Kolbe approached Lundahl regarding Point Five at the same time that Lundahl was preparing the company for sale.

We followed up recently with Michael Salsieder, the president of Kolbe & Kolbe, regarding the Point Five acquisition. Salsieder explained that the initial interest in Point Five Windows stemmed from Kolbe’s desire to round out its existing high-end door and window business. (Point Five Windows manufactures door and window products for ultra high-end residential applications. It is common for Point Five to win projects involving palatial residential estates costing $20 million or more.)

“We saw that the team at Point Five had a corporate mentality and a work ethic that was similar to our own,” says Salsieder. “While our companies were separated by many miles, we were very closely aligned on these important points.”

Management Transition
When an acquisition reaches the point where the buyer has been selected and has signed a letter of intent, it is common for the seller’s second tier of management to be introduced to the buyer. That meeting is always critical, since it is the second tier of management that will remain with the company after a transaction. Throughout the discussions leading up to the acquisition of Point Five, Salsieder and his team continually assured the Point Five team that their goal was not to “Kolbe-ize” Point Five after the acquisition. They were interested in Point Five because it was executing on its business plan and had a capable management team. The assumption was that those aspects of the company were important to its success and shouldn’t be tinkered with. There were opportunities for economies of scale, such as insurance and administrative functions, but these are non-core aspects of a company. The core culture at Point Five was working well and was left unchanged. Jeff Delonay of Kolbe was named president of Point Five following the acquisition. In managing Point Five, he relies upon the management team there to provide the day-to-day guidance for the business, while he focuses on overall strategic planning.

“There has been a lot of communication back and forth and a lot of both companies listening to each others’ needs,” says Delonay.

Another aspect that helped smooth the transition was the fact that Lundahl had been, over the prior several years, transitioning his duties to members of his management team.

Employee Transition
While the second tier of management typically becomes involved with a buyer prior to an acquisition’s completion, rank and file employees usually find out about the sale of a company only after the deal is consummated. The Kolbe management team addressed any initial anxiety among Point Five’s employees by communicating Kolbe’s excitement to be working with the Point Five team. Anxiety quickly gave way to excitement as Point Five’s employees came to see Kolbe as a well capitalized company intent on growth. All around them, other companies were shuttering plants and laying off employees. Kolbe, by contrast, was undertaking an expansion during a difficult period.

Kolbe’s employees also greeted the Point Five acquisition with a great deal of enthusiasm. Salsieder reports that Kolbe’s employees are updated regularly regarding the company’s strategic plans. They saw this acquisition as a strong fit with those strategic plans. They, too, were pleased to see that Kolbe was expanding at a time that others were retrenching. Delonay reports that the excitement extended to Kolbe’s sales force, who were pleased to have access to Point Five’s products in calling on architects that specify high-end door and window products.

Manufacturing Transition
With the employees and sales team focused on the future, the attention turned to capturing synergies in the area of manufacturing. Kolbe’s management team confirms that the acquisition of Point Five has involved a true exchange of best practices. While there were a number of lean practices already in place, Kolbe helped take Point Five’s lean efforts to the next level. Another benefit to Point Five was having access to Kolbe’s product testing facilities. Being able to certify its products has helped Point Five further penetrate the impact zone. Best practices have flowed in the other direction as well. Point Five’s engineers have provided Kolbe with ideas regarding new ways to seal large high-end windows against the elements effectively, as well as other proprietary aspects of constructing high-end and oversized windows.

Smooth Sailing
In any acquisition, once employees and manufacturing methods have been addressed, both companies’ customers must accept the combination in order for it to be a complete success. While Point Five marketed its products primarily through specifying architects, Kolbe had built a national distribution channel in addition to its architect referral partners. Since its distributors call on a large number of architects and builders, Kolbe was able to offer Point Five immediate access to additional avenues for getting referrals to high-end business.

Salsieder and his team continually assured the Point Five team that their goal was not to Kolbe-ize’ Point Five after the acquisition.

Both parties to the Kolbe-Point Five acquisition report that the transaction has been a success. Lundahl, his wife, and Gordon Hannaford, who owned a minority stake in Point Five, remained with the company on a consulting basis for a brief transition period.

He hasn’t retired completely, though, and continues to work diligently on two window-related products in which he sees great potential. The first is a window with radiant glass that produces heat, which he develops through a company called Energized Glass. The radiant glass can prevent steam from collecting on windows near hot tubs and provide a source of heat for the living space that is located near oversized windows in cold environments. The other product is a retrofit window balance that will allow industrial property owners to convert large, outdated single-hung windows to more energy efficient double-hung windows by overcoming the weight limitations on the sash.

The Kolbe team, too, views the acquisition of Point Five as a success. Despite having completed this acquisition during one of the most difficult periods the United States has faced since the Great Depression, the transaction has helped Kolbe continue to move its brand image to the higher end of the market. They advise other companies contemplating acquisitions to conduct careful due diligence on the front end and to choose a business that is performing well and would be a strong fit with their own. By doing so, it is more likely that a given transaction will be a success for all involved. y

Michael Collins is vice president of the building products group at Jordan, Knauff & Company, an investment banking firm that specializes in the door and window industry. Jordan, Knauff & Company served as the exclusive advisor to Point Five in its sale to Kolbe & Kolbe.

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