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Building a New Empire
May 1, 2009 By: Mark Arzoumanian Paperboard PackagingHere's how a long-term business relationship helped ensure a box plant's future.
It's not easy to admit that technology is passing you by. But a couple of years ago, Lewis Eagle, president, Empire Container Corp. (ECC), an independent sheet plant headquartered in Carson, Calif., not only came to that conclusion but realized that if he and his brother, Norm, vice president, didn't take action to keep the operation viable, it would die a slow death.
 The plant's Serenco rotary diecutter is often used to service the needs of the furniture industry. |
It's not that the Eagles didn't have the funds to invest in new technology, whether it's computer hardware or software. They just didn't know what to buy or how to maintain it.
They could have sold the plant to any number of integrated (or even independent) box makers in California and retired. But they didn't want to sell it and run the risk of helplessly watching the new owner usurp all the sales and close the doors.
What to do? Lew Eagle thought about all the good friends he had known over his decades of experience in the industry. That's when Hal Mottet popped into his head.
"I have known Hal for about 10 years," he states. "He was the general manager of the Willamette box plant [now part of International Paper] in Compton, Calif. I consider him one of the sharpest people I know in the industry. He's academically knowledgeable but also streetwise."
Can You Help Me?
In late 1995, Mottet had picked up a Procter & Gamble account. His plant could handle 95 percent of the order, but the remaining 5 percent was small trays that needed to be broken, not nicked. He learned from his sales manager at the time, the late Dave Daly, that ECC had the equipment to do this job. He asked Eagle if he would like to handle it. He said yes.
 No More Verbal Orders |
"I started a great relationship with Lew," says Mottet, who spent 20 years with Willamette. "I would get together with him every couple of months. He built a versatile organization by making small and large boxes and was always looking for niches. It was a soup to nuts approach versus blow and go at Willamette. Lew was always trying something, whether it be corrugated pallets, bulk boxes or promos. He developed a book bin for shipping textbooks in bulk. He also did a lot of targeted marketing and mass mailings. He was a marketing expert, segmenting and targeting. But he was afraid of technology.
"At our lunches I'd throw out just one open-ended question and then sit back and listen to Lew's salty opinions on everything from distributors to Roger Stone."
But in recent years Eagle's ideas didn't come as frequently and the operation started to tread water. Eagle became frustrated with the box making business. At one of their lunches he told Mottet that ECC needed new blood.
Then in June 2007, Mottet received a call from Eagle's son, David. He is a very successful broker at Merrill Lynch and had worked at the box plant years ago but had no interest in running it now.
 Short and Quick |
"My dad has some health issues and is looking to retire," David told Mottet. "Are you interested in buying the business?" David knew that his dad trusted Mottet and liked the way Willamette ran its box plants. That's because while at Willamette Mottet was told by his superiors to run the Compton, Calif., plant like it was his own business (a profit center). But, most importantly, Lew Eagle believed Mottet would operate ECC as an ongoing business, even though he never told Mottet directly he wanted to sell.
Yes, I'm Interested
By this time Mottet had been out of the box making industry for six years; he was now an entrepreneur. He ran a plastics recycling operation and was also buying businesses, including a safe company. He had just built a plastics recycling building in Oregon and was wondering where to take his career next. So when David called, he said yes, he was interested in talking about buying ECC.
Lew Eagle's top concern, and Mottet's number one challenge, was maintaining confidentiality during negotiations. By this time Mottet had gotten back in touch with Don Simmons, a Willamette salesman he knew from his days running the Willamette box plant in Compton. Simmons was now corrugated box sales manager for International Paper.
 Don Simmons (left) and Hal Mottet, Empire Container owners, make certain that their three trucks are marketing the company while they're on the highway, delivering boxes and displays. |
Mottet couldn't tell Simmons many specifics but he did let him know that he was looking to buy a box making business. You will have to trust me, he told Simmons, who like Mottet has more than 20 years of experience in the industry. Simmons had an idea it could be ECC because he knew a lot of the people Mottet knew. Within a few weeks, Mottet told Simmons it was indeed ECC that he was looking to purchase and he wanted Simmons as his partner.
"We couldn't go into the depth of due diligence we wanted too," Mottet admits. "It was way, way below normal. We had to buy the company as is. But we knew the Eagles were straight shooters."
Negotiations started in June 2007; the deal closed in Nov. 2007. Mottet, who sold his plastics recycling company so that he could devote 100 percent of his time to running ECC, and Simmons won't reveal how much they paid for ECC. It was an asset (versus stock) sale: 50 percent equity, 50 percent debt, financed by U.S. Bank.
"Lew truly cares about the Empire legacy and he cares about the people," Simmons states. "He didn't want someone to roll his business into another business after buying it."
Showing Its Age
But Eagle's fears limited Mottet and Simmon's ability to plan for ECC's future during negotiations. For example, its original HRMS computer software "could have gone into the Smithsonian," says Mottet. But the business was still making money. So they elected to stay the course until they came to an agreement with the Eagles.
 CEO Hal Motet (left) and Don Simmons, president, Empire Container, often help Asian companies market their products. They worked with a Japanese maker of noodles to develop this display. |
ECC was very loyal to its 55 employees, many of whom have worked at the company for more than 20 years. These workers didn't meet the new owners until after the acquisition. In their first month, Mottet, ECC's ceo now, and Simmons, president, saw only one salesperson (out of seven) quit. That same month (Dec. 2007), ECC saw volume take a hit.
"The business had over 250 accounts but it needed new blood," says Simmons, who will eventually run ECC when Mottet decides to retire. "We did lose a top 10 account right off the bat. But after black December, every month has been above the last one. Now we're about 25 percent above [revenues when they took over the company] and it's thanks to 80 new accounts [gained after buying ECC]."
One of the first priorities Mottet and Simmons had to tackle was handling employee reaction to the sale. Throughout the 1990s, Mottet had visited ECC, walking around the plant as "Lew's friend."
At lunchtime on their first day as new owners, they shut the plant down and gathered everyone together to introduce themselves. They were there all day, answering any and all questions.
"Lew and his brother Norm didn't just walk out of the box plant [once they were no longer owners]," Mottet stresses. "For the first four weeks they worked every day. After that they were still here, just fewer and fewer days. Lew and I also made calls to customers." Today Lew and Norm Eagle are both happily retired, enjoying their grandchildren.
Other challenges the new owners faced were allowing their employees more freedom to make informed decisions and getting quicker and more detailed customer feedback.
"Now our customers communicate with us any way they want so we can get an accurate answer back to them quickly," Simmons says.
"We tell our employees that if they do anything in the interest of the customer, we will never bite them," Mottet adds. "We will never say, 'Why did you do this?' If it benefits customers, it's right."
Mottet and Simmon's advice to anyone contemplating buying a box plant goes beyond the truism of picking good people and empowering them. While that's critical, it's also important to acknowledge your weaknesses and be open to whatever opportunities present themselves.
"It could be a curveball, a slider or a high heater," says Mottet, a big baseball fan. "Be ready and react."
