E:43 Joseph B. Anderson 13 Acquisitions with Revenues over $1.3 billion

Um Welcome to the top M&A entrepreneurs. My name is John Stoddard. Thanks for joining us. This episode is brought to you by Duilio, a due diligence marketplace of service providers. With legal, accounting, it's free to use, search, pay, only when you engage with the right person. It's the modern way to evaluate a business determine if it's a good deal or a bad deal. No deal is better than a bad deal. Today, I have a very special guest, somebody I've actually been following for about 20 years is uh Joseph B. Anderson. Uh, Joseph, I, I, let me just go down this list. West Point grad, Vietnam veteran. Uh, left the service as a captain. He was featured in a movie called The Anderson Platoon. After Vietnam, became a plant manager for GM responsible for a billion dollars in revenue. He left GM and then he had an opportunity to buy his first acquisition, Shiva's products. He had to leverage everything to buy that. A couple times he sought bankruptcy, kept the business alive, developed a signature turnaround strategy from that. He's also right now, the chairman and CEO of Tag Holdings, which he started in 2001, right before the crash, and He's right now also the holding company for Wolverine Industries and Baron Industries. He was also featured on Blue Collar Millionaires, uh, a show that they had. He's done a total of 13 acquisitions with revenue over $1.3 billion. Joseph, thank you so much for being here. Glad to be with you, John. Yeah. So, let's talk about a little bit about that first acquisition and what you learned from that? Why you decided to go out by yourself, how did that transpire? Did you just not want to work for a big company anymore? What? I was working I was working in General Motors. I did 13 years active duty in the army, uh, actually came out uh on the lieutenant colonel's list for promotion, but did not accept it and resigned as a major promotable. Uh, joined General Motors, uh, did that for 13 years in manufacturing, so I operated a number of businesses over time, uh, within General Motors, and then As things continue to change and restructure and reorganize, uh, I decided to go out on my own, and, uh, a private equity gentleman, uh made me an offer to run one of his businesses as we would do more, as I quickly learned when he said we didn't exactly we mean we. And so, uh, I said, well, let me go do this on my own and I bought my first company in 1994, ship his products. And it was a $50 million operation, primarily supplying General Motors, Ford, and Chrysler. Uh, I learned very quickly that a balance sheet does make a difference because the debt that I put on it did not work over time. And so, uh, but with those lessons learned, I approached the other deals that I did much in future dates, uh, much differently. Yeah, well, well, what, what did that teach you when your balance sheet makes a difference? I, I'm in a couple of masterminds and people put up balance sheets and I And, and we look at them and go, OK, it's just too much debt, it's too much leverage, it's too much assets, you know, how are you going to turn this around? And well, the big, the big lesson that came out of that was so much debt and that I had a little bit of capital to put in it, but uh one of the banks and uh the corporations both uh helped fund the deal. Well, when you've got that much debt and anything doesn't go as planned. Then the balance sheet doesn't work anymore and you can make your payments on debt and then you're uh trying to figure out how to survive. And so making sure that there's not more debt that you can make even in tough times is a major lesson learned. Yeah, and what does that look like? Is there a specific ratio, 1 to 31 to 4, what, what does that look like? It, it depends on the industry. I don't have a specific recommendation because I know a number of your listers in different industries, but in my case, I make sure that the balance sheet and the debt ratio is such that the equity is significantly uh offsetting the debt that exists. It seems like uh we all take these lessons where that that first one we jump in, we dive in, we're unsure, and it's lessons learned, like, this is, I won't repeat that for the next 1320 businesses. That's exactly right. And if you, if you don't change your, your process and method and make the mistake over and over again, that says something about you and you probably shouldn't be there. That's doing the stupid mistake over and over again. You get the same results. So you, uh, established tag holdings, uh, and you, let's see, you acquired in 2002, you acquired vibration Control Technologies, majority owner and divested in March 2010, so you kept it about eight years. Was that a turnaround also, or what would that? No, it was not. It was a joint venture, and the auto industry among the industries has been very aggressive and very successful in creating and upscaling diverse companies, whether they're women owned and are minority owned and are veteran owned, and the way they do that is with joint ventures. And so they will say to their major suppliers, their tier ones and so forth. We would like you to have 1% of content with diverse suppliers. And so the way, uh, a lot of the companies, Johnson Controls, in this case vibration control technologies, meets that requirement of the OEMs, General Motors, Ford, Chrysler, Toyota, Honda is a create joint create joint ventures with the veteran or the minority being the majority owner at 51%, 55%. And then you go forward with that. So it was not a turnaround. It was taking an existing product line of vibration control technologies, letting me acquire 51% of that. And then that joint venture met the OEM requirements for diverse suppliers in the supply base. Yeah, I, I, I have to go back to this, uh, this, uh, the first Shiva's products because I bought a company that was in pretty uh bad. It was an e-commerce company and it It didn't have a lot of debt, it had a lot of problems, and then the energy in it that it took to turn it around was just stressful on my life. I mean, how are you, what lessons did you learn, and let's say taking those from being in the battlefield to say, you know, I'm in debt, business is gonna go bad, what's the worst gonna happen? Well, you know, quite frankly, a number of the lessons and experiences learned in the battlefield makes you sure and confident that you can survive tough times. And so I was certainly concerned. There was certainly a lot of stress, but it didn't take me over the edge, and I think those are the lessons learned and the experiences from the military and in combat that allowed me to succi survive and keep my head up even in the most difficult circumstances in business. Well, what is, so what did you tell your people during that time, saying, hey, it's tough or, or do you keep do you keep, are you transparent with them about the difficulties and say, hey, this is the plan, we just got to execute on it? Both, uh, there is a certainly a required level of transparency, particularly with your leadership team. But on the other hand, they're looking to the leader to make sure that there is a sense of a future and direction and plan. And so that's what I try to do more than anything else is let them know that I did have a plan to execute this and make it work, and it did. Yeah. And uh what did, uh, I don't have a lot of records on that one. What did you guys do with that company? Uh, that company made interior lighting for the automobile industry, uh, and so the dome lights and other lighting interior to the vehicle, we designed, engineered, and manufactured that product. There's another lesson in all of that in that when you're doing the design and engineering and program management in in the auto industry, you're working on a product or program that may not happen for 34 years out. And so the cost of that design, engineering, program management, testing, launching has to be carried by the rest of the company. And if you don't have a strong enough business or back to the balance sheet, you have so much debt that you can't carry those costs of design, engineering, program management, then you've got a, there's an issue that's gonna come to uh uh uh cause difficulty for you very quickly. Yeah, and do you guys, you guys save that business turned around, to get a cash flow positive and sell it, or what happened to that? In that particular situation, I found another partner that wanted to come in and work with me on that, and brought capital to the situation. And so he and I bought it out of bankruptcy, went forward with it uh again. And but meanwhile, other opportunities like the vibration Control joint venture came along. So I turned that business over to this other individual company that was more in line with what they did and, and moved on to another series of acquisitions. Yeah. So I see in 2003, Tag Holdings acquired. a unit of dung so from Korea, restructures it, restructured it, and then became a minority in 2011. So looks like you owned a majority of the company, restructured it, fixed the well, the, uh, uh, fixed it, the balance sheet, and then sold the majority ownership to. And so there were two operations that came, came about, uh, located overseas. One was in Korea and the other was in China. And there's some lessons learned about trying to manage a business that far away. If you're not big enough to have the ability to put employees over there yourself, then my rather frequent visits of every 2 or 3 months. Uh, were not sufficient to make sure that all the things that I said and the things I wanted to have happened were maintained and supported. So again, another lesson learned about owning businesses, particularly offshore, when you don't have a representative representative there of your own organization all the time. I'm just curious, yeah, that's, that's great, uh uh wisdom that comes about. Do you, are you mentors to a number of CEOs and going, hey, like, say, hey, if somebody comes to you and goes, I got this great opportunity to buy a company in China, Korea, and he goes, no, don't do it, right, or something. More than my present team would like and that I spend a lot of time doing that. And, and that goes back to my very beginnings. Uh, when I joined West Point in 1961 as a plea, there was, there were no African American staff or faculty at the academy. Uh, there were no African American generals in the army. There were only 6 African American colonels in the army. One of those colonels took me under his wing and And gave me a lot of insight and lessons learned and counsel and so forth. So with that mentorship in my background, I very much carry forward that when I went into General Motors, where there are very few African American executives and so uh interns and others that would come to me, I give them the time of day, and it's the same thing in business ownership and so that's just something I believe in and something I do. Perhaps more than I should, but I don't have any choice in my mind. I do it. Yeah, who who was that colonel that it was a colonel. It was Colonel James Fowler, class of 41. He was the 5th African American graduate from the United States Military Academy in 1941. Wow, 41. So he was shipped off to where some uh some theater Europe or? I, I, I, I presume so. I don't know the details of his. That's that's perfect time when they just send everybody to Europe or Asia. Wow, yeah. So, uh, and then in December 2003, you acquired North American assemblies and then kept it for about 9 years and sold it in 2012 to a longtime general manager. So, I'd like to learn a little bit more about this. You sold it to somebody that was running your company. What's the? And so that's, that's the, the succession scenario and, and uh when I first met A private equity player uh in Boston and he, his first question with me was, well, what is your exit strategy? And I said, what the hell are you talking about? I'm trying to get into business, not out of business, but that's the thing, another lessons learned. It's the value of your business is nice on paper. But it's only real when you sell it and acquire the, the assets itself. But in terms of my approach, I've always wanted again back to my own background and history of succession and mentorship and so forth. I'm creating opportunities for individuals that are working for me. And so the individual that bought that company, uh, as we started out in 2005 was a particular example. We did that in 2005. We bought a second company in 2007. We did a third company in 2008, all joint ventures with Honda. So again, vibration control technologies in 2002, and then three more joint ventures in 2005, 2007, and 208. He ran those operations for me uh day to day, and so, but I have a standing commitment to all of my managers and executives when you can buy the businesses from me and be fair to my investors and so forth, then you can acquire those. He came to me. In 2010 and said, I've got financing from 5th 3rd Bank. I've got the support of Honda, who I've been supplying. I'm ready to make this happen, and he did. And so we started out with that first company at about 200 million in 2005. Between the three, it was about 700 million by 2007. He bought them from me in 2010. And uh launched it on 2011 on his own. Uh, his revenue now is in the billion 2 range. Oh, that's awesome. And how, where did this guy come from? I mean, did, did you kind of, I didn't know, I didn't know him previously. A search firm brought him to me. He had operated with another supplier, uh, and learn, learning those operations. So it was an interview. I selected him and another lessons learned is all those selections don't work out well, but this one did. That's great. Are you guys close friends now? I mean, do you like, we are, and I serve on his board now. Yeah, close enough where you guys have dinner with each other. Is that formal or is it still mentor mentee kind of? It's, it's, it's still mentor mentee, but on the other hand, uh, he, he is doing exceptionally well, and so uh running a business that big, uh, I'm, I'm, I'm learning things from him too. Yeah, that's, that's impressive. And uh did he go about acquiring businesses where it was all uh through organic growth? Uh, and, and those things, they were all through organic growth from his customer Honda. Jeez, that's amazing. Yeah. So in June 2010, you acquired Wolverine assemblies, supply chain management, warehousing. Was that a little bit different, uh, manufacturing? It's kind of the same. That was the Wolverine was the 5th joint venture and so I've had 5 joint ventures. And again, as I said earlier, the auto industry really supports that concept because it gives you significant revenue and opportunities. The capital equipment in that business with uh in 2005 to 2010. It was tire and wheel assembly. Each one of those assembly lines was $7 or $8 million in capital costs, and you'd have 2 or 3 of them in a plan. So there's no way I'm going to start up a business in that way. But on the other, or buy a business that way. But on the other hand, in the joint venture with Honda, the capital requirements are already taken care of. Yeah, so what is, so it's a big company. I, I don't know if any, as far as I know, like I'm in the software industry because Microsoft saying I'm gonna do a joint venture. The problem with those guys is they, they seem to always like, you know, hey, I'll do a joint venture with you, and then they put you under NDA then 2 years later they have their code in their system. So it's like, I, I don't want to do a joint venture with Microsoft, and I'm not saying they do that all the time, it just seemed like that. It's just it's, it's very much well established and well observed and overseen in the auto industry. And so there's an organization called the National Minority Supplier Development Council, and it has some 20 plus affiliates around the country. Michigan has a Michigan Minority Supplier Development Council, and in that way, they oversee these joint ventures and the certification of minority businesses to make sure that they're truly legit. Yeah. How, how big is that one now? What kind of Size of that kind of Wolverine assemblies. Wolverine assemblies is in the $5 million range and revenue and so forth. Uh, that joint venture did not, uh, OK, did not go forward and that the product that we were going to work on together uh was bought out. And so we uh concluded eventually that they would go on uh the joint venture partner. But going in a different direction. So now I, I have that operation and, and I'm running it as a warehouse, uh, and light assembly operation. So in July and, and to make the point about that, the, the manager that's running that for me is in the final stages of making the acquisition and buying it from me. So yeah, I do that as much as and as often as I can. Yeah, is that your way of giving back and just mentoring? I mean, what, what's your It, it, it's about, it's about helping African Americans uh play in this field of business ownership and wealth creation, but it's also, as I said earlier, it's nice to have that business and the valuation on that business, but you can't spend it until you sell it and you can't buy others with it until you sell it and use that capital to buy others. And owning it is nice. Having owned it is better. I love that. I love that. Yeah. I, but how do you, how do you identify these people that come up to you like there's always this, uh, hey, looks great on paper, but this is, there's this extra special exo like, like, you know, when Tom Brady was drafted, I go, look at this guy, he doesn't look like anything, you know, and then 7 Super Bowls later, it's it, I, I, I wish I had a sophisticated answer, but it's really the luck of the draw because All of us interviewed to the best of our ability, and I've, you know, hired a number of people, but I've certainly had a number of them that did not work out. The ones I'm talking about, well, obviously I'm going to tell you about the success stories. And so the, the fellow that's about to buy this one is really good at what he does. The fellow that did those business with Honda grew to the opportunity and has gotten better and better. And so to make the point, I have certainly had some hires that have not been successful. Yeah, what's, uh, let me go back to this, uh, accomplished list here. 2013, you acquired shared vision. And then I divested in 2017. That was a quick turnaround, 4 years compared to the other ones. And, and it was, it was a difficult story because a major customer in that business ran into trouble, and as the saying goes, the customer caught cold and I caught pneumonia. And so shared vision did not work out because a major customer was not able to keep the volume of work up that I had booked in it, which is another lesson learned. Concentration with a customer can be very difficult and dangerous. Oh yeah, my God, I had, I, uh, kind of had that same scenario where all my customer acquisitions was coming from one source, and I got in trouble. Yeah, yeah, that'll do it. Um. And I love the way that you can take these 4 years' experiences and wrap it up in one sentence, like what you learned like, you know, don't do it again kind of thing. So in uh February 2019 acquired Baron Industries and sals in 2020. So that was like just one year. That's a pretty, the acquisition time actually on that one was 2016. 2016. 0, OK. That was I purchased Barron Industry in 2016, sold it in 2020. Uh, that was a, uh, another one of those success stories that I like to talk about, brag about. And that a strategic supplier came across, identified that particular product is one that they would have liked to have, and so we negotiated, got an excellent price and return on it, and uh they kept the management team in place as they acquired that. So that's one that I did not turn over to a minority manager running it for me. A strategic buyer bought it, but my investors and I did extremely well, so well, and I won't even tell you what the return is. All right, so I'm gonna say it's pretty good though. Did they come knocking at your door or did you kind of, they, they, they, we, you know, we're in the business and so my management team was interacting with their people and so forth and so the discussion began from there. Yeah, I also see that uh 2020 you divested from aircasters also. Yeah, that that was more that same customer that uh was not doing so well and therefore Aircaster was not doing so well. So those, those were a couple of businesses that I sold without exciting returns, but moved on rather than continue to labor the situation when it wasn't working and not being successful. What's uh out of all of these experiences, what would you say? I think I learned most from the failures and the successes because because the success is get the ego gets to you. What, what would you say is like one of your biggest failures or like the best lessons that really centered you? Well, you know, in terms of the, the more strategic perspective that I have, you know, If, if at all possible, you want to get into a product or service where there is not a commodity commodity characteristic to it, so that the low price wins. And so I, I've learned that lesson the hard way also. Uh, you always, always, always have to get the right leadership and management in place because in a holding company, I'm not running them day to day and engaged. I'm putting executives, managers in place to run them for me. And so being successful at that, uh, is the key and, and I, you know, I've had circumstances where I've had to go to a third leader to leadership. Uh, example, because the, the other individuals just were not working out. So a lessons learned is you have to be willing to change the leadership if it's not working. Yeah, how Uh, and if I would say you were in command of a platoon in Vietnam, you make a decision fast cause it could cause people to get killed. But how do you make a decision like, OK, well, we, you know, we grew for 15%, not the 17% I wanted, and I'll let that slide and you go on another month. How, how do you make a decision to Remove somebody, or is it more dramatic and it's a, it's a tough process because if you, if you care about people and like people, you don't want to just discard them, you know, casually. And so I would, I would suggest that most of us probably go too long, too far and not take the decision and pull, pull the trigger, excuse the pun. Yeah, yeah, yeah, excuse the pun. What opportunities do you turn down? I mean, do you see, I mean, do you have, are you flooded with opportunities to acquire business? I am, I am, and you know, having been around the amount of time I have, and I assure you that somebody will call me from this podcast. Yes, they will. They'll see you and go, Holy cow, he's buying these kind of companies. I need to help. And you know, or come up with an opportunity. So opportunities, you know, with You know, the amount of time I've been out here and some level of success and not success, you know, opportunities come, come to me regularly and I assess them in terms of some of the things that I, I pay attention to. Again, is it a commodity or not? What's the customer concentration or not? Another one that the private equity people pay attention to, and I have learned also like that company Aircaster, it was located in a place in Illinois that I couldn't physically get there in a day and get back. And so it's a real reality check on your time when you're doing a variety of things like serving on boards as I was and owning multiple companies as I, as I have, you know, do I want to be able to go check in there, have a good 2 or 3 hour review with the management team and get back home and do something the next day, or am I going to have to Get someplace, drive 3 hours to get there, stay overnight, come back the next day, and so you, you've taken 2 days to spend what you can get done in 3 or 4 hours. Those are the kinds of lessons you learn over time. Yeah, I had a buddy that's a CPA and I, a CPA firm in like Barstow, California came up and goes, John, I got 3 kids, young ones, all under 5. I just, it's gonna take me a day to get there and a day to get back, and I don't want to do that. Those are the lessons you learned. Yeah. Um, do you like being the CEO of, uh, you know, a holding company? I, I like it a lot because there's always something new and different going on, and it's my decision as to whether we go forward with it or not. And it offers the opportunity for me to create opportunities for other individuals and, you know, in fact, create wealth uh for fellows that, you know, have operated the companies for me and now own themselves and, you know, I have, I think now 6 CEOs that are owning and operating their own businesses that have come through Tag Holdings. That's a legacy that I like. Oh, that's, that's fantastic. I love that, yeah. Um, what's the best advice, or I mean, how do you keep up with the skills that, or is this a is this a part of your life where like you can see that wash rinse, repeat, wash rinse repeat? Are you still improving your skills? I'm not improving my skills, but I'm hiring improved skills. And so I'm improving my skills at hiring, but I'm hiring people that have the skills that are needed tomorrow and that are more able to deal with that than I personally am, and I, and I'm, I'm comfortable with that. Yeah, that's, that's beautiful. I love that. So what do you don't know, I mean, what, what's the next? Are you just gonna keep acquiring, I don't know how many businesses per year, or is it, do you want to grow to a certain level? I, I mean, you look at Warren Buffet, it's all about the opportunities as they present themselves, and I have actually 3 in play right now. 3 is for sure going to happen. Uh, a second one, I visited two of their plants and they're sorting out some things, and a third one just came up this week. So this is my world, it's what I do. And to your question, now do I like it, I sure, I sure have fun. And then I, I also have fun in life too, and then I'm an avid wing shooter, bird hunter, and, and have friends that we uh wing shoot around the world. And uh and so I do that, you know, and have fun with my wife traveling and so it's a nice balance and being the CEO of a holding company and not running the company's day to day, I have the opportunity to have that balance in my life. Yeah. Do you ever, have you ever had to step in and say, hey, the the the CEO is not doing his job and you step in for interim period? I have. Yeah. Was that, how did you find that experience? Uh, it, it, you know, where I started out in operations in General Motors and manufacturing, you know, I kind of like to get out and get Some grease on my shoes and so forth. Now, you know, I don't want to have to do it because things are bad, but when I get out there, I'm very comfortable with it and enjoy the developing some of the tools and skills that I've had over time, leadership from the Academy, from combat in Vietnam, a couple of tours, from General Motors and so forth and so on. Yeah, what would you advice would you give somebody entering the M&A world, say, hey, look, I'm, I'm building a holding company, what, what advice would you give them? Make sure you understand the finances in that world because that's the key to success is you've got to have a business case and a financial model that that works in the circumstances that you find yourself, i.e. what particular industry, what particular product or service in that industry, etc. etc. All those pieces have to come together and it's, it's, it's like a jigsaw puzzle. Sometimes they come together and sometimes they don't. And those who come together sometimes don't work and that's, that's again the challenge and beauty of entrepreneurship. You don't control it, you manage it and lead it. Yeah, I, I, I love that advice. You also, uh, somewhere on some site said, hey, one of your favorite scenes is it it is what it is. I mean, where, where did that come from? I, I, I have a buddy that says what it is all that time, because you just don't control things. And, and so again in combat, you know, the enemy has a vote and so you have a, you could lay out a very good plan and Secretary of Defense, uh, Lloyd Austin, I've known him for a few years now and uh. You know, and so when he's making a plan as as a one-star general in combat, as a two-star general in combat, as a three-star general in combat, as a four-star general in combat, and now Secretary of Defense, those plans, as they say in the boxing ring, those plans are good until the first blow lands. Yeah, Mike Tyson said that Schwarzkopf said the same kind of thing and so it is what it is now, how do you handle what is? Yeah. Well, I love it, and I, I appreciate the time for this. I'm gonna make this a short one because I value your time and uh your wisdom here sharing this. Uh, ladies and gentlemen, Joseph B. Anderson, uh, top M&A entrepreneur. So thank you so much for joining us, Joe. Thank you, John. My pleasure and uh good luck. All right, take care.