H.R. Strategy Case Study

Great White Capital and BeachCo Ltd.

Bob Quinn

· Employed at Great White for 3 years. Attracted by their “kick butt” reputation.

· Has been against the BeachCo acquisition since the beginning

· Thought they were paying too much for the acquisition

· Saw different cultures

· Does not see that BeachCo is interested in growth

· Thinks that BeachCo is a “dog with fleas” and is run by a group of rank amateurs

· Sometimes is at odds with the aggressive Great White culture. He has a more thoughtful and people sensitive side than that of his colleagues.

· Was worried that Great White’s style would someday be at odds with a target that did not easily fit into their normal game plan.

· Saw BeachCo as just that type of situation

· Only way deal would work:

· BeachCo’s distributors remained loyal and happy

· If Marie Clouseau (BeachCo’s longtime Managing Director) remained on as BeachCo’s Managing Director

GW Sharkey

· Bob’s boss

· Very positive about the BeachCo acquisition

· Sees potential in finding hidden profits at BeachCo

· GW was a hot-shot… up and coming executive at Great White Capital

· Is not very good at really listening to his subordinate staff

· See BeachCo as being really connected to and knowledgeable about their customer base

· Tells Bob not to worry about the “soft stuff”. “Relax…we won’t force them to change too much….You just need to figure out how to make the numbers work!”

· Upon Board approval, gave Bob three key tasks:

1. BeachCo need to doubled its earnings in three years (they need to increase their earnings by 20% in their first year, cut some heads)

2. No blowups at BeachCo.(the analysts and business press are all over us)

3. I want their top distributors so I can sell them on other Great White products. I want Clouseau to get me in front of them

4. By the way…if Clouseau walks…you can walk out right behind her!

Marie Clouseau

· Has been the Managing Director at BeachCo for 18 years

· Smart, sophisticated and a very polished and professional executive

· Great White could learn a lot from how she managed her distributors

· Truly the matriarch of BeachCo

· Was in title the Managing Director. But Marie Clouseau IS BeachCo!

· Was the godmother of many of the associate’s children

· Was revered within the BeachCo organization

· Demonstrated a strong business sense and personal character

· Well known in charity circles for her generosity

Great White Capital

· Large Wall Street Private Equity Group

· Bob’s company. Has a reputation for being tough on their targets.

· Great White’s CEO has a “take no prisoners…we are at war” approach to M&A

· Wall Street legendary style of acquisitions and performance

· Outstanding team of financial audits and operations pros used in due diligence to determine the “value added synergies”

· Known for its 24/7 “War Room”. Staffed and in place until the deal is done

· The War Room Team said “in 30 days we know more about a target than the people who worked there for 30 years”

· Prided itself on its reputation as a rough culture

· Acquires turnaround targets – small companies with good market position but not very good management

· Not that interested in learning new things from their targets. “We know better” is the mantra.

· Annual turnover is 25%

· Average length of service for managers is 4 years

Post-Acquisition: The Great White Capital’s Typical Integration Approach

· Within weeks, would close the target’s back office operations and move the work to the closest Great White office

· Would fire most of the leadership team within 12 months

· Rewards given to the deal makers for beating the estimates on purchase price

· Squeezed every last dime out of a negotiation

BeachCo Ltd.

· World’s largest producer of beach supplies (chairs, tables, umbrellas, coolers, etc..)

· Great track record, strong profitability, very loyal customer base of distributors, solid management team

· Headquartered in Paris, France. Manufacturing in China, Vietnam and Brazil. Distributors are world-wide.

· 21 management team members all who have worked together for more than 10 years

· 850 associates were very fluid. Worked to handle business “bubbles”, solve customer issues, or get a product to a particular marketplace

· Annual turnover is less than 5%

Deal Rationale

· BeachCo would give Great White a European presence – important GW business strategy

· Access to world-wide distributor network

· BeachCo need growth and Great White had substantial capital to invest

· BeachCo sold through distributors which was a new sales distribution channel for Great White and their other businesses

· Great White’s Board was convinced to do the deal by GW Sharkey with the following:

· We will leave BeachCo alone

· It’s a great opportunity to pick up a world-wide distribution network

· Bob Quinn will get them to focus on growth

· The combination of Great White’s management and BeachCo’s distribution will make this deal a “no-brainer…a home run”

· BeachCo will learn…”you grow or you die….there is no in- between” and “damn it...they will grow”

The Situation

· Bob goes to Paris and meets with BeachCo’s leadership team

· Nice discussion about BeachCo’s traditions and synergies with Great White but no meaningful action items

· Great White’s HR Director tells her counterpart at BeachCo that they are scrapping the BeachCo Associate’s Bonus Plan focused at the associate level

· Great White will be putting in their “Super Star” Bonus Plan which is geared toward upper management

· The bonus change will affect 75% of BeachCo’s workforce

· Great White closed the employee cafeteria where BeachCo employee’s had been given a free lunch for many, many years

· Madame Clouseau was mortified that the “lunch ladies” in the cafeteria were terminated after many years of service with only a modest severance

· Great White’s Controller notified that purchasing and travel would now have to go through Great White’s vendors. There change would possible increase shipping costs for BeachCo while reducing them for Great White. BeachCo’s long standing vendor relationship were immediately terminated.

· Great White now requires multiple approvals before granting customer credit. BeachCo always gave credit decisions based upon a handshake and their word. BeachCo received the first customer complain that anyone could remember when a major distributor lost a deal while waiting for their credit to be approved.

· Complaints pile up in Madame Clouseau’s office:

· New reports that needed to be filled out with no explanation

· Great White officials regularly asked for things but never took time to introduce themselves

· One example of an e-mail from a Great White financial auditor said” fax me the B22 report within the next 30 minutes or I will be in your face Monday morning and your boss will hear about it. GET ME MY G__DAMN REPORT!”

· Bob Meets with Marie Clouseau:

· Asks if Great White is trying to offend her? As she has arthritis, she cannot fly to London in roomier First Class anymore…according to Great White Policy

· “Must get my bosses permission. Is that you she asks frostily”

· “We can meet your aggressive projections if you let us do our jobs”…then opens a drawer with a 12 inch stack of paper and plops it on the desk. These are just a few of your ASAP …IMPERATIVE…type messages we receive daily. Do you know how idiotic and time consuming these forms are to fill out? (Some were travel requests, travel profiles, 10 page performance evaluations, EEO reports (in France?), many were financial forecasts, and some were cost synergy update requests.

· Bob calculated that he was looking at more than 50 requests from close to 20 different Great White employees. Usually these kind of requests were attended to at home on Sunday afternoons at Great White.

· Bob says” Maybe I can get someone to help you get caught up…but this is how we operate”

· Marie says “I’m imagine this is how you operate but not me. We at BeachCo were moving things along rather well before Great White came along. But I will not stand for my staff to be treated rudely and be constantly disrespected. If Great White’s involvement means my company becomes paralyzed, we both have a problem. You have a strange way of “leaving BeachCo alone”.

· My husband has been after me to retire….and give up all this stress. He is starting to make a lot of sense to me now!

· Marie went on to say…Bob…you seem like a nice person. Clearly you are jet lagged….perhaps you need a good night’s sleep.

· “Let’s meet in the morning and discuss the future of BeachCo….shall we?”