The Name on the Door
A Little Perspective on Consolidation in the Lumber Industry
By Warren Reeves, Wholesale Wood Products
Another article on consolidation?! We all know consolidation has been a hot topic over the past few years, so how is this article different from the thousands of others that have circulated through the industry publications? Because it’s written from the perception of all of us.
Four years ago, the company I worked with for 17 years was being bought out. What did this mean? Where would I end up? Would I have to relocate? What would happen to all of my peers? The questions came faster than I could ask them. I was assured nothing would change and that all of my co-workers — whom I also considered my friends — would still keep their jobs, and it would be business as usual. (By the way, this will always be the textbook answer during any acquisition.) I’m not really sure what other answer I was expecting. Perhaps something like: “Well, half of you are going to be fired, but don’t worry, it might not be you.”
Needless to say, this was an extremely stressful time. I understood the reasoning behind the buy-out: Business had been historically low, and the light at the end of the tunnel looked more like that of a freight train than that of a brighter day. Still, there was something within that said don’t give up. The owners of my company must have felt it too, because at the 11th hour, the deal was nixed. This was my first experience with consolidation.
Many of my peers in this industry have coined 2015 as “the year of consolidation,” so I’m not alone in thinking that this might just be the beginning. In the southeastern region of the world (where I reside), I’ve seen pine mills being absorbed on a regular basis. I’ve seen mom-and-pop lumber yards gobbled up by big chains, and then those big chains gobbled up by even bigger chains! Almost every time I read an industry publication, there’s a news brief about someone I’ve done business with being bought out.
From my perspective, not much has changed after the transaction. Most of the time, I’m still cutting and receiving POs to and from the same people. So, what does change? Just the name on the door? I don’t think so. For obvious reasons, I can’t divulge names or companies, but I can share what I’ve been told. What changes is internal pride — the pride that employees had working with a “local” company that had employed their parents and their grandparents and so on. That name on the door was the same name on their kids’ baseball jersey. The same name that helped build many communities over the years.
My findings are simple: It’s really hard to let go. Does this mean that the new name won’t be better? Of course not; it’s just new. Most people don’t like change; some even fear it. My advice? Embrace the newness and try starting your own traditions. Who knows, they might be better than the past generations who instilled the internal pride to start with.
“The one with the most sticks wins the game.” Maybe. Maybe not. It’s probably an obsolete way of thinking, but I still feel that people do business with people. You would be hard pressed to find another industry that still does million-dollar deals based off of a handshake. This is the world we live in.
I haven’t stopped doing business with anyone because the name on the door has changed. As long as they still do what they are supposed to do, then they will continue to have my loyalties. I’ve lost countless hours of sleep due to the concern of consolidation. “If the mill I’m buying from gets bought out, I won’t be able to get my material.” Guess what? It has and I still do. “If my biggest customer gets bought by someone that I’m not ‘in with,’ then we are going to go out of business.” You got it; they have and we’re still here. I can throw out many clichés on why this is, but it’s simple; We’ve proven to be a viable entity to our vendors, as well as our customers, and no matter the circumstance, we’ve put ourselves in a position of need. This is the secret to success, and I’ve given it to you free of charge!
The bottom line is this: Consolidation within our industry is going to continue. I can’t give you the answers to when, where or why, but what I can tell you is that you have to make the most out of your situation — no matter what name is on the door.
To learn how other leading industry firms are dealing with the challenges that come with industry consolidation, you are encouraged to attend NAWLA’s 2016 Leadership Summit: Where Industry Decision Makers Grow, March 13-15, 2016 at the Westin Mission Hills in Palm Springs, California. You will build knowledge on relevant management topics and key trends in education sessions and connect with peers through multiple networking events. You will leave with proven best practices, cost-saving measures and new or renewed relationships with customers, prospects and suppliers. Learn more or register at www.nawla.org.
Why the Increased Consolidation?
Many industries today are dealing with the realities of consolidation for a number of reasons: changing economy, evolving marketplace, advancing technologies. The forest products industry is no different. Here are some of the most common reasons for the consolidation of this industry1:
- Access to standing timber
- Reduced profit margins
- Stricter government regulations
- Decreased housing construction
(1 Sources: Great Falls Tribune, State Impact)