Notes on Blackstone's Takeover of CMR
Industry:
• A lot of small local and regional companies
• Compete in residential & commercial construction market o Residential: custom cabinets & millwork for new & remodeled homes. $4.8B market in US in 1996. Only 15% homebuilders contracted for custom cabinetry for high-end home o Commercial $5B in US in 1996
CMR:
• Bought in June 1997 (founded 1975 as subcontractor providing custom cabinetry to homebuilders)
• 115 employees
• $6.8M annual sales (top 5% in industry), 80% is from commercial (2/3 of projects)
Goals:
• $70M in sales by 2007 (10 years)
• Increase profits & cash flow
• Replicable franchised business model (footprint) generates $8 -15M sales, local sales & some local production
• Having employee engagement
Company-wide Problems:
• A lot of debt: note to previous owners &cash invested from Walter
• Cash flow in commercial is slow since projects take 6+ months and get paid at end project
Residential – Good news first year growth:
• Project cycles are 4 – 6 weeks: helps with cash flow
Current organizational changes:
• Invested in IT
• Reconfigured the plant to improve productivity (how?)
• Hired VP Sales
• Hired 1st Commercial Salesperson
Commercial Work Process:
• Commercial Framework: 3 roles involved o Owner: ultimate customer and payer o Architect or designer: responsible for drawings o General contractor: turning plan into finished project by due date (could be by separate firms or by a single design-build firm)
• CMR bids through FW Dodge & MSA (open markets) o Got 75 – 80% projects that it looked at o Got 50 projects/week
• CMR goals: o build relationship with contractors to improve odd of winning open markets, and o create opportunities for negotiating bids among limited # of acceptable bidders o Obstacles for these goals:
Contractor not used to having a salesperson contacting them. No other subcontractors have direct sales force
Subcontractors come to Contractor’s “plan room” to get architectural info
• A lot of small local and regional companies
• Compete in residential & commercial construction market o Residential: custom cabinets & millwork for new & remodeled homes. $4.8B market in US in 1996. Only 15% homebuilders contracted for custom cabinetry for high-end home o Commercial $5B in US in 1996
CMR:
• Bought in June 1997 (founded 1975 as subcontractor providing custom cabinetry to homebuilders)
• 115 employees
• $6.8M annual sales (top 5% in industry), 80% is from commercial (2/3 of projects)
Goals:
• $70M in sales by 2007 (10 years)
• Increase profits & cash flow
• Replicable franchised business model (footprint) generates $8 -15M sales, local sales & some local production
• Having employee engagement
Company-wide Problems:
• A lot of debt: note to previous owners &cash invested from Walter
• Cash flow in commercial is slow since projects take 6+ months and get paid at end project
Residential – Good news first year growth:
• Project cycles are 4 – 6 weeks: helps with cash flow
Current organizational changes:
• Invested in IT
• Reconfigured the plant to improve productivity (how?)
• Hired VP Sales
• Hired 1st Commercial Salesperson
Commercial Work Process:
• Commercial Framework: 3 roles involved o Owner: ultimate customer and payer o Architect or designer: responsible for drawings o General contractor: turning plan into finished project by due date (could be by separate firms or by a single design-build firm)
• CMR bids through FW Dodge & MSA (open markets) o Got 75 – 80% projects that it looked at o Got 50 projects/week
• CMR goals: o build relationship with contractors to improve odd of winning open markets, and o create opportunities for negotiating bids among limited # of acceptable bidders o Obstacles for these goals:
Contractor not used to having a salesperson contacting them. No other subcontractors have direct sales force
Subcontractors come to Contractor’s “plan room” to get architectural info