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CEOs, Corp. Development

Growing 3X in 3 Years (Part 2): Outbid at the 11th Hour


In 2015, Dane Manufacturing CEO and president Troy Berg and COO Mike Lisle set the audacious goal of growing the company 3x in 3 years — from $10 to $30 million. Read Part 1 before diving into this installment. As a quick recap, in Part 1 we covered how Troy originally got financing to buy Dane, why he brought on a COO for the business, and his audacious goal of 3Xing the business in as many years.

“A Small Acquisition Is Just as Much Work as a Big One”

By 2016, it was clear that Dane would need some serious inorganic growth to reach their goal. “Dane had done a few smaller acquisitions, but we knew we had to look bigger,” says Troy.

The team became aware of Axial around the same time. “I’ve never been a fan of the way business brokers and intermediaries go to market with companies. It’s never been efficient. I told Mike, ‘Look, we have to accelerate our acquisition strategy because I’m not finding things the way that I used to. I think a lot of these intermediaries just died, or retired, or went to sleep because I can’t find anything. They’re not here.’ But lucky for us, we found Axial.”

Troy and Mike decided to join Axial in August 2016. “Yes, it cost a bit of money. But we could see right away that the people on Axial were there to do deals. They were there to make connections and talk seriously. We had seen too many brokers and accountants and lawyers go hot and cold and not know who they were representing that well. It made it challenging to get anything done. But on Axial we found good write-ups and reliable information. The folks representing companies on Axial were, in general, extremely knowledgeable about the companies that they had shared. As a result, we could make a really quick ‘let’s pursue’ or ‘let’s decline’ decision.”

Troy and Mike began working with their Axial account manager, Levi Cohen, during their weekly check-in meetings. “As Levi always says, the work in the acquisition is just as hard if it’s a $10 million acquisition or a $1 million acquisition. So, we decided to raise our sights a bit together,” says Mike.

“We painted a picture of what a successful acquisition would look like and then evaluated every opportunity through that lens.”

Troy and Mike outlined exactly what types of acquisitions they were — and weren’t — looking for. “We painted a really tight target around what we wanted. If a deal didn’t hit our criteria, it didn’t matter how good it sounded or familiar it was. We painted a picture of what a successful acquisition would look like and then evaluated every opportunity through that lens.” They were looking for a proprietary product business, which would allow them to control their destiny a bit more by selling directly to the customer. The product itself had to depend on quality sheet metal. Dane didn’t have an extensive marketing team in-house, so they wanted an existing brand. They also wanted to something that was relatively predictable — “not susceptible to wild swings in the economy,” says Mike.

They found a few promising deals, but nothing that panned out. Then, in March 2017, Mike came across the Dantherm Cooling deal. Dantherm was a division of Dantherm A/S, a publicly traded Danish company originally formed in Spartanburg, SC in 1998. The company provided climate control and air handling solutions to North, Central, and Latin American telecom, industrial, and oil & gas markets and was looking to add new products.

“Pursue It”   

Troy and Mike sat down to review the deal. “Every Thursday we would review deals against our criteria. We said, ‘Pursue it,’ to the Dantherm deal pretty quickly. It hit all our criteria.” There was an opportunity for Dane to manufacture much of the metal that Dantherm was currently buying, and Dane saw a lot of potential to capitalize on their market position and the fact that Dantherm was already a global company.    

When Troy and Mike connected with Dantherm’s M&A advisor, there were already multiple suitors. But Dane made their interest known and moved quickly. “Within ten days, we were in Chicago to do our first in-person vetting with the president of the company,” says Mike. “We saw all kinds of potential.”

It quickly became clear that the deal wouldn’t be a simple one. “Dantherm had had a banner year in 2016, but when we first saw the company in April of 2017 they were already well beneath that banner year — but there wasn’t a great sense of why,” says Mike. They also learned that earlier in 2016, the company had almost been acquired by a company that looked a lot like Dane, but the buyer had walked away.

Those details raised a bit of doubt, so Troy and Mike quickly flew to South Carolina to visit the company’s headquarters. “We saw immediately that the culture was similar to Dane’s. We knew we had not just a good product fit but a good cultural fit.” On the Friday before Memorial Day, they issued an LOI. “We were on a high — it was the last day before a long weekend, and we’d found something that hit all our boxes to help achieve this huge goal.”

By the following Tuesday, Troy and Mike’s hopes had been dashed. Another group had made a higher offer, and now that company was in a 90-day exclusivity period with Dantherm.

Still, Mike didn’t lose hope. He had a feeling Dane might get another shot at the business. He knew that the company that outbid them had never visited Dantherm. “I’m no valuation expert, but I had a hard time believing the buyer was going to close at that price, because Dantherm’s foundation was a little weak. I just had a gut feeling the exclusivity period would expire.”

Mike may have been confident, but Troy was getting nervous. Three years was coming up soon, and they would need a Hail Mary to make good on their 3x goal.

Three years was coming up, and Dane would need a Hail Mary to make good on their 3X goal.

Rather than fixating on a potential failure, Troy channeled his energy into sales. Dane landed a $5 million contract and then a $2 million contract. “That gave us the runway for Dane in 2018 to be $20 million. And if we could close Dantherm then we’d be there. We’d get to ring the bell at 3X,” says Troy.

The only thing to do was wait until the end of summer, when the other suitor would either close the deal with Dantherm — or their exclusivity period would run out.

Next up: Read Part 3, including what happens when the target company’s parent declared bankruptcy and Dane’s long term bank said, “No thanks” to the deal.

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