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One Corp Dev Team’s Secrets to Sourcing Foreign Acquisitions


As part of our ongoing series profiling the inner workings of active corporate development teams, we sat down with Greg Wolf, president and CEO of BHS Corrugated North America, to chat about the challenges of working in foreign markets, the benefits of a lean corp dev team, and why people should be at the core of every acquisition. BHS Corrugated makes machines that make corrugated boards (i.e., cardboard), and is the leader in the space with more than a 50% market share.

MMR: Where is BHS Corrugated based?

The main headquarters is in Germany, but we have manufacturing plants in Europe, North America, South America, and China.

China is really the growth market for us. We’ve had a presence there for about 15 years. We started out kind of the wrong way — the way most Western machinery makers start — by making our lower-end equipment and older designs in China and seeing if the market wanted to buy those. It didn’t work. So now we’ve developed specific lines to design and build in China by our Chinese organization, for the Chinese market. We abandoned the only-go-for-the-low-cost strategy, and now we’re really in China for China. We’ve found success this way.

MMR: What acquisitions have you made to date, and what are you looking for?

We recently acquired a small competitor in Shanghai and a company outside Chicago. We also established a joint venture with a company in Kalamazoo, Michigan, and have two development agreements, one with a Japanese company and another with a German company, with the agreement that we’ll start joint ventures once the developments come to fruition.

So we’ve done a fair amount of deals in multiple geographies, and there are a ton of opportunities on our plate right now. In particular, we have a new business unit called Digital and Logistics, targeting digital printing for corrugated, as well as the logistics in material handling, with things like robotics and the utilization of the Internet of Things to try and build remote capabilities. A lot of our activities today are focused on trying to expand our presence and acquire and develop new technologies.

We don’t have a hard screen in terms of company size, but in general, a company has to have revenue of $5 million U.S. dollars  or Euros or above. The amount of work on a $5 million deal and a $30 million deal is the same, so we’d rather be looking at things that are bigger. Our sweet spot would be between $20 million and $40 million in revenue. We’re not very focused on turnarounds, but for the right strategic deal — if it’s a good technology, an early stage software company — we might make an exception.

MMR: What’s the makeup of your corporate development department?

It’s very small. I’m the head of corporate development, but I’m also the president in North America and South America. I have one analyst who works with me in Germany.

MMR: Why so lean?

We basically made a decision about three years ago to run very lean. In the corporate development world there’s an ability to outsource a lot of the activities, from a legal standpoint, a project management standpoint, even a banking and advisory standpoint. We utilize external resources.

In North America, Axial has helped us become more proactive and get into the circle of North American advisors. We’re not particularly known as a robotics company, or a logistics company, but we want to see those deals.

In Germany, we’ve taken a different approach. We’ve made an alliance with a university near us, and specifically a business professor who formerly ran M&A for one of the business divisions of Siemens. We work with him and a couple of his M&A students as consultants, and they do proactive screening for us of potential companies. I can’t emphasize enough the benefits of having such an experienced guy as an informal advisor.

In China, we’re also looking to partner with a small middle market investment bank or advisory firm to do screens for us on a retainer basis.

MMR: What are some of the challenges of managing acquisitions in multiple geographies?

It really helps to have a local presence. For example, when we do a deal in China, we’ll have our local Chinese CFO and the human resources director from our Shanghai operation on the acquisition team, and they have the ability to understand the complexities in the deal. Obviously in China there’s also a language issue, but the finance, the tax, the HR, and the legal are also very unique market to market.

MMR: Does the local team also help evaluate cultural fit?

That’s been a lesson learned. In the beginning we didn’t pay nearly as much attention to that as we do today. The integration process in terms of country to country — how you would do it in America versus how you would do it in China — is different based on cultural fit. And then the culture of the organizations is another layer to pay attention to.

We’ve done a fair bit of business around the world, but we’re a German company and have to be careful that we understand the different ways of communication in local markets. For example, Germans are very direct, even more direct than Americans — particularly when it comes to interpersonal feedback. Germans use words to amplify feedback. So something isn’t unacceptable; it’s totally unacceptable. Whereas Americans use words to make it softer. It’s not quite right or it could’ve been better. So when I tell a German employee something isn’t quite right, he thinks he did a great job. We’ve got to remember that cultures are different and language is different.

MMR: What advice would you give a company that is looking to start making acquisitions?

Don’t underestimate the people element. People, and the ability for people to work together successfully, are the most critical factors in acquisitions. We spend a lot more time today evaluating the management teams of potential targets. There are deals we’ve walked away from because we thought the management team wasn’t deep enough and didn’t think we had the depth in our organization to compensate. You can tell a lot from the style of the business leader at the target company. You can look for whether they’re letting other people develop and take ownership of pieces of the business, or if they’re commanding control.

BHS Corrugated: Axial Profile | Website

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