Academic journal article Business Case Journal

Decisions to Learn From: The Life and Times of Brad Clancey

Academic journal article Business Case Journal

Decisions to Learn From: The Life and Times of Brad Clancey

Article excerpt

Late in the fall of 2010 and after a career in buying and selling companies, Brad Clancey faced a difficult decision about whether or not to sell Specialty Materials Technologies (SMT) located in Maine; a company Clancey had purchased in 2003. The company manufactured footwear components, industrial cutting dies and cleaning cards for transactional equipment (such as POS scanners and optical scanners that validate checks and currency). By early 2008, the cleaning card business, which counted for around 68% of revenues and about the same in operating income, saw sales decline in a key segment--the Las Vegas casinos. To Clancey, that signaled things were getting really bad; the economy was in free fall and people were not gambling. He believed that when the gambling industry slowed, it was a leading indicator of an economic headwind. He decided to cut operating expenses and by the first quarter of 2009 when everyone finally realized how bad things were, he had already put the company into survival mode to weather one of the worst recessions ever. By 2010, he was looking at selling the company. Clancey reflected:

   There was no more to cut--we had cut down to the bone. It is like
   the Symphony--you don't need the piccolo player very often, but
   you still need him. Based on my gut, there was something telling me
   that I should sell the company. Before I could do that I needed to
   show some value to a buyer. I called all the employees together and
   asked them to find ways to cut more costs, since we could not cut
   more employees.

As he pondered these difficult circumstances, Clancey, who had a background in mergers and acquisitions, knew that a sale would require finding the right buyer. One option was to sell the business to buyers who wanted to split the assets; one firm taking the cleaning card business and the other assuming the remaining SMT assets. He knew this offered the potential that he would maximize his own personal financial position, but it could also mean employees would lose their jobs. Another possibility was to sell the company back to the previous owner, who was more likely to keep the company intact. This would mean far fewer loyal employees would lose their jobs, but it could also mean that he would potentially "leave millions on the table." A third possibility was to reconsider any sale at all, since the employees had really stepped up and things seemed to be improving. A lot depended on how Clancey saw the future. One thing he knew for sure--his approach to this decision was very different at 55 than it would have been when he started out.

The highlights of Clancey's career are summarized in Table 1 in the appendix. What follows is a discussion of how 30-years of experience resulted in the SMT decision that he faced in 2010.

The Early Years: A Developing "Rock Star" of Mergers and Acquisitions

After earning a bachelor's degree in mechanical engineering at Virginia Tech, Brad Clancey had already led two operational turnarounds while working for Hercules Inc. (a major U.S. chemical company) in the 1980's. He left Hercules when a group of investors came in and bought the business that Clancey had turned around.

   I was on a fast track at Hercules to be a vice president, and in
   the '80's if you were a vice president of a Fortune 500 company,
   you were a rock star. Early on, I had been relocated to a plant and
   business that Hercules was selling. My assignment was to drive the
   costs down and improve performance to attract a higher selling
   price. A group of investors came in and bought the company--Extrusion
   Tech. Here's the interesting part. They offered me a job
   to go with them and become the COO of that business. I was 30 years
   old. It was high risk, but the timing was right. It was my
   opportunity to do something different--run a company. The goal of
   these investors was to take the business public, but that meant
   more acquisitions. … 
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