ASHTABULA, Ohio—Work relationships certainly can influence some life-changing decisions. Especially when you least expect it.
Richard Selip and Joseph Misinec can attest to that.
The co-owners of Grand River Rubber & Plastics Co. had worked tirelessly to make their manufacturing plant a success. They had an exit strategy: grow the business until they reached their mid to late 50s, then sell to the highest bidder.
A funny thing happened on the way to retirement.
“The problem with that is by the time I got to be 55, back in 1998, the first time I went to sell the business, I found out I really liked the people I worked with,” Selip said. “It wasn't as simple as putting it out in the market and selling it to the right bidder.
“What happened to the company after we sold it became just as important as the act of selling it.”
While the end of the story is widely known—three years ago, the pair agreed to sell the business to its employees, and they will retire, together, in March—the story of how they reached that point demonstrates their commitment to their workers.
In 1998, Selip, Misinec and former co-owner Bob Jessup signed a letter of intent to sell their business to a private equity firm, which, according to Selip, was building a portfolio of specialty rubber and plastics firms. Each of the three would retain 10 percent of the company.
Selip and Misinec knew what that meant: The company would be sold again.
Selip posed this question to one of the equity firm's partners: “We can control the sale of company the first time, but what happens the next time?”
“What he said was,” Selip recalled, “ "Look, when the time is right, I can't tell my investors that the minority shareholders are holding up the sale.' “
One morning, the issue came to a head, while Selip and Misinec met for a morning jog and breakfast.
“I said, "Joe, I can't do it,' “ Selip said.
“Too many bad vibes,” Misinec said.
They called off the sale. “It didn't feel like the right thing for everyone involved,” Selip said.
The equity firm did proceed with their plan, acquiring Wek Industries Inc., in nearby Jefferson, Ohio.
Eight years later, with the exit strategy on a back burner, another sale possibility emerged, oddly enough, at a funeral.
R.L. Hudson, owner of R.L. Hudson Co., broached the subject of acquiring Grand River with Selip, after attending services of a mutual friend.
The companies soon entered into negotiations, then signed a letter of intent.
Selip, however, said he began to have reservations again about selling the business, especially to a firm that had little experience dealing with a union.
“They had never dealt with manufacturing actually themselves,” Selip said. “They were engineers and sales people.”
The union that represents Grand River employees offered tepid support of the move. “They said ... if you and Joe believe this is in our best interest to be sold to R.L. Hudson, we're 100 percent behind you,” Selip said.
“(The union was) nervous about it for two reasons: one, because R.L. Hudson brought in so much product from China, they were really afraid the first thing they would do is they would move some of the production of the product over to China. The second thing was the fear of the unknown.”
Before the end of May 2007, Grand River had halted negotiations with R.L. Hudson. And both parties benefitted from the decision.
A little more than year later, a major recession hit.
“It was probably a blessing for our employees that we didn't go forward with it,” Selip said, “because (R.L. Hudson) was dramatically affected.”
Meanwhile, as the pair finally settled on an exit strategy—an employee stock ownership plan, known as an ESOP—they also worked on growing the business.
They negotiated two, relatively small transactions, acquiring Couples Rubber in Carruthers, Mo., in 2011, and Tri-Seal, the leaf cut division of Triangle Rubber & Plastics of Goshen, Ind., in 2012.
“Between the two acquisitions, we picked up somewhere north of $1 million in sales,” Selip said.
Then, in the first quarter of 2013, they purchased one of their most formidable competitors: the belting division of Icon Polymer Ltd., headquartered in England. Icon's compound technology, equipment and product line expanded Grand River's operation and global reach significantly.
“It was somewhat of a defensive acquisition,” Selip said.
“You either beat them or you buy them. We had spent four years trying to beat them.”
The acquisition helped to push the company's sales to near $50 million. But the bottom line isn't as important as the folks who make and sell the products.
“The bottom line comes from offering opportunities to the employees and treating them fairly,” Selip said.
“That is no philanthropy. It's a business strategy, that if you offer opportunity to employees, and they can earn a living wage, and they provide a higher standard of living for the families.
“That is what creates the bottom line.”