Ken Bloom returns to rubber to run Hexpol's Americas business

When Hexpol A.B. purchased Preferred Compounding last July for $232 million, Preferred CEO Ken Bloom was resigned to the fact that he was going to walk away from the combined organization and leave the rubber industry in his rear view mirror.

Bloom had spent 13 years with Preferred, but when private equity owner Audax Group—the third PE owner of the Copley, Ohio-based custom mixer since 2002—started the process to cash out its investment, he knew his position could be in jeopardy.

"It's very natural when companies are acquired, the senior leadership typically are the ones the most at risk," he said. "They don't need two CEOs or CFOs."

Hexpol Compounding Americas, which accounts for more than 60 percent of Hexpol's global compounding revenues, already had a president in Tracy Garrison, and a chief financial officer. So Bloom and Preferred CFO David Kantor weren't needed when the deal became official July 1.

"I wasn't upset about it," Bloom said. "It was just kind of the normal course of business. They treated me fine and I was off doing other things, and was there to help if needed. But they were a very competent team, and they knew what they wanted to do with the business. And I went off to do my own things."

That meant the former Preferred Compounding CEO would be leaving the rubber industry to fulfill his non-compete agreement. "At that point I was very comfortable with that," he said. "I'd been in the industry 13 years. I was actually never thinking of going back to the rubber business. Part of that was there was really nobody out there—even after a non-compete was over—I wanted to go work for."

But November came, and all that changed when Bloom received a text from Mikael Fryklund—Hexpol A.B. CEO and president until Fryklund and Hexpol parted ways Feb. 14—asking "Can you talk?"

It turns out Garrison had plans to leave Hexpol at the end of 2019 to become CEO of Geon Performance Solutions.

After some negotiating and a whirlwind trip to Sweden to meet board members, Bloom's six-month exile from the rubber industry ended when he took Garrison's post as president of Hexpol Compounding Americas on Jan. 1.

Life leading to rubber

Bloom is an engineer by training, working in multiple businesses throughout the years. He started with an entry level job in aerospace, working for jet engine manufacturer Pratt & Whitney. Then he went into building products in the polyvinyl chloride construction sector, focusing on vinyl windows, doors and siding, among other goods.

That was followed by a stint in the packaging world before going back into building products with Cleveland-based Associated Materials, a large, vertically-integrated maker and distributor. He worked there about six years, before the business was sold and he left in 2006.

Bloom came into the rubber business in 2006 when he joined Preferred, owned at the time by private equity firm Watermill Ventures. At the time, Preferred was doing $30 million in sales with one location in Barberton, Ohio. That was the start of a tenure of more than 13 years, where Preferred went through three different owners in the PE world, made four acquisitions, expanded into Mexico and ended with six factories and sales in 2018 of about $240 million.

Bloom likened the custom mixing business to that of window manufacturers that make everything in a just-in-time system, specified to a home owner's needs.

"Everything we do, every compound we make is very specific to a customer's needs," Bloom said. "Part of our technical capability is to really dial in our products to support a particular customer's needs, and not every customer is the same.

"It's a very intimate customer-client relationship, which I like very much. And I think that's a pretty neat business to be in. I like the idea that our finished goods warehouse pretty much turns out everyday. I literally get an order five to seven days out and I make the order and it ships."

During his time at Preferred, he said he was proud of the mixer's growth trajectory, ending with 540 employees at the time of the Hexpol acquisition. He said Preferred had a good reputation as a partner and was a supplier of choice for most of its customers.

But mostly, Bloom said he's proud of the team they built, "and how they grew with the business and became better leaders over time. They learned how to manage a much bigger business from what they started with."

And that's not to mention how they dealt with three separate private equity owners during his tenure. "It was like getting married and divorced three times," he said. "You have to learn the intricacies of the new partner, and everybody is a little bit different."

Through the three PE groups, though, Bloom said he had nothing but good experiences with the owners. "I know that's not always the case," he said. "We were very fortunate to always end up with a partner that thought like we did and had the same goals and objectives as we had in the business."

Hexpol steps in

Audax and some members of Preferred's management had purchased the custom mixer in 2016, and it was a good run. During Audax's ownership, Preferred pulled the trigger on several acquisitions, including Trostel Ltd., not long after Audax came into the picture.

But as with most private equity owners, there comes a time when a PE group will look to sell and take the profit on its investment. Bloom said he had no idea that Hexpol would be the suitor that won the Preferred business in the end. He always knew the top rubber compounder in the world had interest, having inquired with Preferred on a possible deal going back to 2010.

From mid-2018 to mid-2019, Preferred went through what Bloom called a competitive auction process, as other strategic firms and private equity firms showed interest.

"At the end of the day, Hexpol came in really very unexpectedly at the last hour and was able to put together a deal that made sense," Bloom said. "They were fortunate to get the business, and as I see today we were glad that they did, because I think the teams have worked very well together."

The former Preferred CEO said he always respected Hexpol as a competitor. The firm had great quality, service and technical ability, and shared a similar business philosophy as his firm.

"Culturally, the businesses got along really well because we both thought about the business in a similar way," Bloom said. "You have to show clients everyday that you can add value to their business, whether with cost structure or with your ability to help them solve problems, and you have to be responsive to new projects. Both companies had that same culture, which is why I think we were No. 1 and No. 2 in the industry."

An unexpected call

After the deal closed, Bloom began looking for other opportunities in private equity. He had good success in that sector during his career, and was considering co-investing in some businesses outside the rubber industry.

"I always kind of look for things in my life that are kind of the next challenge," he said. "To go work for a small compounder and grow them like we did Preferred, I'd already done that. There was really nothing else I wanted to do in the compounding world."

That was, of course, until former Hexpol CEO Fryklund changed Bloom's plans.

"To me, it's like getting called by the New York Yankees or the Boston Red Sox," Bloom said. "Name the sports franchise of your dreams, and it was kind of like receiving one of those calls. It was very intriguing and I was very interested, and I actually never thought it would happen."

He met Fryklund in an airport, when the then-leader of the Swedish firm was meeting with some of the Hexpol Compounding Americas staff. Bloom then flew to Sweden the Saturday after Thanksgiving to meet with the chairman of the board and other global leaders.

The meetings went well, and the decision was made to go forward with Bloom poised to take the reins at Hexpol Compounding Americas at the start of 2020.

He said he was intrigued by the thought of running a business of that size and scale in an industry he knew well. "I always respected Hexpol very much as a competitor," Bloom said. "It was the top competitor in most of the accounts."

There also were other benefits that went with staying in familiar territory. He always had enjoyed working with the employees at Preferred, and he'd enjoyed the customers and the industry. Plus he could continue living in Ohio, so it kind of checked all the boxes.

Business as usual

Having been in the business as a competitor for 13 years, Bloom said everything at Hexpol was pretty much what he expected, adding that he was quite impressed by the Hexpol staff.

"I think the Hexpol people are just absolutely terrific," he said. "They're extremely hard working and passionate about what they do. They're extremely focused on customers and making sure customers are satisfied and supported."

Bloom is responsible for North America, and that extends to South America if Hexpol ever decides to expand in that region. The Americas business is by far the largest for Hexpol, accounting for 61.6 percent of the Swedish firm's 2019 compounding revenue, or about $940 million of $1.53 billion.

Hexpol operates as a very low overhead company, Bloom said, with the corporate staff in Sweden probably fewer than 10 people. "They really push the responsibility down to the operating divisions. That's where the people and the work get done," he said. "It's very much like a private equity firm in some cases. They are there to help and develop strategy with, and to be supportive. They're not involved in the day-to-day running of the business."

The main item on the agenda when Bloom came aboard in January was to continue the integration of Preferred Compounding into the Hexpol organization. Roughly speaking, he said, the process is probably a third to half complete. Many of the benefits programs were combined effective Jan. 1. There remains a substantial amount of work to putting the various control and ERP systems together.

Organizationally, he said things are in good shape, with four regions each having an operations and sales director in place.

Some facility consolidations were close to being complete before Bloom took his post, including a facility in Wadsworth, Ohio, that came when Preferred acquired Kleen Polymers. He said Preferred had that facility on its list for consolidation but hadn't done it yet. Most of the work from there was moved to a Hexpol facility in Burton, Ohio.

The other plant to close was a Kardoes facility in Alabama, as the business shifted to other legacy Preferred and Hexpol facilities.

"It was just because of market conditions," Bloom said. "There was too much capacity. Hexpol over the years has acquired many companies and has not done a lot of consolidations of the business as they've acquired companies. I think that's something that has to be done on a regular basis, just to make sure you're utilizing all of your assets properly."

Bloom said Hexpol's manufacturing footprint in the Americas is strong, with capability spread across the U.S. from the upper Midwest, to several facilities in the South, to a couple in the heart of California's manufacturing industry. Those are supplemented by three facilities in Mexico that form a triangle in the area where much of that nation's industrial growth is centered.

Running a large enterprise brings new challenges, he added, including dealing with more people and personalities, and making sure management knows who the next wave of leaders will be.

"It's like a big bus going from point A to point B," Bloom said. "Do we have all the people sitting in the right places? That's kind of a constant thing we evaluate."

Hexpol will continue to supply custom compounding needs, whether it's for five pounds of materials, or large batch sizes of more than 1,000 pounds.

"We have every capability," he said. "We can calender, we can pelletize, we run colors, we run black. Any polymer type in any size or form, packaged any way you want. That's kind of what we do. To me, we can service anybody. It's very important that customers know that they can come to us."

There are some differences between running a firm for a private equity owner and leading a publicly owned firm like Hexpol, but that doesn't change the way Bloom operates.

"We want to run a very responsible company," he said. "We're going to be great citizens, and provide great quality and service to our customers. We will add value and try to build a great company going forward. That's really at the end of the day the same either way."