Ian CasselKeymasterOfflineTopics: 88Replies: 30
Here is a full chapter from our new book, Intelligent Fanatics: Standing on the Shoulders of Giants:
The Fighting Scottish Clan: Harold & Dan Leever
“To make no mistakes is not in the power of man; but from their errors and mistakes the wise and good learn wisdom for the future.” —Plutarch
Why do so many companies never sell to an outside investor or go public? Simple: they don’t want to disrupt their company culture or legacy. Quality ownership thinks and acts for the benefit of the long term. Often, families and their employees own these businesses outright. Their goal is to pass the company to future generations or to employees. Other owners sometimes have different motives. They are often short term–minded, looking for a quick dollar at the cost of long-term sustainability.
Why do some companies choose to sell their businesses at a lower price to Berkshire Hathaway rather than a selling at a higher price to other companies or private equity institutions? Berkshire Hathaway is the rare company that has a long-term mind-set. Companies trust Berkshire Hathaway will not change what made them great in the first place. The probability that their business will sustain its success for generations is higher under Berkshire Hathaway’s umbrella.
What happens when the wrong type of owners take over an intelligent fanatic–led organization? The win-win relationships built with employees, suppliers, and stakeholders tend to get compromised. The culture dies and performance suffers. MacDermid Inc., a specialty chemicals company, was one such business.
In this chapter, the history of MacDermid will be highlighted, from its founding through its subsequent evolution. Harold Leever, MacDermid’s second leader, would instill the foundation of a quality-driven culture. Despite some cultural dilution in the domestic operations under Harold’s successor throughout the 1980s, a renaissance would soon occur. Harold Leever’s son, Daniel, brought about an intelligent fanatic amplification. Dan built upon his father’s vision and got extraordinary results out of ordinary people.
Like other intelligent fanatics, Dan Leever stood on the shoulders of giants. He took the best ideas from a wide variety of mentors and other business operators, both within and outside the specialty chemical industry. His vision and strategy from 1990 to 2013 led to industry-leading performance, and MacDermid’s equity value would trounce its peers and the S&P 500.
MacDermid was sold to Platform Specialty Products in 2013. The culture that Dan Leever and his father, Harold, had worked so hard to build at MacDermid would soon be diluted. MacDermid has been “corporatized” as win-lose propositions have started to creep in. Dan Leever retired from the company in 2015, and he regretted selling the company to private equity in 2006. There are many lessons to learn from Dan Leever’s experience, one being that intelligent fanatic ownership is extremely important to the success of an organization.
MacDermid is a story of four phases, which starts with its founder Archibald “Archie” J. MacDermid. Archie was born in West Kilbride, Scotland, in 1884. The eldest of ten children, Archie would spend several years of his youth as an apprentice in industrial shops throughout Scotland. At the age of nineteen, in 1903, Archie, like many other Europeans, decided to take a chance and emigrate to the United States. Opportunities were better for a young man in the United States in those days, and a few relatives who had already made the move were ready to help him.
Archie’s first job was with the Connecticut Dynamo Company in Plainville, Connecticut. His uncle was an officer. The company manufactured low-voltage motor generators for electroplating. Archie served as a factory worker and salesman while also getting his first taste of the nascent electroplating industry. A brief stint working on the Panama Canal at the age of twenty-seven provided him with valuable management experience. Arriving back at Connecticut Dynamo in 1913, Archie furthered his understanding of electroplating—and noticed an opportunity.
Cleaning metals was at that time a time-consuming, labor-intensive job. An opportunity arose for someone to introduce a chemical cleaner to reduce labor intensity. Realizing that alkali cleaning compounds could eliminate that tedious physical labor, Archie set about furthering his exposure to this field. He took a job with J. B. Ford Company in Michigan and rose from Eastern sales manager to foreign sales representative.
In the nearby town of Waterbury, Connecticut, Archie saw where his preparation would pay off. Since the early nineteenth century, the town had been considered the “Brass Capital of the World.” One-third of U.S. brass was made in Waterbury. Archie’s observation of chemical cleaners and electroplating prepared him to seize the opportunity. In 1922, Archie successfully convinced friends and family to loan him $4,000, added $3,000 of his own money, and started his own venture, MacDermid Chemical Company. The company’s first product was Metex Metal Cleaner no. 1, an industry-first electrolytic brass cleaning process.
From scratch, Archie led the company to $391,690 in sales and $22,603 in profits by 1929. Each year, it was profitable. The company’s strong sales focus and ability to produce needed, innovative products were the key to becoming a dominant local chemical producer in New England. However, the company fell on the hard times during the Great Depression. Waterbury’s brass industry imploded. MacDermid’s sales fell to $167,670 in 1932. It was Archie’s conservative cash management that enabled MacDermid to survive the worst of the Great Depression.
Archie’s insistence on selecting competent employees, sharing financial successes with them, and creating a caring, family-like working atmosphere not only enabled MacDermid to make it through the Depression but also set the foundation for a great company. All that was necessary was a new, hungry leader with the right skills to take the company to the next level.
By 1938, MacDermid hired its first research chemist, Harold Leever. Harold, too, was of Scottish heritage, and he quickly made an impact on the company. He developed a lucrative chemical finishing product called Anodex, a reverse-current alkaline cleaner. The cleaning results on steel, and the prevention of the formation of metallic films on the metal, resulted in tremendous savings in production time. There was no such cleaner for steel on the market at the time. This led to a huge boom in sales to U.S. auto manufacturers, and MacDermid became a national chemical company.
Harold Leever oversaw much of MacDermid’s development of creative technical staff, sales personnel, and manufacturing expansion. Eventually, in 1954, Harold became MacDermid’s president. The secret to MacDermid’s success during this period was Harold’s insistence on building upon Archie’s founding values and culture. Many characteristics of that culture fit perfectly within the intelligent fanatic model. Leever would expand the company’s vision, which would survive and later thrive under his son’s tenure. The values included:
Our business is serving our prospects’ needs, known or unknown, so that we can increase his profitability, the results of which will be profits and opportunities for all.
Our formula is that the man selling the product will make the difference. We will be effective where our salesmen and technical people serve and add to the systems they are selling.1
Five years later, in 1959, when Archie was ready to retire and the company received an offer from a potential buyer, Archie sold MacDermid Inc. to Harold and fifty-six employees. The company was acquired for $961,640, or $33.16 a share.
Harold would grow MacDermid to $4.8 million in sales by 1962. By that time, the chemical product line had expanded. In 1965, MacDermid had entered the Japanese market, supplying electronics manufacturers with chemical solutions. On June 22, 1966, MacDermid became a publicly traded company, selling 20% of its shares to the public, and that year the company generated $16.8 million in sales. By 1980, Harold Leever would grow MacDermid to $56.8 million in sales and $5.3 million in earnings.
Harold’s success could be traced back to his infusion of “the religious, moral, ethical, and philosophical ideas, so much a part of his own character, into the bloodstream of the organization.” His philosophy was that “the worth of the individual is supreme, his self-development sacred.”2
In 1982, Harold Leever stepped down from day-to-day operations as CEO and remained as chairman. The third phase of MacDermid would begin when Art LoVetere took Harold’s spot as CEO. MacDermid’s U.S. domestic operations would lose the leadership and discipline that had been instrumental in the company’s prior growth. Now MacDermid had a manager who was trying to smooth out financial results. MacDermid’s internal focus, cost discipline, and respect for the individuals in the trenches, who were generating revenue, fell considerably. In other words, Art came in to “MBA-ize” the company.
Art’s style wore on MacDermid employees. Even though the company expanded internationally, in Japan and Hong Kong, and acquired a few firms, results started to wane. Sales increased rapidly but MacDermid’s U.S. earnings started to fall precipitously. Those reductions in profits and cash flow were a result of poor cost discipline. The only bright spot was the international division.
MacDermid’s high insider ownership allowed it to think long term in the face of poor performance. There were concerns, and surely things could have been changed sooner, but the company was not desperate. Chemical Week described MacDermid’s unique position in 1987: “The company thinks in the way [the] Japanese do. They run the business with a view to the long-term success of the company, and most companies are prone to short-term pressures.”
Fortunately, future leadership had already started developing within the company. Daniel Leever, much to the chagrin of his father, Harold, got a job at MacDermid in 1982. Dan had a winding road to the company. In grade school, Dan had a learning disability and was held back twice due to poor grades. Eventually, Dan would fight and overcome his obstacles.
After school, Dan started work as a salesman for MacDermid. When he realized he wasn’t great at sales, he decided to open his own business, selling consumer telecommunication devices and importing cell phones from Asia. Along with his brother, Andy, the two ran Leever Brothers, turning it from a one-store retailer into a wholesaler. Their customers included Macy’s, Sears, and other large retailers.
Both brothers worked extremely hard. During this time Dan learned how to compensate for his deficiencies by leveraging other people: “I found a way for coping with my mental limitations: it was called having an assistant.”3 This would help him greatly during his leadership at MacDermid. Leever Brothers was a modest success, reaching $10 million in sales with twenty employees. Unfortunately, a Federal Communications Commission decision on phone adapters would wipe the company out virtually overnight. The experience served as an important lesson for Dan in the adaptability of organizations.
Nearly broke, with “little to show but a shirt on my back,” Dan worked at a Sambo’s restaurant, similar to a Denny’s, and made his way into the management training program. The experience helped bolster Dan’s confidence in himself and taught him some valuable management lessons. He worked his way from assistant manager to manager, turning the worst restaurant in the chain into one of the best. Unfortunately, Dan wasn’t running all of the chain’s stores. The Sambo’s chain went bankrupt soon after. Dan again was without a job.
In 1982, about the time that Dan’s father stepped down from day-to-day operations, Dan joined MacDermid. He became a low-paid analyst and Art LoVetere’s assistant on a few projects. Various positions later, Dan would be involved in running MacDermid’s fledgling international operations. First, he headed the operations in South Africa, then Asia, and then worked his way to running all overseas operations.
It wasn’t long before MacDermid’s foreign operations were running much better than the U.S. operations. From 1985 to 1989, MacDermid’s international sales and profits were growing more than 23% annually, even while U.S. sales and profits were in decline. By 1989, international profits were nearly twice as large as those of MacDermid’s domestic operations. Much of this was due to Dan Leever’s leadership and decentralized model of “strategic business units”—small, loosely organized, minimally controlled, fast-reacting units throughout different regions.
The strategic business unit model was so effective internationally that it would be executed in the United States when Dan Leever was appointed MacDermid’s chief operating officer. When Art decided to leave MacDermid to become a deacon in the Catholic Church, MacDermid appointed Dan Leever as president and CEO, in 1990. Dan took his father’s vision and improved upon it to create a high-quality organization, and he was about to unlock MacDermid’s full potential.
It was maybe the most important thing that I did for many, many years, was to reinforce and develop the culture.
Intelligent fanatics are self-aware enough to understand their shortcomings. To make up for those weaknesses, they surround themselves with people that fill their deficiencies. In addition, a quality leader is able to motivate his or her team to do extraordinary things. Humans have much latent ability. People need to be inspired to attain levels they never before thought possible. In Dan Leever’s case, he would rebuild and retool the culture to make an effective, high-performance organization. He would turn MacDermid’s domestic operations around by focusing on the company’s core values. Gone were the days of treating employees working in the trenches without respect.
Dan made significant improvements to MacDermid’s culture. MacDermid would go all in, with a fighting Scotsman’s mentality that Dan described as “very, very hard driving,” focused on the motto “If it’s to be, it’s up to me.” In MacDermid’s 2002 shareholder letter, Dan described Clan MacDermid as:
“Clan” is the Scottish word for “family.” We are a classic Scottish family, dedicated, scrappy, and committed to the cause. I’d hate to be a competitor of MacDermid. We just keep on coming at you. We have the unusual ability to rally around the tartan. You as a shareholder are lucky to be partnered with such a fine group of men and women. I am lucky to be their leader. We have come through a trying period. Our strategy going forward is simple, the execution of it is not. I promise you maximum effort from a dedicated Clan MacDermid.
MacDermid would take care of employees and other stakeholders. Dan Leever’s refocus, back to intrinsically and extrinsically motivating employees, was an extension of his father’s vision: “We really felt strongly about the concept that if we take care of the employees, the employees will take care of the customers, and the customers will take care of the shareholders.” Dan was right; MacDermid’s results under his tenure took care of themselves.
During Art LoVetere’s tenure, MacDermid was growing; however, it was growth for growth’s sake, and Art did not adapt. Harold Leever initially built MacDermid paternalistically and was successful. Harold never fired anybody during his whole career. Dan said, “He was so judicious about hiring people and being so lean that he could get away with that.” Harold Leever highlighted this early on: “MacDermid personnel shall be carefully selected. The firm will not grow for growth’s sake. The main emphasis shall be on the worth of the individual, his ability to perform, and his personal characteristics, so that each person can utilize the best of his skills.”4
MacDermid’s growth brought challenges in acquiring new employees, and cultural dilution took place. MacDermid needed a strong leader to adapt to the new situation and provide a higher cause. Instead of paternalism, Dan described his leadership style as being objectivist. Accountability became a focal point.
Dan would try everything he could to help those in the organization who were struggling. Tools and support were given to prop people up and make them successful. Peter Kiewit and other fanatics in this book would do the same, and also would put underperforming individuals in more appropriate positions. One of the most important jobs of a leader is to put people into the jobs most suited to their abilities. Employees who couldn’t or wouldn’t get it, with all the support, were given a recommendation for another job. Dan and other MacDermid executives were prepared to let those individuals go. It was best for the overall organization and for those employees who did follow MacDermid’s values.
Dan worked hard to destroy the bureaucracy that had been building at MacDermid. During Art LoVetere’s tenure, the dissemination of policy manuals for U.S. employees had been increasing at a rapid pace, stripping away an employee’s ownership of his or her job. Management’s lack of respect in their U.S. employees was a large driver in MacDermid’s domestic underperformance during the 1980s.
Dan changed this by getting rid of domestic policy manuals. Individuals in the trenches were given back the authority to do their jobs. Leever did this by splitting MacDermid’s domestic operations into thirteen different strategic business units, each with approximately $4.5 million in sales. Each unit leader acted like an entrepreneur, with a small base from which to grow his or her business. As the 1989 annual report stated, “In a $4 million ‘business,’ a very interesting opportunity could be as small as a $100,000 niche. Many of these ‘niches’ might otherwise fall to small regional and local operators.”
The decentralized model allowed MacDermid to react much quicker to customer needs. The strategic business units acted as MacDermid’s eyes and ears to listen to customers. This system skewed the odds in MacDermid’s favor when competing with all types of competitors, both large and small.
MacDermid employees now had intrinsic ownership of their jobs. Ownership became an inspiration for employees to do what they felt was right. As the winningest coach in women’s basketball, Pat Summitt, often said, “Responsibility equals accountability equals ownership. And a sense of ownership is the most powerful weapon a team or organization can have.”5 The entire organization had the right environment again to unlock its fullest potential and dominate its niches.
An important aspect of ownership, found in the best intelligent fanatic–led organizations, is the philosophy of calculated risk taking. At MacDermid, it was called the “guts to fail.” Harold Leever believed that “an organization run on conviction, motivation, and morale, where the individual is allowed to and can ‘have the guts to fail’ ” will be successful.6 Dan reintroduced that ideal, and he described his personal “guts to fail” in MacDermid’s 2002 shareholder letter, stating, “Basically this holds that one must take risks to gain advantage. We judge ourselves not by our mistakes, but by the end result, in balance.” Everyone throughout the organization at MacDermid gained ownership of his or her work by being allowed to make mistakes and learn. As Stephen Covey said, “Accountability breeds response-ability.”7
Dan Leever also started to listen to employees, especially the ones at the bottom. By listening to those individuals on the front lines, Dan was able to let problems percolate in his mind. As months went by, he’d piece together unique insights about the operations, to help make better decisions. This is a fantastic example of stuffing the subconscious mind with relevant detail and then letting the information form new associations. Jack Henry, of Jack Henry & Associates, was often found utilizing the same tactic, and any elite leader, regardless of the field, has successfully mastered this skill.
External incentives were also important. Employees had just about every form of financial incentive available. MacDermid had a defined benefits plan, a 401k plan, a profit-sharing plan, a cash bonus plan “that went all the way down to the bottom of the company,” and stock options for virtually every employee in the company. When there were tax problems with such incentives in international locations such as China, MacDermid did “to the extent they could” to give employees proper incentives.
Other initiatives were put in place to help inspire employees. One of the most interesting things at MacDermid, dating back to the 1950s, was a company picnic. In the early years, Harold Leever, Dan’s father, had a tradition of giving a speech about every person who made it five years with the company. Dan built on this tradition and kept it going even after MacDermid had 2,500 employees. Dan said:
I would tell a story about the individual. I would also try to pick something about that function or that person that was a little bit unique, that reinforced the culture. People were sobbing in those things, because their spouse may have never heard anyone talk so nicely about their spouse before.
Throughout this process, employees would be singled out and honored, regardless of their position at the company. Like his dad, Dan knew virtually all MacDermid employees by name, even as the company grew to a large size, and he knew enough to tell a story about each one of them. This recognition and praise showed employees that their leader truly cared about them.
Dan Leever also mentioned that he really believed in the integrity of the process, finding something genuinely good to say about everyone. He believes that there’s always something good you can say about somebody. Doing so brought him respect, and the speech was a great way to reinforce the values of MacDermid.
One last example Dan Leever gave was MacDermid employees bonding through events. Groups of the top one hundred most senior MacDermid employees went to Berkshire Hathaway’s annual meeting, and once to Disney World. In both instances, the group of MacDermid employees dressed in kilts (at Disney World) or similar shirts (at the Berkshire meeting), displaying the MacDermid name to show their team spirit. At Disney, Clan MacDermid paraded through Epcot Center with a bagpiper one evening. Dan said, “The whole place came to a stop. It was really cool.” After Berkshire Hathaway’s annual meeting, Warren Buffett’s secretary mailed MacDermid and asked whether the group was part of MacDermid. Dan wondered, “It’s hard to describe why that [those two events] should matter, but in some way it does.”
In addition, MacDermid annual meetings hosted several hundred sales and technical employees. Usually, these meetings were held at ski resorts in New England during the summer. Rituals play an important part in our daily lives, and group rituals help create a cohesive team spirit.
If you’re curious and you’re trying to get better, you should try to constantly search for who has got a leading edge out there that you can learn from.
One key to this book, its predecessor, and IntelligentFanatics.com is to seek out exceptional business leaders to learn from, internalize, and emulate. Intelligent fanatics often utilize this technique to their own benefit. There is no quicker way to learn than by standing on the shoulders of giants. Dan Leever found multiple mentors to learn from.
One of Dan Leever’s greatest mentors was, and continues to be, an unknown but fantastically successful investor. Thomas W. Smith ran Prescott Associates from 1973 to 2015. Tom had been a director of MacDermid, and he continued in that role during Dan Leever’s tenure. Tom’s investment philosophy is very similar to Warren Buffett’s, and his performance has been almost as impressive. According to Prescott Associates investor letters, Tom and his team have compounded capital at about a 15% compound annual growth rate since 1973. Dan learned a lot from Tom, and he relied heavily on Tom’s focus on cash flows and capital allocation.
It was from Tom Smith that Dan Leever learned of Warren Buffett. Admiring Warren Buffett’s letters to shareholders, Dan, too, would communicate with MacDermid shareholders as if they were partners. Dan’s philosophy on acquisitions, long-term thinking, ownership, and capital allocation were clearly communicated. Leever would go so far as to borrow heavily from Berkshire Hathaway’s “owner’s manual” and create the same at MacDermid.
Tom Smith also introduced Dan Leever to Henry Singleton’s share repurchase philosophy at Teledyne. When Mr. Market was undervaluing and underappreciating MacDermid at $20 per share in 1994, Dan would emulate Henry Singleton with a Dutch tender for 23.8% of shares outstanding. The offer was for $30 a share, and the company’s largest shareholder, Fidelity, was pleased to exit its position for a premium. They believed MacDermid’s illiquid stock—the public float greatly reduced—would not go anywhere. Within nine months the stock was at $100 per share.
Dan Leever learned cost discipline from one of the most efficient chemical companies of the time. Dan had been introduced to Emerson Kampen, the CEO of Great Lakes Chemical Corporation. Dan described the transformation of Great Lakes:
Great Lakes was basically in the bromine business. This is going thirty years ago or something like that. He took a company that was basically a commodity chemical producer, and by taking costs out, created essentially a specialty company out of it. He ended up with a company that—I think in the probably late 1980s or somewhere around then—was doing $600 million in revenue and $100 million dollars in free cash flow. It was an amazing company.
While touring the company, Dan described the headquarters as “spartan as all get out.” There was little in the way of extravagances. In the conference room next to Kampen’s office was a light that ran on a fifteen-minute timer—and then the room went dark. Dan said, “Obviously with $100 million in free cash flow, he could afford to pay the light bill. The symbolism of that . . . holy cow.”
During Art LoVetere’s tenure, MacDermid had lost its cost discipline. A great, albeit small example related to water. MacDermid had problems with its tap water in the 1980s, because its office, located at the end of the water line, had contaminated water. Therefore, the company was forced to purchase bottled drinking water. However, the water line had been repaired some five years before Dan became CEO. For five years, MacDermid continued to purchase bottled water. After Dan met with Emerson Kampen and saw how frugal he was, he questioned employees about the water expense. They told him about the fix and said that it was costing $50,000 per year to keep buying water. Employees agreed with Dan that they could eliminate this expense. Dan would soon find many other superfluous expenses to cut.
Dan mentioned one area that should be highlighted in the optimization of profitability. All too often, organizations that focus first on making shareholders happy will find themselves looking at profit optimization as a zero-sum game. Although Dan Leever had an eye on reinstating cost discipline at MacDermid, he did not let the endeavor get out of control. He stayed true to his father’s win-win relationships with all counterparties. When a company sees profit optimization on a zero-sum basis, or as a we win–you lose scenario, it is not sustainable.
If you had purchased shares of MacDermid in 1990, at the start of Dan Leever’s tenure as CEO, and held until 2006, when the company was purchased by private equity, you would have realized a 19.79% compounded annual return. Private equity then sold MacDermid to Platform Specialties in 2013, where its value ascended at a similar CAGR. An investment in the S&P 500, comparatively, would have grown at a 6.45% CAGR during the same period.
“Our progress and your progress, our company’s long-term advantage and your long-term advantage, lie in human resources. Other advantages that come about from technological improvements, the opening of new markets, lower costs, all prove to be relatively short run. So, it is the initiative, the will and the motivation people bring to their work that we have to rely upon for survival and growth.”
—Harold Leever, in Following the Road Less Traveled . . . The MacDermid Story
Intelligent fanatic–led organizations can lose their edge when the company’s culture deteriorates. The wrong type of owner can dilute the culture and the essence that makes a great company.
For years, Dan Leever tried to sell MacDermid to Berkshire Hathaway. At first MacDermid was too small, and later it was too expensive. Dan said:
I tried to convince Warren Buffett. I said, “Listen, this is a company that grows cash flow by 10% a year. It doesn’t need any capital at all.” Why wouldn’t you just take the coupon? Where are you going to get a company that grows, and it’s all in cash, where you can just take the cash out. It doesn’t need any cash unless you want to invest in an acquisition or something like that. The kind of return you get, with the growth rate built in, it’s twenty percentish.
In 2006, Dan Leever, Court Square Capital Partners, and private equity firm Weston Presidio took MacDermid private for $1.3 billion, in a leveraged buyout. Dan regretted the decision, and it is a great lesson for any leader. Dan’s original exit strategy was “a pine box . . . but it’s not always up to you.” Without control, and with incorrect partners, he couldn’t fully choose his destiny. He recalled:
I tried really hard to get the exit [from MacDermid] as an IPO [initial public offering]. I almost pulled that off. But when you sell it to somebody? Boy, it’s pretty hard. If there’s a single mistake that I made in my career that outweighs all the rest, it was the LBO [leveraged buyout]. By doing the LBO, I lost control of the future. I could have done all kinds of things—recaps, other things like that—that could have accomplished the same thing without losing control.
In the absence of Dan’s full control, MacDermid was then later sold to Platform Specialty Products, a specialty purpose acquisition corporation. At first, the idea of partnering with Martin Franklin, Platform’s owner, looked attractive. Martin Franklin had a track record and skill set as a talented business acquirer. Franklin had previously invested in Alltrista Corporation (renamed Jarden Corporation in 2002), and he became the company’s CEO after working with the board. Franklin provided significant value with his buy-and-build strategy. From September 4, 2001, to June 2011, when Franklin stepped down as CEO, Jarden’s equity value grew at an annual compounded rate of more than 35%.
The idea with Platform Specialty Products was to combine Martin’s acquisition skills with Dan’s operational skills to recreate a similar buy-and-build strategy, only in the specialty chemicals space. The two men did not see eye to eye. Instead of exiting in a pine box, feet first, Dan would retire as CEO of Platform in October 2015.
While Dan Leever rolled 100% of his equity stake in MacDermid into Platform, he had to work with a board that didn’t share the same values. One of the first orders of business Franklin and others believed necessary was to replace the employees’ defined benefit pension plan. The idea was to cut costs, but Dan refused. He stated:
We had the least expensive pension plan for like twenty years, and we were triple the benchmarks. All we did was not do stupid sh*t. Our largest investment actually was in Prescott, Tom Smith’s company. We put $20 million into Prescott, and I think it’s worth $80 million today . . . but they were insistent [on changing the plan].
Dan’s problem was that any other plan they would choose would likely be more expensive and would be a detriment to employees. If the costs were lower and didn’t compromise employees, that would be okay. Franklin and others ultimately decided to change the pension plan, and of course it was more expensive and to the detriment of employees. Dan went on to say, “I fully respect there are different, effective ways to operate a business. It could very well be I was the one out of step. Platform’s style and mine just didn’t mesh, so I needed to leave. I certainly wish them well in the future.”
As was described in the chapter on Jack Henry & Associates, an acquiring firm has a great opportunity to demonstrate its values to all stakeholders. The message that Platform Specialty sent to MacDermid employees was that they were not going to be treated as well as they were under previous ownership. That single action would morph into a different feeling within the company, which Dan described: “Right now the rank and file do not know what’s going on, don’t feel a part of it . . . It’s kind of a typical company approach where everybody is kept in the dark, and they’re only told what they need to be told.”8
Investors and entrepreneurs can learn from Dan Leever’s experience. While Platform Specialty continues to grow through acquisitions, the new ownership’s hand is on the table. The authors believe the pension change is a losing proposition for employees and has started to unravel MacDermid’s founding culture. Employees do not feel the same way about the management and ownership of the company. The company might continue to do well, but it could likely do better over the long term under ownership that truly believed its greatest competitive advantage lies in its human resources.
Harold Leever summed it up many decades ago: “When you do the job right, money happens.”9
If you enjoyed this story on Dan Leever, you will love our latest book, Intelligent Fanatics: Standing on the Shoulders of Giants. Become a Member and we’ll send you the eBook-Kindle version for Free. [Join Today]
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