CNG/SPR: a good fit?

We’ve had some very strategic transactions in the book publishing segment and in our international business, expanding our core competencies and getting into products such as plywood and metals.

We’ve also grown the group organically and made major investments in technology, facilities, people and inventory on the distribution side to grow that segment.

OPI: Let’s talk about SPR. How did this acquisition come about?

BM: We’ve known SPR and its management for a long time. When Mike [Maggio] and Yancey [Jones Sr] decided to sell the business, one of their goals was to keep it as an independent wholesale distributor. We were a potential acquirer and naturally started to engage with them.

We have a great deal of respect for how Mike and Yancey approached the purchase. Their primary concern was for their people. They were focused on protecting their staff and we are pleased we were able to retain all 1,300 employees – it was very important to us. supporting suppliers and customers. We believe this is an important component of the make-up of the company.

There was probably a bit of surprise in the industry about CNG being the purchaser. However, we understand the distribution part of SPR’s business and have operated in the channel for years. As such, for us, it was not as much of a stretch as one might imagine.

We are in the paper business which has its own set of challenges. The diversification of products, customers and suppliers, and certainly the number of transactions that occur daily at SPR really appealed to us.

There are many things we do in terms of our organisation that we can use to enhance what is happening at SPR.

OPI: What shape did you find SPR in when doing your due diligence and also once you had the keys?

BM: The wholesaler – and its management –was certainly a victim of unfortunate timing, as Mike and Yancey’s acquisition coincided with COVID-19. To be in the business products channel and have everyone leave their offices is about as difficult a situation as you could imagine. It led to a lot of pressure on the financial side of the business.

OPI: How did you end up getting parachuted into Atlanta as the new SPR President?

BM: I have spent my entire career of more than 40 years at Lindenmeyr, so I would like to think I know the distribution business reasonably well. We’ve made 16 acquisitions altogether on the Lindenmeyr Munroe side, so that’s another area where I have considerable experience.

I also believe I can bring a deep knowledge of our culture to the table. That’s important. We can add some of the institutional knowledge in our distribution business to SPR while, vice versa, we will leverage several of the things the team at SPR does into our affairs.

OPI: How would you describe the cultural fit between the two companies?

BM: SPR has a deeply committed, dedicated group of experienced professionals and what I would describe as a very strong culture of

The consequence of it was the challenges presented in making continued investments, which is one thing we can absolutely help with. We will be able to strengthen the balance sheet, put ourselves in a better position with vendors, and open up the supply chain – which has been seriously challenged over the past few years.

OPI: Would you say it was a distressed sale?

BM: I wouldn’t, but there were difficulties with the financing of the business and funding growth, no doubt.

OPI: What are the short- and medium-term plans for you and the team now? How engaged will you be in the business, given the other responsibilities you already have?

BM: I will be very engaged. Over the first 90 days, there are three things we want to accomplish. The first is to meet our employees and we are out trying to get to know as many of them as we can. As with every acquisition we have made, we are excited to be adding experienced, talented people to CNG.

The second point is to stabilise supplier relationships – to create an opportunity to improve the supply chain with all our vendors and enable a more consistent flow of product. We are in the process of doing that with the manufacturing community.

Thirdly, it is vital for us to invest in inventory. Listening to our customers and suppliers, the biggest issue SPR has faced over the past three years was a lack of inventory.

OPI: Was this a cash flow problem or the inability to get product because of the global supply chain issues?

BM: A combination of both, but where we can help is with the cash flow. We have already seen that our capability to engage with suppliers in a different fashion has allowed us access to products and improve relationships with our vendors.

OPI: Dealers are bouncing back from COVID as well. Some fared quite well during the pandemic, others not so much. But they are in growth mode. So what does this acquisition mean for your independent dealer channel customers?

BM: We will be in a better position to service the IDC. We will have a much deeper and broader inventory and be able to invest in technology and our logistics. In the longer term, we will operate slightly differently to how we’re doing things today.

We will work hard to put decision-making closer to the customer and empower our sales teams to make decisions in the field. Our aim is to be fast and nimble in dealing with all our clients – which very much include the IDC.

OPI: Are there any specific new services and propositions in the pipeline?

BM: We are moving towards different types of delivery to service the jan/san category and engaging more with people on small parcel delivery. But what we are really striving to do is to execute better.

OPI: What will come after these first few objectives – what’s the longer-term plan as far as you are concerned?

BM: We have a desire to strategically grow the company and also believe there will be synergies to take out expense. An example would be that we do a lot with third-party logistics in our CNG distribution business. Some of this service we can move to SPR thanks to its national footprint.

We are confident there will be opportunities to take advantage of our expertise in distribution to drive out operating expenses. We’re looking forward to doing that, but it will be a slow process.

We have all the necessary tools, but haven’t had the chance to take them out and use them properly. Freeing up our people to operate with more support and execute with a little more freedom is going to be meaningful for our dealers. This is what they’re asking us to do.

OPI: There’s clearly a massive need for diversification. What commitment can you give that you really understand this and will double down on inventory and capacity for these other products which are absolutely essential for dealers to get into now?

BM: I’m 45 days into the job and it’s probably too early to answer this properly. What I will say is we are committed to growing other parts of the business outside of office products. We know the traditional office supplies segment is under pressure, so we are developing – and investing in – our furniture, jan/san, breakroom and technology offerings. We’re also making investments in areas other than the traditional furniture category to offer a much greater out-of-the-office component.

Ask me the same question in six months’ time, and I will definitely give you a better answer on the specifics.

OPI: We’ve spoken about the IDC, but you have other customers, of course – ODP being a notable one. How has this client reacted to the new ownership news?

BM: I am reluctant to comment on individual companies, but we obviously have strong relationships in different parts of our business with every customer in the channel. It has been pretty much business as usual with all of them.

Suffice to say ODP is a very good and long-term customer we are fully engaged with.

OPI: It would be impossible not to refer to your primary competitor’s unfortunate cyberattack recently. It must have created a bit of a gain for SPR, but I’m sure you have some sympathy for this operator.

BM: Yes, ‘unfortunate’ is an understatement. We really do feel for them because this kind of attack can happen to anyone. We have seen it in the paper business where organisations – which have invested a lot of resources in minimising cyberattacks – have been seriously compromised. We hope they will be fully functional again very quickly – there is no pleasure in taking advantage of an opportunity like this.

OPI: It’s obviously a scary situation for its customers, especially the first call ones. BM: It’s extremely challenging. I would like to think we’ve done a good job stepping up over these past few weeks to support dealers in the channel. But we also know they will work through these issues and come to a resolution.

OPI: Last question. In March, we published our first-ever list of influential women in the business products industry and SPR’s Kimberly Fulford was included. I believe you actually have quite a large number of women in managerial positions within SPR. BM: We are exceptionally proud of Kimberly’s well-deserved inclusion. It has been a strategy of the company to give opportunities to and empower all its employees.