TS: I do not know if there is a company making more news than AFC. In the last few months you have completed four acquisitions, and we are not talking about little mom & pop operations. The growth rate of AFC is impressive. What is going on with AFC??
Kevin: As you know, there are so many great companies in the industry. We have been fortunate that we were a good fit for several who were either looking for a partner to help them move their business forward or provide a stable transition plan where they knew their customers and employees would be treated well.
AFC has a good organic growth rate, but acquisitions remain an important part of our strategy. We continue to see consolidation of customers as well as competitors and if we can address strategic needs by acquiring businesses that have successfully developed target capabilities or markets then we think it makes sense to do that.
I guess that is a long-winded way of saying we are having fun and working hard to build a great company. Acquisitions just happen to be more visible than the other things we do.
TS: Is there an end game or goal? Does AFC have a specific dollar amount or some target you are trying to attain?
Kevin: I suppose that depends upon who you ask. We have several different stakeholders that each are looking for different things from the business. Part of my job is to balance all of that. There are certainly investment objectives and when those are met the investors will exit, but those are just one factor in what we do. We are confident that ultimately the investors will get their best returns if we do what is right for the business.
So no, we do not have a specific number we are trying to hit. Our goal is to continually focus on those things we believe will allow us to build the best business possible. If we do that then it will create value for investors and customers, opportunities for our employees and suppliers, and provide management with the flexibility to adjust as needed to changing needs in the business.
TS: And, in addition to the business acquisitions you have recruited several industry veterans and you are assembling a strong management team.
Kevin: I am glad you asked about that. The thing I am most proud of at AFC is our team. The first thing I did when I got here was recruit a team of experienced professionals who knew this industry and were excited about our vision. We have continued to add to that as we have grown.
The thing I probably think about, worry about, and focus on the most is the culture and capabilities of our management team. It is critical that we have experienced, smart, high-integrity, people running the business. Much of our success is because we have good strategic alignment without stifling bueracracy, and that is possible because our team understands the industry.
TS: One last AFC question. Although private equity is involved it seems like your companies are retaining and being run by “fastener people”. Is that the strategy?
Kevin: Our P.E. investors are excellent at what they do and what they do is very important to our success, but they are not operators, they are investors. It is our responsibility to run the business. If we are doing what we are supposed to do they shouldn’t need to be involved in running the operation.
TS: Now, I knew you before you became the CEO of AFC but for those readers who are not familiar can you share your fastener background? Where did is start and what have been the stops along the way to becoming the CEO of AFC?
Kevin: I began working at 13, so there were a lot of stops and I learned valuable lessons from each of them that I still use. Prior to joining the industry, I had various production, machining, and quality jobs eventually working my way up to materials and operations management. A couple of those stops included helping to manage large reorganization projects. I was recruited to General Fasteners Company to help with some restructuring projects they were considering. That was my introduction to the industry. I originally planned to be here about a year or two and that was 17 years ago!
I believe you and I first met when I was working with the purchasing group at GFC. Those initial projects were successful, and they asked me to stick around. I did and eventually became the president and CEO of the company. There are lots of great people at GFC and I really enjoyed my time there. You spoke earlier of industry veterans and at GFC I was able to work with several of them that broadened my perspective on value creation and the role distribution can play in the manufacturing supply chain.
I was at GFC until late 2015 when I left to take the position at AFC Industries.
TS: And, I think it is important to point out that you are the current President of the NFDA. You are making time to give back to that organization. What news do you have to share with us about what is going on with the NFDA?
Kevin: We are very excited about the future at NFDA. We have always offered several benefits such as access to data and benchmarking reports as well as discount programs and things like that, but the events and networking opportunities were a unique part of the value for NFDA members. Obviously, COVID made that more difficult, but the team worked really hard to develop content and provide networking opportunities that can be delivered virtually.
In a sense, the pandemic forced an acceleration of things we were already working on and we have had great feedback from those events like the roundtables and virtual meetings. That just opened our toolbox even further and we will continue to look for opportunities to provide those kinds of opportunities, but we also recognize that in-person meetings still offer unique value and so we are excited to resume onsite meetings this year. We have the ESPS meetings coming up in Minneapolis as well as the executive summit in Florida later in the year, etc. The more opportunities we have to facilitate interaction between industry leaders the more value we can provide.
Another thing that I am really excited about is our partnership with the Young Fastener Professionals (YFP) group. There are few, if any, issues more important than the recruitment, retention, and development of the talent our companies need to remain competitive in the coming years.
YFP is a group of bright energetic folks who are the future of our industry, and we want to use our platform at NFDA to help extend their engagement of talented people who are earlier in their career or new to the industry. I think we all benefit by expanding the role of the association from being a resource primarily for owners and executives to providing support for the next generation of leaders as well.
TS: Clearly, AFC is in acquisition mode but you are not alone. The fastener industry is seeing a lot of mergers and acquisitions both on the distribution side as well as the supplier side. I’d like to hear your thoughts about where the industry is heading.
Kevin: Barring some sort of major disruption, I think that is likely to continue for some time. Several factors are contributing to this being an attractive market for acquisitions.
As the largest manufacturers get more sophisticated, they are looking for suppliers that have the scale, technology, and geography to support them. The investments and purchasing power required to push their requirements down the supply chain are difficult for smaller businesses to make.
There is also a lot of pent-up capital waiting to be deployed in the investment markets, particularly for private equity. For several reasons the businesses in this space are increasingly attractive to private equity investors as they are looking to put that money to work. This pushes up valuations in the market for other buyers as well and makes selling a business attractive to a broader number of owners.
Because of these reasons and several others we could discuss, I think we will see continued consolidation and it will be increasingly difficult for localized players to compete for larger customers in the long run.
TS: I hope next year I am not asking this question when doing interviews but I want to ask how supply chain issues are affecting AFC. I know everyone in our industry is experiencing challenges but how challenging has it been with AFC and recognizing that, to some degree, you still run as individual businesses?
Kevin: As you said, everyone is facing the same challenges. It takes time, but we are working to integrate those supply functions. We know which supply partners have supported us across the divisions and which still have some work in that area. Although in many cases we are issuing releases locally, the supply chain team coordinates efforts to ensure we don’t have disruptions. So, I don’t think our structure has been an advantage or a disadvantage regarding the supply chain shortages, although we continue to work on further integration.
TS: Finally, let’s finish up with some personal questions? Are you still enjoying yourself? Still having fun with this crazy fastener industry?
Kevin: Absolutely! Everyday I have the opportunity to learn something new and work with amazing people who are passionate about what they do.
TS: And what else do you want to accomplish in the coming years?
Kevin: Tomorrow isn’t promised to any of us. I just want to be faithful in whatever God brings my way and do whatever it is to the best of my ability. If I can do that and help others to be successful along the way I know I won’t have any regrets.
