Deal makers with a track record

As other consolidators stall, Integra pushes ahead with its plan

By -- Industrial Distribution, 5/1/2000

Northbrook, ill.-If Rudolf Huyzer and his management team continue to execute their consolidation strategy as Huyzer did at BT Office Products, watch out.

Huyzer, CEO and chairman of Integra Integrated Procurement Solutions, Inc., expects to double the company's revenues to $350 million by next spring, and Integra is racing toward that target. At press time, three buyouts were pending of distributors with $90 million in annualized revenues, two of which focus on cutting tools, abrasives and specialty tooling.

Integra's goal is to become perhaps a $1 billion company and a dominant provider of integrated supply services. Huyzer said he will consider taking Integra public in two to three years.

Formed late in 1998 as Industrial Distribution Partners-the name was changed last year to avoid confusion with similarly named competitors-Integra's game plan is straightforward. Acquisitions of specialty distributors will complement its "backbone" of general mill supply divisions and offer an array of products from one corporate roof for customers like Honda and American Freightways.

In its first year Integra acquired five firms with revenues that should reach $175 million in 2000. Integra's first two specialty distributors, Scheibert Safety Supply of Indianapolis and Rubber World Connection, Inc. of Landisville, Pa., were acquired during the first quarter of this year.

Huyzer, who made 70 acquisitions for the Netherlands-based distributor BT Office Products and expanded it from $35 million to $1.6 billion in just seven years, says deal making is not his end game. In the office supplies industry, at least, he is considered an expert in integrating companies after acquisitions and reducing operating costs.

In the industrial MRO arena, Huyzer said his goal is to meet end users' demands to manage more indirect materials as a first-tier supplier.

"We're not in the business of buying companies," said Huyzer. "The acquisition is just one avenue. Internal growth is the second. We must build common operating systems, retain senior managers ... We're doing this to offer optimal integrated supply services. I call it a menu of services-we offer a whole array, and some companies only want a few."

"We were attracted not by a high annual growth rate but by the opportunity to consolidate, and we have been successful," he said.

Indeed, while several of the consolidators and roll-ups that shook up the industry in 1998 have stalled, Integra appears to be growing against the grain. Some exceptions include Montreal-based Westburne, which is rapidly buying U.S. electrical distributorships and Questron Technology, a logistics management provider for fasteners and other small parts.

Integra made a name for itself with its initial acquisitions of the Ross Willoughby Co., J. Fegeley & Sons and KSC Supplying Industry last year. Ron Cory, president of the Ross Willoughby division, says his company was courted by perhaps 10 other acquirers, but the owners thought Huyzer's approach and background was the right fit.

Huyzer previously led consolidations at four companies, most recently the office products firm owned by Dutch paper merchant giant Buhrmann NV.

During its first year as part of Integra, Ross Willoughby showed strong internal growth despite a difficult business climate. And in the first quarter of 2000, the division had high single-digit sales growth and "very strong" double-digit earnings before taxes, interest, depreciation and amortization, Huyzer said.

"I'm more and more convinced we've done the right thing," said Cory. "We found no one with a track record like [Huyzer's]."

Ross Willoughby itself had been an active acquirer since the mid-80s and had grown to $78 million by 1998. However, Cory said that to reach the $100 million level and survive in a rapidly consolidating industry, senior managers concluded the company couldn't do it on its own.

Overall, last year Integra increased its same-store EBITDA 16 percent and expects to improve that a few more percentage points this year. Some of the key steps taken to integrate the divisions include quickly moving them to a common computer system; centralizing functions like accounting and payroll; internal benchmarking such as comparing departments within divisions; requiring budget contingency plans and establishing an acquisition pipeline overseen by one management team.

In one specific example of making the acquisition tick, Cory and Huyzer said specialists from Integra's information technology systems provider trained employees at one division, and those employees later trained their new colleagues at other locations along with the vendor.

In addition to adding several cutting tools-abrasives distributors, Huyzer said future additions may include fasteners and bearing houses. Integra expects to maintain its geographic concentration in the Midwest and East, but is also interested in serving Texas' petrochemical industry and West Coast industries.

Huyzer said customers are driving Integra's plan to cross-source more materials beyond mill supplies.

"Some of them are either pushing us to be very aggressive about it, including acquiring companies in areas we don't cover or starting" a new firm, he said. Currently about one third of Integra's customers are automotive, truck manufacturers and their suppliers, and the firm expects to further diversify its base.

Is an IPO in Integra's future? Huyzer said it's a strong possibility, "but not a premature one. I've told investors [Wind Point Partners of Chicago] we need two to three years to build a sustainable record and go to Wall Street ... if you want a quick buck, not with me."