John Quarmley, CEO and founder of Highwood USA, led the startup in 2004 and has grown the business each year since. In 2021, Highwood was acquired by Kaho Partners and merged with Recycled Plastics industries. The two companies then consolidated under Premier Outdoor Living.
Quarmley, speaking at the Philadelphia Smart Business Dealmakers Conference, says even though the company has had fairly steady growth over the years, as it worked toward a sale of the business in 2021, it was a challenge trying to convince buyers that 2020's numbers didn't represent a COVID bump.
"It was actually part of our plan that we wouldn't grow that much," Quarmley says. "We could have, had we had unlimited capacity, grown significantly more, and then we definitely would have had a COVID bump. But that's probably the single biggest challenge during the whole process was trying to convince people that, no, this is real, and we're going to continue on this curve through next year."
The supply chain challenges that affected many businesses in the wake of the pandemic weren't an issue for Highwood, a producer of synthetic wood used in an array of backyard living products. He says that was a result of the company being either smart or lucky.
"I really want to buy locally. We source virtually nothing outside of the U.S. The vast majority of everything that we buy and make we source in Pennsylvania. So, from a supply chain side, we had virtually zero issues during the entire COVID time period," he says. "We've actually had more now. And it's actually capital equipment; trying to buy new equipment to expand and grow capacity — controls, user interfaces, anything related to automation is virtually impossible to find. But during the entire COVID period, we did not have a whole lot of supply chain issues."
So, to convince buyers that the company's COVID numbers weren't just a product of the times, Quarmley says it came down to salesmanship.
"A plan is a plan," he says. "You can draw a line and say, We grew 35 percent this year, we'll grow another 25 percent next year, trust me. But ultimately, it's in the execution. And as long as we can show that we have a very well-laid plan and we're capable of executing, we're working down that path, because the sale process is not a quick one."
The process lasted about 12 months from start to finish. That meant numbers each month were checked from the time conversations with potential buyers began through the entire process. He says the company had a sell-side QofE done and six months later they updated it in an effort to illustrate that the numbers were real and the company is continuing to execute on its plan.
As part of the deal, Quarmley elected to rollover equity. He says time will tell if it was a good or bad decision, but part of the rationale in making it was that if the management team stays, the value of the company will be better. If there's rollover equity, it shows confidence in the company.
"Going into the deal we said, These are things we're willing to do to ultimately maximize the transaction that we were facing. That's the plain and simple factor," he says. "There were a number of times in the final months of the deal that I was ready to say, F this, I'm taking whatever and I'm going home. But we work through things and I'm still there and I expect to be there for a while. So, it's been a positive process."
The best thing any company can do to be ready for a transaction, he says, is to have good data and ultimately know the numbers and know the business.
"We always made every decision in the company based on data. It was never a whim." Quarmley says. "Any time any requests for data came during the entire process, within minutes we could generate something that would demonstrate that. That's not something you do months before you start the process. That's something you do years or a decade before you start the process."