The roots of Michael Canty’s success as a turnaround dealmaker can be traced back to a Mansfield manufacturing company he worked at early in his career.
Canty was in charge of sales and marketing, but was frustrated with the quality of the products he was being asked to pitch to potential customers.
“The president tapped me on the shoulder and said, ‘Quit whining. You’re going to take over this division and go make me some money,’” Canty says. “I said, ‘I don’t have any real manufacturing experience.’ He said, ‘You didn’t hear me. Quit whining and go make me some money.’”
Nine months later, the division at this $50 million company turned a profit for the first time in 35 years.
A no-nonsense approach to getting things done has served Canty well at numerous companies in which he has invested and revitalized, including Alloy Bellows & Precision Welding.
In this Dealmakers feature, we return to our conversation with Canty and learn more about his approach to making deals in tough situations and the value of staying true to your convictions.
Do it your way
Canty learned about the situation at Alloy Bellows through an acquaintance who knew the company’s owner.
“He said, ‘Look, I know these people. They are in desperate trouble. It’s a father/son deal. It’s a nice group, but they are having some real issues,’” Canty says. “They wanted someone who would come in and make an investment.”
Canty was willing to do it, but only if he had total control to do what he felt needed to be done. Struggling companies are in rough shape for a reason. If you’re looking to make an investment, be clear about your intentions before signing off on the deal.
“It was the father, the son and me for the board, so that’s why I wanted to make sure I had total operational control with no vetoes,” Canty says.
In other words, you need to be able to create and implement your vision for what you think the company can be.
Act decisively
When you’re investing in a company that is struggling, patience is typically a luxury you can’t afford.
“I said we were going to make some very rapid-fire decisions,” Canty says. “We didn’t have a choice. We were going to go bankrupt. I told them, ‘We’re going to make some decisions you’re going to like and some you’re not going to like. But in the end, this company is going to survive.’”
In a situation where morale is low, your attitude can go a long way toward determining the success of your investment.
“They need to know it’s not some yo-yo who is going to be sitting in the office somewhere trying to call the shots without a clue,” Canty says. “Demonstrate you have a vested interest in what’s taking place.We all act together to improve what we do. If we don’t, we all go down together.”
The mechanics of the deal are obviously critical. But the mindset you create can be just as pivotal in the ultimate success of the investment.
Stay true to yourself
The initial deal Canty made at Alloy Bellows in 2006 was for five years. However, by 2009, he felt it was time for a change.
“I would meet with them every month about what was taking place and they clearly saw the improvements,” Canty says. “We were becoming very profitable and growing quite rapidly. I said, ‘Look, we’re going to part. I can go out and sell the company. My agreement allows me to do that and then we just split based on equity. Or here’s an offer for you.’”
Canty put an offer on the table that he felt was a strong valuation. If neither party could agree on a buyout, Canty said he would look to sell the company.
“They looked each other and initially, the father and son really wanted the company back,” Canty says. “But they couldn’t run it and everyone knew the senior team was not going to support that. So the father said, ‘The company is yours.’”
The deal Canty made left him with a business that was worth five times the valuation of the company when Canty first got involved.
“The father recognized it was a very fair deal and that we needed to part ways,” he says. “In July 2009, I bought their 60 percent share.”
It wasn’t always easy, but a decade later, Canty’s investment continues to gain value.
“You always learn things afterward that you didn’t think through,” Canty says. “That’s just the nature of the beast. The goal is having a clear understanding of what you’re looking for as a potential business owner and where you can go with the opportunity.”
