E189: Austin King of Steel River Explores Long-Term Hold Strategy in Industrial Services Space - Watch Here

About the Guest(s):

Austin King is the co-founder of Steel River, a permanent holding company focused on acquiring and growing businesses within the industrial services sector, especially those supporting critical infrastructure such as the overhead crane space. With a background in bond hedge funds and management consulting, Austin transitioned into private equity before launching Steel River with his business partner, Eric Factor. Together, they aim to carry on the legacy of foundational American industries with a long-term growth strategy.

Episode Summary:

In this insightful episode of the How2Exit podcast, host Ronald Skelton welcomes Austin King, the industrious co-founder of Steel River. The conversation is a deep dive into the world of industrial services acquisitions and the journey of building a company that focuses on preserving the backbone of America's infrastructure.

Austin shares the story of his transition from private equity to co-founding Steel River, emphasizing the company's mission to create a long-term home for businesses they acquire. The episode outlines Steel River's growth, which boasts an impressive portfolio of 11 acquisitions, predominantly in the overhead crane industry, expanding their footprint in manufacturing support services.

Listen as Austin discusses the vital lessons learned in merging cultures post-acquisition, valuing employee equity stakes as a means of long-term incentive, and the strategic approach to organic growth in their chosen industries. He wraps up with a keen focus on the importance of team-building, preserving an owner's legacy, and generating long-term value for both the acquired companies and their investors.

Key Takeaways:

• Build a Strong Team: Prioritize hiring exceptional talent at all levels, and compensate them well to encourage long-term investment in the company's success.
• Long-Term Thinking: Adopt a strategy that balances immediate decision-making with long-term growth to protect the company's future and legacy.
• Maintain Legacy: Show consistent respect and due diligence when acquiring businesses, focusing on the legacy and community impact.
• Employee Equity: Offering equity to branch managers and employees drives investment in the company's success and helps retain top talent.
• Cultural Fit: After acquisition, ensuring cultural integration is critical to a smooth transition and sustained growth.

Notable Quotes:

• "Team first. Build great team, like, know your shortcomings and just be open and honest about them and go hire the best people you possibly can, even if that means what you think is overpaying." – Austin King
• "Think longer term. We think that thinking long term, even if you're not playing a true long game, if you think long term, it actually should improve short term decision making." – Austin King
• "We try to offer that full turnkey suite. And one of the things we invested in early was the safety and training program, where it is a dangerous trade." – Austin King
• "We love the deals in that five to 10 million of revenue range where we can get to know the owners, we can get to know every single employee during the process, and it really is a sweet spot for us." – Austin King
• "We're building relationships. That that acquisition might not have come to fruition for five or ten years. But if we have a relationship and we continue to get to know each other, when that day finally comes, hopefully we're there and we're in the position to do the deal." – Austin King

Article:

Navigating the Industrial Services Acquisition Landscape: Insights from Austin King

The industrial services and manufacturing sectors underpin the American economy, often going unnoticed despite their significant role. In this riveting discussion with Austin King, the co-founder of Steel River, we get an insider's view on the complexities and strategies of acquiring and managing businesses within this backbone of America. This article draws out the essence of the dialogue, presenting key takeaways and diving deeper into the themes of long-term business acquisition, the importance of team dynamics, and the preservation of legacies within industrial service businesses.

Key Takeaways

• Building a Success-Oriented Team: Emphasis on assembling a strong team that complements your skillset—preferably one that is top-notch and incentivized through meaningful equity sharing.
• Long-Term Strategic Thinking: Consider long-term outcomes in decision-making to improve both immediate and future plans, aiming to foster sustained growth and stability.
• Preserving Founders' Legacies and Employee Welfare: Ensure a seamless transition and continuity of businesses by focusing on the well-being of employees and preserving the legacy of founders.

Building the Right Team for Industrial Takeovers

One of the most compelling lessons shared by Austin is the critical importance of building an exceptional team for successful acquisitions. By acknowledging one’s shortcomings and actively seeking talent that fills those gaps, acquirers can pave the way for success. In the case of Steel River, this strategy is epitomized by the creation of an equity-based plan that extends to branch manager levels, effectively distributing ownership and ensuring that each member is personally invested in the company's future.

"We are offering equity up in the business because we want to push equity as far out into the field as we can. We think it drives the right behavior," Austin explains. This approach not only results in a highly motivated workforce but also fosters a culture where employees are keen on driving the business forward due to a sense of shared success.

The Advantage of Long-Term Acquisition Strategy

In an era of quick turnovers and short-term thinking, Austin King’s perspective on long-term strategy in acquisitions is refreshing. He advocates for a vision stretching decades rather than just years. This mindset not only influences the operational playbook and underwriting processes of Steel River, but also encourages sound short-term decisions, ensuring a stable business that employees and investors can rely on.

"The long-term horizon... is thinking in decades rather than years," Austin states, emphasizing the need to create long-term value and resist the typical private equity mentality of flipping businesses for rapid gains. Adopting this forward-looking framework grants the stability essential for nurturing business growth and ensures a steady return for patient investors.

Cultivating Legacy and Employee Welfare

Preserving the founder's legacy and ensuring the ongoing stability for employees are pivotal aspects of Steel River’s acquisition ethos. Austin underscores the significance of a seller-centric approach that prioritizes the needs, culture, and welfare of the acquired company. By maintaining the integrity of these attributes, they not only honor the founder's hard work but also retain the trust and loyalty of the existing workforce.

"Our goal is to make this a career where they can build some long-term wealth... and see upward mobility," says Austin, reflecting on the broader implications on the community and society. In Austin's acquisitions, bridging the possible gap between the retiring generation of owners and the next wave of leadership is seen not just as a business transition but a community-focused mission.

Recapping the Insights on Industrial Service Acquisitions

Throughout the conversation, Austin King has displayed a deep understanding of the delicate balance required in industrial service acquisitions. He has shed light on the need for a dynamic team that carries the businesses towards success while also illuminating the necessity for long-term strategic planning. Most importantly, Austin underscores the vital role these businesses play in the economic fabric of small towns and communities, making their continuity and the welfare of their employees a central concern.

Considering these themes underscores how business acquisitions, particularly in the industrial services sector, are not merely financial transactions but also community-centered endeavors. Austin King’s insights reveal a nuanced strategy of growth, community focus, and employee welfare, setting a high standard for how acquisitions can be both successful and socially responsible.

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