E231: Inside the Acquisition Process: How Reg Zeller Scaled CaneKast to a Multi-Foundry Empire - Watch Here 

About the Guest(s):

Reg Zeller is the CEO and founder of CaneKast, a company specializing in non-ferrous foundries, primarily dealing with aluminum but also handling brass, bronze, and zinc. With a comprehensive 17-year background in corporate manufacturing and a focus on scaling operations through innovative technology and strategic acquisitions, Reg has become an industry thought leader. His expertise lies in transforming distressed assets into thriving operations, a feat achieved by leveraging modern systems and AI/ML tools.

Episode Summary:

In this engaging episode of the How2Exit Podcast, host Ronald Skelton welcomes back Reg Zeller, CEO and founder of CaneKast. Reg provides an in-depth update on his company's progress since his last appearance, shedding light on their impressive acquisition strategy and operational efficiencies in the non-ferrous foundry industry. The conversation offers a fascinating glimpse into the world of metal casting, emphasizing innovative techniques and the complexities of manufacturing.

Over the past few years, Reg Zeller's CaneKast has grown exponentially, acquiring seven foundries through a meticulous off-market strategy. As Reg outlines their unique approach, including setting up systems for operational efficiency and employee retention, listeners gain valuable insights into what it takes to thrive in the competitive landscape of metal casting. He delves into the role of AI and ML tools in enhancing productivity and the importance of building a robust, team-oriented corporate structure. Furthermore, Reg touches on future prospects, such as their ambitious plans for high-capex equipment aimed at solidifying their market dominance.

Key Takeaways:

• Strategic Acquisitions: Reg Zeller's CaneKast has successfully acquired seven foundries using a calculated off-market strategy, demonstrating the importance of targeting distressed assets and revitalizing them.
• Operational Efficiencies: The implementation of automated systems and AI/ML tools has been paramount in improving productivity and maintaining high-quality output across multiple facilities.
• Employee Engagement: CaneKast's approach to employee retention involves structured onboarding processes and performance-based bonuses, ensuring a motivated and committed workforce.
• Technological Advancements: By investing in high-capex equipment and advanced technologies, CaneKast aims to remain at the forefront of the foundry industry, offering capabilities few competitors can match.
• Industry Challenges: Reg discusses the broader challenges in the manufacturing sector, including stringent regulations, labor shortages, and the need for governmental support to foster industrial growth.

Notable Quotes:

1. "Non-ferrous foundries mainly deal with aluminum, brass, bronze, and zinc, primarily aluminum. We melt metal at around 1300 to 1400 degrees and pour it into a form."
2. "Most of our deals are off-market. We rarely do on-market deals at this point in time because the market for foundries has drastically consolidated over the last 50 years."
3. "Our goal is to 10X in about seven years, and we should see that level of growth over the next three to four."
4. "We emphasize keeping employees healthy and safe, building a quality product, and delivering that product on time. Everything else falls into place around those core principles."
5. "The real threat is whether our government will decide to support manufacturing and facilitate an environment where businesses can thrive without excessive red tape."

Article:

Insights from Building a Metal Casting Empire: Lessons from Reg Zeller's Acquisition Journey

Key Takeaways

• Systematic Acquisitions: Reg Zeller's methodical approach to acquiring and integrating foundries is key to CaneKast's success.
• Innovation in Traditional Industries: Leveraging advanced technology and new methodologies can transform age-old industries like metal casting.
• Employee-Centric Transitions: Transparent communication and incentivization ensure smooth transitions and employee retention post-acquisition.

Reg Zeller's Acquisition Strategy: Systematic and Methodical Growth

Reg Zeller, the CEO of CaneKast, exemplifies a methodical approach to acquisitions in the manufacturing industry. Over seven years, he meticulously expanded from a single foundry to a conglomerate of seven, consistently refining his process and structure.

"Yeah, so we own non-ferrous foundries. Non-ferrous, the easiest way to say that is aluminum, brass, bronze, zinc. Pretty much what it is. Mainly aluminum though," Zeller explains, showcasing his deep understanding of the specific market segment he operates in.

Understanding and leveraging industry needs, Zeller's acquisitions involve extensive due diligence. He has spoken to over 600 foundries to narrow down his list to about 35 that align with CaneKast’s goals. This rigorous process ensures that each acquisition is not just opportunistic but strategically beneficial.

Moreover, Zeller’s partnership with Josh, who manages day-to-day operations, allows him to focus solely on acquisitions. This clear division of responsibilities increases efficiency. "My job is only to buy. And then I throw it over to my business partner, Josh. Josh runs all of the day-to-day," Zeller says, highlighting the importance of a well-defined operational strategy.

Bridging Traditional Industry with Advanced Technology

CaneKast's innovative approach to a traditionally manual industry sets it apart. By incorporating advanced technology and methodologies into metal casting, Zeller rejuvenates a sector that has remained relatively unchanged for centuries.

"We use an ERP like Acumatica. We use all brand new no-code tools. I don't know anybody else in our industry that's using a lot of this stuff. And so we have a bunch of AI ML tools we're already starting to use and build in," Zeller remarks.

The application of AI and machine learning, alongside creating a structured playbook, introduces a level of automation and efficiency unheard of in traditional foundries. This technology allows for better forecasting, reduced downtime, and increased production precision.

This forward-thinking mindset isn’t just about tools and technology; it’s also about strategy. For example, Zeller discusses capital investments in machinery, which promise significant returns. By investing $4 million in a piece of equipment, the company could potentially generate $20 to $30 million in sales on one shift, illustrating a calculated risk with high reward potential.

Employee-Centric Transition and Integration

A critical element of CaneKast’s success is its focus on smooth transitions during acquisitions, prioritizing employee security and morale. Recognizing that employees are the backbone of manufacturing, Zeller and his team use a structured, empathetic approach when integrating new acquisitions.

"It's brilliant that you have a system that you've done enough already, this is what works for you," Ronald Skelton acknowledges, appreciating Zeller's transparent communication strategy that helps ease employees' anxieties.

This structured approach involves timely announcements and consistent follow-ups. "We won't tell employees after a Tuesday. It'll either…we know we'll start Monday. Typically foundries start at five or 6 a.m. So we'll get them out there," Zeller elaborates. This ensures employees have time to process the change without the undue stress of weekend contemplation.

Additionally, compensation structures that align employees’ interests with the company's success bolster morale and productivity. "We put the resources over top of them. So we've got shared resources that they could, they can all use," says Zeller. By fostering an environment where employees feel valued and integral to the company's growth, CaneKast ensures high retention and satisfaction rates.

Redefining Small Manufacturing's Future with Strategic Choices

As Zeller scales CaneKast, he grapples with broader challenges and strategic decisions critical to the future of small manufacturing. One such decision revolves around geographical expansion and regulatory environments.

"In Minneapolis where I live, they banned all new, heavy industry. You can no longer build it," Zeller laments, accentuating the need to navigate and sometimes confront regulatory landscapes to ensure growth.

When questioned about expanding to highly regulated states like California, Zeller’s stance is firm, prioritizing regions that facilitate manufacturing growth. "In a shocking turn of events, absolutely not," he asserts, emphasizing logistical and regulatory hurdles that could stymie CaneKast's operational efficacy.

Innovation and investment also play critical roles in CaneKast’s roadmap. Transformative ideas, like high-capital investments in cutting-edge machinery, promise enhanced capabilities and market leverage. "We're literally installing a piece of equipment in our South Carolina facility. We'll be the only small foundry in the Americas that has that piece of equipment," Zeller boasts, hinting at future disruptions CaneKast plans to introduce in the industry.

The insights gathered from Reg Zeller underscore the power of meticulous planning, innovative integration of technology, and a profound respect for people in driving success in small manufacturing. Reflecting on operational strategies, the importance of adaptability, and the role of comprehensive technological frameworks, Zeller's journey with CaneKast offers a blueprint for sustainable and pioneering growth in traditional industries.

Leveraging his seven-year experience, Zeller continually emphasizes the significance of a clear vision and strategic methodology. With a keen eye on the future, he balances traditional wisdom with modern innovation, ensuring that CaneKast not only survives but thrives in a rapidly evolving industry landscape.

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