October 11, 2004
Hammering out a deal | Hancock Lumber brings its emphasis on contractors to recently acquired Marriner Lumber
By Taylor Smith
Over the last 156 years, Hancock Lumber has established itself as a local stalwart in Maine's retail landscape, changing hands through six generations of Deckers and Hancocks and expanding the reach of its retail locations, lumberyards and sawmills from its Casco headquarters to Kennebunk, Bethel and Pittsfield. The company has bulked up its roster of customers in the last decade through a string of well-placed acquisitions and savvy strategy decisions.
Along the way, it's worked hard to maintain its folksy role as the neighborhood hardware store and lumberyard, where local contractors are a priority and do-it-yourselfers can get expert help choosing the best timber for a backyard tree house. "We're very customer focused," says Chris Vickers, general manager of Hancock's midcoast retail operations. "We sell a commodity, and that's all about how you treat your customers."
For Vickers, understanding what's been behind Hancock's decades of success ˆ and how to keep that success going ˆ is a matter of vital importance. That's because for the past year he's been the point man in Hancock's most recent move to expand its reach in Maine: In early September, the company paid an undisclosed amount to acquire 57-year-old Marriner Lumber, a hardware retailer with deep Maine roots and four stores reaching from Falmouth to Damariscotta.
The deal was the result of nearly a year of planning sparked by Hancock Lumber President Kevin Hancock's decision last year to expand the company into the midcoast region. Hancock Lumber's operations were spread across 10 locations in southern and western Maine, and the company was ready for additional growth. But Hancock figured going head-to-head with established competitors in a new market was unnecessary; instead, an acquisition would ease the company's entrance into a new region.
In Marriner, Hancock found a kindred corporate mindset where customers ruled and employees were an integral part of each company's success. In addition, Hancock Lumber would bring to Marriner a business model more focused on serving contractors ˆ a model that's helped the company compete in the retail hardware market increasingly populated with big-box stores like Home Depot and Lowe's Home Improvement Warehouse. "Contractors are waiting for the services and products we can now offer," says Tom O'Brien, who worked as vice president of operations for Marriner and now is the vice president of Hancock's midcoast operations.
But in acquiring Marriner, Hancock Lumber is faced with the challenge of integrating two old-line Maine companies without alienating Marriner's customer base and staff, while, at the same time, preserving Hancock's carefully planned operational strategies. Hancock is working with former Marriner employees and executives (the majority of Marriner's staff stayed with Hancock after the acquisition) to help piece the two companies together. "Our strategy isn't to pull apart Marriner," says Kevin Hancock. "We're looking for the Marriner people who had been leading the business to continue leading the business."
The courting of Marriner
Hancock, who took the reins of the company in 1998, last year wanted to continue the expansion that had helped Hancock Lumber grow rapidly in the late 1990s. The firm in recent years has made a handful of acquisitions, including a 1999 deal for Atlantic Kitchens in Portland and a 2000 purchase of the PH Chadbourne & Co. sawmill in Bethel. Over the last decade, the company more than tripled its annual revenues, to more than $100 million last year.
For the most recent expansion, Hancock ruled out a push into New Hampshire and Massachusetts in favor of expanding the company's in-state presence. To do so, he and a group of company executives, including Vickers, consulted a map of Maine. "We saw where we were and where we weren't," says Hancock. "The number one area that we weren't in ˆ and that we wanted to be in ˆ was the midcoast area."
Though the company didn't have any retail presence in the midcoast area, Hancock Lumber already had made inroads into the region through its relationship with contractors working there. Its red trucks rumbled up Route One on a regular basis, delivering building materials to job sites from Brunswick to Woolwich and beyond. Hancock knew the best way to get a foothold in the midcoast area was to find an existing company to partner with. But it couldn't be just any company. "It was much smarter to see if there was an existing company in that region that we shared values with and that we could work with," he says. "The process would be dramatically sped up [if we could capitalize] on the goodwill and marketing presence that company had built up."
Hancock and his team found that company in Marriner Lumber, a firm that had been growing its business steadily in recent years. "Our companies were in many ways identical," he says. "We were very lucky because Marriner was an excellent company before Hancock ever showed up."
Marriner was founded in 1947 by Everett Marriner as a Brunswick sawmill that provided timber for shipbuilding. The firm was bought in 1969 by Derril Lamb, who transitioned Marriner over the next two decades away from the shipbuilding industry and into a full-blown hardware operation. Neil Lamb, Derril's son, joined the company in 1974 as the company's treasurer, taking over Marriner after his father's death in 1999.
Hancock earlier this year approached Lamb ˆ it essentially was a cold call, he says ˆ to ask if he'd consider selling the company to Hancock Lumber. Though Lamb initially said Marriner wasn't for sale, according to Hancock, the discussion was intriguing enough for Lamb to agree to a second meeting. That led to what Vickers calls Hancock's "courting" of Marriner ˆ walking Lamb through Hancock's operations in deep detail, making the case that combining Hancock Lumber and Marriner could work. "When we looked at where we really wanted to be, Marriner made the most sense," Vickers says. "Kevin was able to make sure Neil saw that the companies would fit well together." (Lamb left the company after the acquisition to pursue a career in music.)
Meanwhile, having decided that Marriner was worth pursuing ˆ and with some assurance that Neil Lamb was open to the idea of selling the company ˆ Kevin Hancock in the months leading up to the September acquisition set up two internal teams to vet the deal, from both a financial and operations perspective. The due-diligence team worked to put a fair price tag on the Marriner business ˆ and to decide whether that valuation made sense for a potential acquisition. The group drew up reports detailing the company's operations ˆ including all the information they could glean looking from the outside into a privately held company ˆ but were satisfied that the company wasn't holding any fiscal or operational skeletons in its closet. "We were cognizant of the fact that we knew very little about the details of the business," says Vickers. "But Marriner kept a very well-run organization, and, culturally, we knew there wouldn't be a big gap between how we ran the business."
Competing on a commodity
The second team was charged with figuring out how best to transition the Marriner organization into the Hancock family. Hancock executives looked at everything from the organizations' employee structures to their point-of-sale computer systems and found that the two companies were structured similarly. For one, both Hancock and Marriner were decentralized, with their management teams spread out among the different stores, managing sales and operations in different regions. For example, the Brunswick location where Chris Vickers and Tom O'Brien work ˆ which still sports Marriner signs at its Church Road entrance ˆ has a cluster of offices upstairs from the retail aisles.
As a result of that decentralized structure, Vickers doesn't expect to have to lay off any of the combined companies' staff, now totaling more than 650. In fact, he expects that the expanded Hancock will need to start hiring more workers ˆ from inside sales support to kitchen designers ˆ to keep pace with the expected influx of new contractor business coming in from the midcoast area. "We have the resources to invest in the business, and we have opportunities to grow the business rather than cutting it," he says.
For a $100 million company like Hancock, resources are the name of the game. The company is among the largest U.S. producers of eastern white pine, turning out more than 65 million board feet a year through the 40,000-plus acres of timber owned by its sister company, Hancock Land Co. Having that direct link to lumber helps the firm remain competitive with bigger retailers like Home Depot and Lowe's as profit margins on such material remain notoriously low. "It's really tough to make money with lumber, but it's easy to lose money," says Mike Eads, associate editor of Do It Yourself Retailing, the monthly magazine of the Indianapolis, In.-based National Retail Hardware Association. "If a smaller outfit is able to produce a lot of its own product, their retail markets will be better for it. Every penny counts."
The company's size ˆ its annual revenues are more than double the industry average ˆ also has helped it strike exclusive deals with dozens of manufacturers, allowing it to carry a selection of specialized materials that many other retailers can't match. For example, Hancock offers the full line of Anderson Windows ˆ which Eads calls the "Cadillac of prefabricated windows" ˆ as a member of Anderson's Circle of Excellence program. ("Even Home Depot can't get that," boasts Vickers.)
Marriner, however, struggled to compete at Hancock's level. The company last year generated roughly $25 million in revenues and had recently seen its growth start to level out. Marriner's relationship with Ace Hardware, an Oak Brook, Ill.-based co-op of 4,800 independently owned hardware stores, allowed the company to purchase inventory directly from Ace, which helped keep prices competitive. But Marriner in late 2003 faced additional competition as a new Home Depot was slated to open in Topsham and plans were underway to build the state's first Lowe's in Brunswick.
For a company that derived nearly a third of its revenues from homeowners and do-it-yourselfers ˆ a big chunk of Home Depot and Lowe's clientele ˆ the entrance of the big-box stores was troubling. "We'd exhausted our model," says Tom O'Brien.
The big-box factor
Chris Vickers thinks Marriner was where Hancock Lumber was about 10 years ago ˆ growing quickly, but starting to plateau and needing a shift in its business strategy. Hancock Lumber in the early 1990s faced increasing competition in southern Maine from big-box retailers such as Home Quarters and Home Depot. The company decided the best way to combat the big-box invasion was to specialize in niches the big guys ignored. It targeted local contractors and building firms, as Home Depot and its ilk hadn't had widespread success tapping into the professional market. To that end, Hancock Lumber added sales staff to better meet the needs of contractors, both on the job site and in the company's retail locations.
The strategy has remained successful, and Hancock Lumber today generates roughly 90% of its revenues from the professional contractor market. Many industry-watchers think it boils down to a simple matter of service. "Most contractors worth their salt might realize they're saving a nickel a foot on framing lumber going with Home Depot, but the [local] guy I'm buying from now, I've got his phone number and he can open his store for me on a Sunday," says Eads.
With the former Marriner locations added to its retail stable ˆ now 14 stores strong ˆ Hancock Lumber has an opportunity to tap into the contractor market in the midcoast area that Marriner had yet to fully exploit. And, in addition to the typical lumberyard and hardware offerings, Hancock Lumber also has built up a range of services in hopes of attracting more contractors. For example, the company's financing arm offers quick-turnaround loans to contractors, and currently has $10 million in loan capital out to local contractors ˆ a sign, according to Eads, that Hancock Lumber has a strong hold on the market.
Vickers isn't worried about competition in the midcoast area from the likes of Damariscotta-based Poole Brothers Lumber and Building Supply and Downeast Building Supply in Brunswick ˆ two companies firmly entrenched in the area. "It's healthy to have more than one major player in a market," he says. "We've always been in a competitive environment. It makes you better, sharper and more innovative."
Vickers expects that the majority of sales growth in the midcoast area will come from that range of services and inventory Hancock Lumber will bring to the former Marriner locations. But the company's top priority, he says, is continuing to build trust between Hancock Lumber and former Marriner employees and customers. To that end, Hancock asked those Marriner employees to set the agenda and timeline for the companies' integration. The employees, however, already appear to have placed trust in Hancock Lumber: Long-time Marriner employees have pushed to accelerate that transition schedule. "Their agenda is probably more aggressive than ours would have been," says Hancock.
For Kevin Hancock, that's a sign that the transition is moving along successfully. At the same time, he says, the ease of integrating the two companies also speaks to the compatibility of Hancock Lumber and Marriner. "[Neil Lamb and I] both felt that our companies had bright futures either way," says Hancock. "But we both felt that we had the brightest future together."
Along the way, it's worked hard to maintain its folksy role as the neighborhood hardware store and lumberyard, where local contractors are a priority and do-it-yourselfers can get expert help choosing the best timber for a backyard tree house. "We're very customer focused," says Chris Vickers, general manager of Hancock's midcoast retail operations. "We sell a commodity, and that's all about how you treat your customers."
For Vickers, understanding what's been behind Hancock's decades of success ˆ and how to keep that success going ˆ is a matter of vital importance. That's because for the past year he's been the point man in Hancock's most recent move to expand its reach in Maine: In early September, the company paid an undisclosed amount to acquire 57-year-old Marriner Lumber, a hardware retailer with deep Maine roots and four stores reaching from Falmouth to Damariscotta.
The deal was the result of nearly a year of planning sparked by Hancock Lumber President Kevin Hancock's decision last year to expand the company into the midcoast region. Hancock Lumber's operations were spread across 10 locations in southern and western Maine, and the company was ready for additional growth. But Hancock figured going head-to-head with established competitors in a new market was unnecessary; instead, an acquisition would ease the company's entrance into a new region.
In Marriner, Hancock found a kindred corporate mindset where customers ruled and employees were an integral part of each company's success. In addition, Hancock Lumber would bring to Marriner a business model more focused on serving contractors ˆ a model that's helped the company compete in the retail hardware market increasingly populated with big-box stores like Home Depot and Lowe's Home Improvement Warehouse. "Contractors are waiting for the services and products we can now offer," says Tom O'Brien, who worked as vice president of operations for Marriner and now is the vice president of Hancock's midcoast operations.
But in acquiring Marriner, Hancock Lumber is faced with the challenge of integrating two old-line Maine companies without alienating Marriner's customer base and staff, while, at the same time, preserving Hancock's carefully planned operational strategies. Hancock is working with former Marriner employees and executives (the majority of Marriner's staff stayed with Hancock after the acquisition) to help piece the two companies together. "Our strategy isn't to pull apart Marriner," says Kevin Hancock. "We're looking for the Marriner people who had been leading the business to continue leading the business."
The courting of Marriner
Hancock, who took the reins of the company in 1998, last year wanted to continue the expansion that had helped Hancock Lumber grow rapidly in the late 1990s. The firm in recent years has made a handful of acquisitions, including a 1999 deal for Atlantic Kitchens in Portland and a 2000 purchase of the PH Chadbourne & Co. sawmill in Bethel. Over the last decade, the company more than tripled its annual revenues, to more than $100 million last year.
For the most recent expansion, Hancock ruled out a push into New Hampshire and Massachusetts in favor of expanding the company's in-state presence. To do so, he and a group of company executives, including Vickers, consulted a map of Maine. "We saw where we were and where we weren't," says Hancock. "The number one area that we weren't in ˆ and that we wanted to be in ˆ was the midcoast area."
Though the company didn't have any retail presence in the midcoast area, Hancock Lumber already had made inroads into the region through its relationship with contractors working there. Its red trucks rumbled up Route One on a regular basis, delivering building materials to job sites from Brunswick to Woolwich and beyond. Hancock knew the best way to get a foothold in the midcoast area was to find an existing company to partner with. But it couldn't be just any company. "It was much smarter to see if there was an existing company in that region that we shared values with and that we could work with," he says. "The process would be dramatically sped up [if we could capitalize] on the goodwill and marketing presence that company had built up."
Hancock and his team found that company in Marriner Lumber, a firm that had been growing its business steadily in recent years. "Our companies were in many ways identical," he says. "We were very lucky because Marriner was an excellent company before Hancock ever showed up."
Marriner was founded in 1947 by Everett Marriner as a Brunswick sawmill that provided timber for shipbuilding. The firm was bought in 1969 by Derril Lamb, who transitioned Marriner over the next two decades away from the shipbuilding industry and into a full-blown hardware operation. Neil Lamb, Derril's son, joined the company in 1974 as the company's treasurer, taking over Marriner after his father's death in 1999.
Hancock earlier this year approached Lamb ˆ it essentially was a cold call, he says ˆ to ask if he'd consider selling the company to Hancock Lumber. Though Lamb initially said Marriner wasn't for sale, according to Hancock, the discussion was intriguing enough for Lamb to agree to a second meeting. That led to what Vickers calls Hancock's "courting" of Marriner ˆ walking Lamb through Hancock's operations in deep detail, making the case that combining Hancock Lumber and Marriner could work. "When we looked at where we really wanted to be, Marriner made the most sense," Vickers says. "Kevin was able to make sure Neil saw that the companies would fit well together." (Lamb left the company after the acquisition to pursue a career in music.)
Meanwhile, having decided that Marriner was worth pursuing ˆ and with some assurance that Neil Lamb was open to the idea of selling the company ˆ Kevin Hancock in the months leading up to the September acquisition set up two internal teams to vet the deal, from both a financial and operations perspective. The due-diligence team worked to put a fair price tag on the Marriner business ˆ and to decide whether that valuation made sense for a potential acquisition. The group drew up reports detailing the company's operations ˆ including all the information they could glean looking from the outside into a privately held company ˆ but were satisfied that the company wasn't holding any fiscal or operational skeletons in its closet. "We were cognizant of the fact that we knew very little about the details of the business," says Vickers. "But Marriner kept a very well-run organization, and, culturally, we knew there wouldn't be a big gap between how we ran the business."
Competing on a commodity
The second team was charged with figuring out how best to transition the Marriner organization into the Hancock family. Hancock executives looked at everything from the organizations' employee structures to their point-of-sale computer systems and found that the two companies were structured similarly. For one, both Hancock and Marriner were decentralized, with their management teams spread out among the different stores, managing sales and operations in different regions. For example, the Brunswick location where Chris Vickers and Tom O'Brien work ˆ which still sports Marriner signs at its Church Road entrance ˆ has a cluster of offices upstairs from the retail aisles.
As a result of that decentralized structure, Vickers doesn't expect to have to lay off any of the combined companies' staff, now totaling more than 650. In fact, he expects that the expanded Hancock will need to start hiring more workers ˆ from inside sales support to kitchen designers ˆ to keep pace with the expected influx of new contractor business coming in from the midcoast area. "We have the resources to invest in the business, and we have opportunities to grow the business rather than cutting it," he says.
For a $100 million company like Hancock, resources are the name of the game. The company is among the largest U.S. producers of eastern white pine, turning out more than 65 million board feet a year through the 40,000-plus acres of timber owned by its sister company, Hancock Land Co. Having that direct link to lumber helps the firm remain competitive with bigger retailers like Home Depot and Lowe's as profit margins on such material remain notoriously low. "It's really tough to make money with lumber, but it's easy to lose money," says Mike Eads, associate editor of Do It Yourself Retailing, the monthly magazine of the Indianapolis, In.-based National Retail Hardware Association. "If a smaller outfit is able to produce a lot of its own product, their retail markets will be better for it. Every penny counts."
The company's size ˆ its annual revenues are more than double the industry average ˆ also has helped it strike exclusive deals with dozens of manufacturers, allowing it to carry a selection of specialized materials that many other retailers can't match. For example, Hancock offers the full line of Anderson Windows ˆ which Eads calls the "Cadillac of prefabricated windows" ˆ as a member of Anderson's Circle of Excellence program. ("Even Home Depot can't get that," boasts Vickers.)
Marriner, however, struggled to compete at Hancock's level. The company last year generated roughly $25 million in revenues and had recently seen its growth start to level out. Marriner's relationship with Ace Hardware, an Oak Brook, Ill.-based co-op of 4,800 independently owned hardware stores, allowed the company to purchase inventory directly from Ace, which helped keep prices competitive. But Marriner in late 2003 faced additional competition as a new Home Depot was slated to open in Topsham and plans were underway to build the state's first Lowe's in Brunswick.
For a company that derived nearly a third of its revenues from homeowners and do-it-yourselfers ˆ a big chunk of Home Depot and Lowe's clientele ˆ the entrance of the big-box stores was troubling. "We'd exhausted our model," says Tom O'Brien.
The big-box factor
Chris Vickers thinks Marriner was where Hancock Lumber was about 10 years ago ˆ growing quickly, but starting to plateau and needing a shift in its business strategy. Hancock Lumber in the early 1990s faced increasing competition in southern Maine from big-box retailers such as Home Quarters and Home Depot. The company decided the best way to combat the big-box invasion was to specialize in niches the big guys ignored. It targeted local contractors and building firms, as Home Depot and its ilk hadn't had widespread success tapping into the professional market. To that end, Hancock Lumber added sales staff to better meet the needs of contractors, both on the job site and in the company's retail locations.
The strategy has remained successful, and Hancock Lumber today generates roughly 90% of its revenues from the professional contractor market. Many industry-watchers think it boils down to a simple matter of service. "Most contractors worth their salt might realize they're saving a nickel a foot on framing lumber going with Home Depot, but the [local] guy I'm buying from now, I've got his phone number and he can open his store for me on a Sunday," says Eads.
With the former Marriner locations added to its retail stable ˆ now 14 stores strong ˆ Hancock Lumber has an opportunity to tap into the contractor market in the midcoast area that Marriner had yet to fully exploit. And, in addition to the typical lumberyard and hardware offerings, Hancock Lumber also has built up a range of services in hopes of attracting more contractors. For example, the company's financing arm offers quick-turnaround loans to contractors, and currently has $10 million in loan capital out to local contractors ˆ a sign, according to Eads, that Hancock Lumber has a strong hold on the market.
Vickers isn't worried about competition in the midcoast area from the likes of Damariscotta-based Poole Brothers Lumber and Building Supply and Downeast Building Supply in Brunswick ˆ two companies firmly entrenched in the area. "It's healthy to have more than one major player in a market," he says. "We've always been in a competitive environment. It makes you better, sharper and more innovative."
Vickers expects that the majority of sales growth in the midcoast area will come from that range of services and inventory Hancock Lumber will bring to the former Marriner locations. But the company's top priority, he says, is continuing to build trust between Hancock Lumber and former Marriner employees and customers. To that end, Hancock asked those Marriner employees to set the agenda and timeline for the companies' integration. The employees, however, already appear to have placed trust in Hancock Lumber: Long-time Marriner employees have pushed to accelerate that transition schedule. "Their agenda is probably more aggressive than ours would have been," says Hancock.
For Kevin Hancock, that's a sign that the transition is moving along successfully. At the same time, he says, the ease of integrating the two companies also speaks to the compatibility of Hancock Lumber and Marriner. "[Neil Lamb and I] both felt that our companies had bright futures either way," says Hancock. "But we both felt that we had the brightest future together."
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