CEO Scott Clawson's Growth Strategy

CEO Scott Clawson's Growth Strategy

Kison: [00:00:00] I am Kison Patel, and you are listening to m and a Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during m and a deals.

Kison: Hello and welcome to the m and a Science podcast. [00:00:30] This podcast is part of a mission to rethink how m and a is done. The old school seller led approach instead, buyer led m and a is all about strategy, alignment, and efficiency. Putting value creation at the center of every deal. And let's be real. It's not just about closing the deal, it's about making it successful.

Kison: We uncover what truly works in m and a by learning directly from the best. I'm your host, Kison Patel, founder and CEO of deal room, and Chief scientist here at m and a Science. Joining me today is Scott [00:01:00] Clawson, chairman and CEO of Culligan International, a global leader in consumer water services and solutions hunter's leadership.

Kison: Colligan has transformed from a legacy water treatment company into a 3.3 billion global platform. Through strategic turnaround, operational focus, and a highly programmatic m and a approach. With nearly 300 acquisitions and operations in over 50 countries, Scott has built a true m and a machine while maintaining a [00:01:30] sharp focus on purpose-driven growth.

Kison: Today we're gonna talk about activating a programmatic m and engine that scales God's company 10 x in under a decade. He'll share tactical insights on balancing organic and inorganic growth and how capital partners like Advent and BDT have shaped the journey. Scott, how are you doing today? Great. Good to be here.

Kison: Fellow Chicagoan, fellow Chicago. Awesome. Thanks for hosting and I know it. Colbin global [00:02:00] headquarters here, just outside of Chicago and round here.

Scott Clawson: We got some planes coming by. It makes it easy to get in and outta town, and it's a pleasure to be together. I look forward to our conversation here.

Kison: I gotta tell you, your office is like the best tasting water I've ever had.

Scott Clawson: It better be, let's try this together. Oh yeah, that's good water. It's one thing you don't have to worry about here.

Kison: Something you gotta appreciate too. Exactly. Can we kick things off a little bit of your background? I have a little

Scott Clawson: bit of a background similar to you. I came from a small town in [00:02:30] Indiana, very small.

Scott Clawson: I'm not sure how small yours was. 25,000 in little Was smaller little town Nebraska. I was, uh, yeah, I knew it was in Nebraska. 5,000 in Batesville, Indiana. Grew up there. Started my career really in operations after undergraduate in finance. Then went to business school and then one of my first jobs was actually doing business development in Central and Eastern Europe.

Scott Clawson: That was a great experience. Then wanted to run a business and decided to join Danaher, [00:03:00] and I was being interviewed by one of their senior executives, very senior. I. He was asking me about my m and a background and business. I said, I wanna really run, run a business here. And he's like, no, you really need to get to know how we do m and a and business development.

Scott Clawson: And I said, no, I've done that. I just did that here and there. And he looked at me and said, not the way we do it. And as you know, Danaher is a very yeah, respected company in m and a. So I worked at Danaher, spent some time there then. [00:03:30] Did my first private equity deal with Centerbridge Partners. That was in 2007, an agriculture business in Illinois.

Scott Clawson: Partnered with them. That went really well, and after that, ended up here at Culligan and joined in 2012. And that's in my journey up to this point in Culligan. And I'm someone that understands really complex business models and international. And both direct and dealer businesses and it's just been a great career so far for me.[00:04:00]

Scott Clawson: One, I've learned a lot in too along the way.

Kison: How about the Culligan story? Can you walk me through what this, the turnaround Culligan story and how did you set the stage for your m and a strategy?

Scott Clawson: Let me tell you first a little bit about Culligan. We provide healthy, safe, soft water to millions of people around the globe.

Scott Clawson: And we do it throughout the day, whether you're at home, at a gym, at your office, at a hotel, it just doesn't matter. We do it through all types of products, whether it be a really great picture to water filtration [00:04:30] devices and solutions at the office, and of course a lot at home. And it helps us eliminate a lot of single serve plastic in the world because it's all filtered, just like you're getting today.

Scott Clawson: When I started in 2012 at, it was really a turnaround story at the start because. It had been over leveraged and really we bought it in a restructuring from CD and r. It was at that time was an over 80-year-old company, started right here in Chicago. You might have [00:05:00] seen back in the day a big. Complex off of North in Northbrook, off the interstate.

Scott Clawson: But first part of what I did is needed to turn around the business in terms of just having it on strong, safe footing, making sure the strategy was right one, and we did that the first four years sold the company to Advent. We didn't very little to no m and a at that time. None. Two things came together that had us start this programmatic m and m [00:05:30] machine.

Scott Clawson: The first one's a little different than what you may have heard before. I literally is on vacation with my family in The Bahamas, pretty remote barrier island where there's not a lot of commercial stuff on the beaches. You could go to this part of the and be really remote and there was a huge amount of plastic on the beach.

Scott Clawson: Single serve other stuff not from hotels. And I'm sitting there saying, all right, this is ridiculous. I have a daughter who's always on me [00:06:00] about she won't drink outta plastic. And I looked at our business and said, we're not that big in drinking water yet. It's a big emerging trend. And then when we sold the advent, they were very interested to grow the company both organically and inorganically.

Scott Clawson: And that's how our. Programmatic m and a like machine is what I like to call it started and we really then put a lot of time, effort, money analysis into setting up [00:06:30] the programmatic m and a machine in 2016. And that's when the start of what has now been over 300 plus deals, it started in basically 2016, 17.

Kison: Was there a shift in the business model? Was it more like the core business was water treatment and then when you saw the plastic bottles it shifted towards Exactly.

Scott Clawson: We were bigger in water treatment and that's still a great business for us, but we saw this unique opportunity to take the brand [00:07:00] and expand it in water treatment.

Scott Clawson: Now, we were in water treatment, some, but not in offices, not in hotels, not in restaurants. So. What we did was we looked at, did a lot of strategic work, which frankly any m and a programmatic m and a machine should start with making sure you have the right strategy and target markets and product lines around it.

Scott Clawson: We did not do that fast. It took us six to nine months. A lot of thoughts, some outside help going back and forth with Advent in the [00:07:30] board, and then we nailed it and we said, oh my gosh, there is a boatload. Opportunity really fragmented to go after. And at that time we were in basically four countries, Canada, north America, France, and Italy.

Scott Clawson: And the company was healthy on, and we said we shifted the strategy to also grow and water filtration for people at home on the go on. But we needed to get. The mass. [00:08:00] We need to acquire some people to help accelerate that. 'cause it wasn't our core product line.

Kison: So the inspiration started with time at the beach with their daughter and just seeing all the plastic bottles.

Kison: I like the point that you're being Canada just didn't happen overnight, but yet about a nine month journey. Oh yeah. Can you click into that? I'm just curious because I feel like I'm going through the same thing. Running a tech business, which I feel like. Every week we think their strategy differently.

Kison: Exactly.

Scott Clawson: I give a lot of credit to my board and partners at Advent, and by the way, one of the reasons we picked Advent as our next [00:08:30] partner is because they had capability and international experience to do this. So between their involvement, we hired some really good outside consultants. We had to pause some of the things we were doing and say, hold on, let's get our best people working on this.

Scott Clawson: We did a piece of work that I think is critical to be successful in programmatic m and a, and that is, let's define exactly the guardrails per our strategy. [00:09:00] Healthy, safe, filtered water, no plastic. But then what are the attractive markets? What are their growth rates, what's their penetration versus kind of single sur and.

Scott Clawson: By the end of that work, we had something that even the market consultants wouldn't have. I could say pick a market, Germany, France, Canada, Mexico, and say, oh, we know what their growth rate is for filtered products here, what it is for softening [00:09:30] and the penetration. And therefore that was then like, okay, this is a great opportunity.

Scott Clawson: And of course, frankly, we also already had a brand and a really healthy business in it. So that's how we started.

Kison: So it was really defining product, what you're actually gonna market with, and getting crystal clear on that. And then it was mapping the whole marketplace out of like where you wanna go, where do you wanna prioritize.

Kison: Did the, you use some consultants? Yes, we did. Were they helpful? Do you A good ROI? [00:10:00] Yes.

Scott Clawson: If you consider that we've taken EBITDA from where we are today. A lot more, call it almost 20 times since and at least almost 10 times since the Advent deal. What did

Kison: they do? How'd they add value? I'm always like Advent.

Kison: Well, let's start with the consultants, then we'll go back to D firm. Well, you gotta

Scott Clawson: be careful with the consultants, but they really helped us along with our kind of analytical team in house of defining market growth rates, solution or service growth rates. 'cause we're a water service company. Of course we need some [00:10:30] filtration products to do that.

Scott Clawson: They just helped nail that down. Then we had our, okay, these are the best 20 markets. These are our guardrails. Okay, how do we start the programmatic m and a?

Kison: So really a lot with market study. I. You name the consulting firm? Yeah. Bain.

Scott Clawson: It was Bain and, and Ammani. All right. There was a firm that was a water consulting firm, Amani.

Kison: Okay, that's nice. They're

Scott Clawson: now part of Roland Berger.

Kison: I had Hugh MacArthur on here, so I got a good, okay. Could put it back to Bain. So that's good.

Scott Clawson: Both of those

Kison: together. Really. That's good. It was a bad [00:11:00] experience. We, we wouldn't wanna name them but Exactly. Could

Scott Clawson: like that. It's important to get, I think anytime you start, what we did is to be grounded in strategy.

Scott Clawson: And guard rails of where it makes sense. You know, somebody does m and a in an area

Kison: that's a dog. So we got the market studies help expanding that with the consulting firm. And at the P firm, what do they, do they help? Anything with strategy? Well,

Scott Clawson: advent was tremendous. They helped on, and the board, we had independent directors on the board to [00:11:30] make sure we had this strategy defined, well, thought out, and targeted.

Scott Clawson: And then they were very helpful in setting up the programmatic m and a machine along with. Ahm at Shaw, who runs that for me globally in terms of the pipeline work, transactional and integration playbook. Much of that we had from my background, 'cause I came out of companies where I learned it myself and did it well.

Scott Clawson: But on our first 10 20 deals, they were very helpful and active. They had people on the team, you know, they [00:12:00] do that a lot and they help

Kison: get our people up to speed as well. So they're really helping with the process, the execution. I'm wondering how much of it do they actually help you with in-house? I know some of these bigger PE firms will have a portfolio support or Yeah, sure.

Kison: Like a portfolio operating group.

Scott Clawson: Yeah, and I've been with several that are very different from Centerbridge to Advent to now B-D-T-M-S-D, so they helped significantly on the initial deals of the [00:12:30] transactional. Side of things, analysis and so on, and a little bit on the integration playbook, but we pretty much had that note.

Scott Clawson: They did not help much on the actual pipeline work. We built that up in house and then as time went on, I. They would only like really support us on deals that were pretty sizable. That was back in 2017 when we set that up. Today we have zero help from our right. I wouldn't say zero help, but very little on [00:13:00] what a lot of PE firms would do would be have somebody on the deal and do an analysis and all that.

Scott Clawson: We generally do it all in house if it's a bigger transaction or so on. We can always lean on them for help or review and so on.

Kison: Are there any other areas that you found PE to be really helpful? I'm curious about this too, Scott. 'cause I'm at this stage with our business, I bootstrapped it to about 10 million revenue and now I'm starting to think about doing a minority recap.

Kison: Yeah. So I'm starting to date the PE firms. It's interesting. So I'm like paying attention to their operating model. How well do [00:13:30] they support their port codes? I guess part of it too is less ownership of this capital structure. We got a partner that can. Help you think through debt and equity balance and what other levers you can use.

Scott Clawson: Did you find anything of that significantly significant value add with all three of my private equity partners, Centerbridge Capital Partners for two deals, advent International and B-D-T-M-S-C each in somewhat different ways, but I'll [00:14:00] describe where. First and foremost, they are excellent. Just the, what you said Kison about challenging and looking at your business and what are these strategic opportunities to really change the game or add value.

Scott Clawson: They can be thought leaders on that. So that's the first thing. Second thing is they challenge, they push, they ask questions. That's great for us. It makes us stronger, especially if you have a management team that understands that's [00:14:30] partnering versus seeing ghosts and things like that. So they would immediately help look at and say, how can we grow this?

Scott Clawson: How can we add more value? Have you thought about that? And that's been really value. And then third, they actually will apply resources at times if you want to help fix something or improve something. And look, I'll give you a great example of that. That was. Honestly, one of my harder, darker days as A CEO, and this goes back [00:15:00] to 2009 10, my first PE deal a lot on the line.

Scott Clawson: First time CEO of a PE backed company, standalone, CEO. And I had a big issue in Brazil and I was in Brazil, a lot of problems, distrust, foul play. And I was down there with one member of my team and I realized that. I was in the gym playing Michael Jordan in basketball. I had no shot of figuring this [00:15:30] out, not speaking the language, not spending a lot of time down here.

Scott Clawson: This business unit of ours had a serious financial problem underneath. I called up the operating partner at Center Bridge on our deal, and I remember it was late at night. I just left and it just hit me. I'm out of my league, and he immediately, over the next week. Got partners, worked his network in Brazil.

Scott Clawson: He flew down there and he had seen messes before. Two weeks [00:16:00] later, we had an interim person on site. Boom, boom. He was on it with me and it was like, oh my gosh. Wow. To this day, if when I see this gentleman, I mean, I look and say thank you know, thank you. Now he did worked his network. They really can help you improve businesses and ops and help you drive the value creation plan.

Kison: Capital structure, helping shape your strategy, helping you build the m and a as well, challenging you, maybe even driving some urgency to keep you a little on edge [00:16:30] and motivated. Having the right independent board. The resources, it's resources, like being able to actually resources help you out. And

Scott Clawson: then like in Bdt, MSDS case, very strong relationships around the world.

Scott Clawson: I can give you an example to there, how they've literally helped us in our programmatic m and a.

Kison: Yeah, absolutely. You know, when you look at this, you've done like 300 deals, and I'd love to hear a little bit more about when you started this process. You got the strategy nailed down, you started building out some of the pieces.

Kison: The key firm initially gave you some of that start. You [00:17:00] gotta essentially scale it out from there. Was there any other essential pieces to really get that right?

Scott Clawson: Yes. Pipeline. One of the biggest opportunities in programmatic m and a is how. Companies set up the pipeline resources, and I noticed this early on, and then how you incentivize people.

Scott Clawson: But if you don't have pipeline and it has to be not the data and getting all the targets, who's actually gonna talk to 'em? Who's gonna visit them and is it the right person? And what [00:17:30] we did that was hugely successful, that I don't think enough companies do is find pipeline resources that are in our industry that all they care about.

Scott Clawson: Pipeline. They don't wanna do a bunch of due diligence. They don't wanna be trying to do the contract work or integrations. They are rewarded on. Get those relationships, find the deals, meet the people, and get them to a table, to an LOI. After that, they [00:18:00] can take off and they're hard to find. A lot of people wanna be involved in everything.

Scott Clawson: We found an individual at the start that is an all star at that, and then he got a couple people more, so that helped. Of course, it's once you have the strategy, you need the and the guardrails, you need pipeline, and of course a transactional and integration playbook we put in place. And then we went around the world and set this up in these 20

Kison: markets.

Kison: Easy.

Scott Clawson: Easy peasy. Easy. Well, not easy, but it can work. [00:18:30]

Kison: I like the pipeline focus 'cause it's tried and true. Like even running a software company, every manager meeting I have is all pipeline. You found this formula of this right profile of a person that could do well at building pipeline because you've scaled this out across what?

Kison: About 50 countries now?

Scott Clawson: You know our m and a programmatic m and a in pods around the world. So. Eight areas where they're operating a country or cluster of countries, cluster of country countries. Yeah.

Kison: And this is where I'm really intrigued because how do you scale that out? [00:19:00] Do you say, Hey, this is the profile, and then you just start hiring those organically in these different markets?

Kison: Yes. Against your strategy? Yes.

Scott Clawson: Now first we gotta be in that market, and in our case, we were in. Basically four countries. So we had to get to these other 20 countries through generally the first acquisition is a beachhead, and then we would in that area, build out this small pod of the programmatic m and A machine.

Kison: But you'd hire that BD person first?

Scott Clawson: Exactly. [00:19:30] So what we first did is we hired one in the US and one in Europe. Their job was pipeline. It's a certain type of person. It's someone that really has strong interpersonal capabilities, knows how to get to know people, can work with our teams and others, and they would go meet with and target the deals.

Scott Clawson: That, of course, came out of our research of target companies. And they would help us find those deals that would help us get into those markets. And then once we were in that market, lemme give you a good [00:20:00] example. Southern Europe, there was Liberia we didn't have any real business in. It's a great target market.

Scott Clawson: Portugal, Spain, filtered water. The water isn't great, plastic isn't growing that much there. So we first, through our kind of corporate pipeline, guy found a business in Portugal. Fairly sizable purchased it. Their team stayed on with us and then within that we said, oh, this is a great area. But they need [00:20:30] a local pipeline person.

Scott Clawson: They need an integration lead. They need transactional, kind of comes from their finance team, but we have that playbook. So that's how we did it. And then they've since in that area, probably done. More than several acquisitions. Oh, and now we're basically one of the leading companies in Iberia over five years.

Scott Clawson: If you go there today, it's like they run their own, it's like a its own little P deal. They're running their own programmatic m and a. But what's [00:21:00] interesting is what. I'll give you another example. Then we're in another country and I'm visiting it, and they're like, they're not doing any, and they're stable.

Scott Clawson: They're growing organically. They have a good team. Of course you want that. When you start, it's like, why aren't you guys doing more deals? It's 'cause the finance lead is in this part-time trying to talk to some of the water service companies. They're asking their GMs to try. They don't have time. They're trying to make their budget.

Scott Clawson: So I was there and I said, no, no, no. [00:21:30] Go hire the m and a pipeline guy if he can help do the transactional part. Great. And what do you think happened a year later? They hired the person like six months later, a year later, six months after he started, they got like deals flowing. Why? Because that's his job.

Scott Clawson: And then you want to incentivize people to do it, right? So it's remarkable if you just get the steps, which we've outlined. Get them going in a place it can really work. And as long as you have the incentive set up too.

Kison: What's the incentive [00:22:00] look like? Is it like almost, I think it's our sales rep. You get a base pay and then you close deals and you're gonna get kickers for that.

Scott Clawson: Yeah. There's a hidden gem in this. You tell me. I don't think many businesses comp this. Right? And it's Yes. Pipeline person and you guys go get it done. Reward 'em for their performance. Maybe they get some bonuses for ex getting these deals done, but how do you get the business to like, the business has to then own due [00:22:30] diligence and integration.

Scott Clawson: Yeah, and we have great playbooks for those, and most companies do, but I've been at a business before. Oh, we can't. This is one of our leaders that's calling Bob. This literally happened several years ago. We're missing our budget some because of these acquisitions, and I get it, they should. It's hard to do a bigger acquisition and two, and then, you know, it does take your eye off the ball.

Scott Clawson: But in the incentives part, what we have done is incentivize the [00:23:00] BU leaders and their teams with it, helping their budget if they do small programmatic m and a. So if you have a budget of 10 million, but you'd get these deals done and. They give you X amount of EBITDA that helps your budget and it wasn't planned.

Scott Clawson: Meaning they could be missing their budget by a million, but they just bought a couple companies that make up that million and they, and that's like free budget money. We're happy. 'cause it's accretive. They're happy because it's like, [00:23:30] Hey, programmatic m and a can help us make or beat our budget. Ideally beat it and pay our whole business unit team more.

Scott Clawson: So that's a powerful thing. I don't know how many companies do that. I think it's probably what they generally do is like, oh yeah, go get these deals done. You're a stockholder, so therefore you know you'll be rewarded. This is in our blood. We do call it the m and A machine at Culligan because it's just natural.

Scott Clawson: And of course they're gonna be rewarded as shareholders, [00:24:00] but if you're in France or you're in Germany, or you're in Latin America, you have a tremendous amount of pressure to make your budget. But the minute we say if you go by people, that's plus to your budget.

Kison: Yeah. It adds right to it.

Scott Clawson: And then what we say is if you buy 'em, let's say you buy somebody in November.

Scott Clawson: We give 'em credit for half the year of the LTM. Now we got everybody lined. Pipeline guy. Businesses like this helps us grow as a, and make money as a shareholder. It helps us make our budget. Now, of [00:24:30] course, they have to have these elements in place, which the integration playbook and the due diligence playbook,

Kison: that's

Scott Clawson: the easy

Kison: part.

Kison: The vis dev person, is there a kicker based on hitting the LOI or at close?

Scott Clawson: Their kicker is based on a couple things. In some instances, they're on a whatever bonus program of the business or corporate they set in. If you're the development person, again in France, however France does, [00:25:00] you get that we could give them a kicker for a deal or two.

Scott Clawson: But globally what we do is we have a matrix target of how much EBITDA we wanna buy. Multiple, and it's just formulaic that, let's just say we have a target to buy. I'm making up numbers. We do more than this 10 million of EBITDA and our target is 10 million at seven and a half times. And then if you buy 10 million at less than seven and a half.

Scott Clawson: You're getting a accelerator to your, your target. Mm-hmm. I like that. If you buy, [00:25:30] it's perfect. It's like perfectly aligned. And this

Kison: is for the biz dev person to get,

Scott Clawson: this is for the biz dev people to get, and by the way, it could be those at corporate. At corporate, yeah. Or in some pod, call it France. That this is mainly used for biz dev and the corporate resources.

Kison: I like it. 'cause you're incentivizing 'em to do good deals, not just deals.

Scott Clawson: Exactly. If you pay too much, it hurts you. Now we know our market. We've been doing this for a while. We kind of know if you've done 300 plus deals, you're aware of things and we [00:26:00] have huge credibility coming to us because of our reputation of how we treat people after deals.

Scott Clawson: If you do that plus this. Somehow reward the business unit leader. But you know what, when you reward the business unit leader, it's on by saying, oh, you, you know, if it goes well, you may get some extra bonus at the end of the year that's not, and just

Kison: like count it all towards business. It kind of

Scott Clawson: like it can work or not, but if you have it part of your incentive program where.

Scott Clawson: It's been now going on for us six, six or seven years. It's okay if we [00:26:30] do. Everybody wants to do programmatic because it helps 'em beat budget. Yep. And then if they beat budget, they make more money and they're doing Now, if they do a big deal, we don't let that. If it's a really big deal, that's different thing.

Scott Clawson: A business that's doing 10 million, let's say they do a $8 million merger, we're not gonna have them probably blow. Through that. But remember, we're an m and a machine on water service companies where they're pretty small and programmatic, and that's the best way to do it

Kison: if they did the bigger one. Is [00:27:00] that just completely different?

Kison: Do they, is it just like a, here's like a whole business case and you just have a whole different, it's part of

Scott Clawson: that grid. For the m and a teams and so on. And then for the business, we would have to set up a special program for that year.

Kison: Can you walk me through the overall structure of this m and a organization?

Kison: Because I've worked with a number of teams and ev I feel like everybody's just structured differently. There's a lot of ways to do it, but what's interesting is that you're doing this on a, essentially a [00:27:30] global scale. There's this balance between the biz having that localized. But then when you go through diligence and you go through integration, I'm also thinking through like those processes where, hey, maybe there's some parts that you do wanna localize, but maybe there's some parts that you want centralized.

Kison: And just trying to put that in mind of how you actually do deals with, like how do you actually structure the team to make this efficient from all you learned over the hundreds of deals? Yeah,

Scott Clawson: this is a great question and there are various ways to do it. [00:28:00] We are set up where. The corporate m and a team, Shah, who leads that is responsible for the setup of resources in the regions.

Scott Clawson: One, to make sure the strategy and guardrails are what we talked about. Two, three is that then the playbooks are in good shape and kind of followed, which is we have two playbooks, due diligence, playbook and integration playbook. That's it. [00:28:30] Everything else is in the region or the business unit. And then there's just several of them that then have pipeline targets.

Scott Clawson: They use these playbooks. Of course, any bigger deal goes up to Amit. He sees almost every one, but he's not having to prove a small deal and wherever because it's small and as he sees it, 'cause he is always tracking it. And he has our multiple versus price and, and works that. So we really stay [00:29:00] grounded in our strategy around water services and then the guardrails, and that is part of corporate's job, but pipeline execution, due diligence.

Scott Clawson: All part of the business unit. Now look, some of our business units or clusters are 50 to a hundred million of ebitda, but I don't want some, there's not somebody flying in from around once we get it going, that's their own programmatic machine. It's running in France, it's running in Iberia.

Kison: You're almost like treating them like a pork co of your [00:29:30] own, it seems like a, yeah, and we have

Scott Clawson: common themes and for sure, 'cause we at Colligan run quite decentralized.

Scott Clawson: It's also with the common purpose of healthy, safe water and so on. But that's also been a reason why we get a lot of deals. People trust us. I can have people call up, just call up these people. They were at their own company. They're happy here. Talk to them about how it went and how much money they made later or not.

Scott Clawson: Deals come to us that way and it's because we treat sellers with respect and [00:30:00] credibility. Reminds me of in Italy. How we got our machine going, if you want. Hear a good story about that. Yeah, I love it. So there was a business we wanted to buy and Advent helped us look at it and I kind of came in at the 11th hour when they were gonna go another way.

Scott Clawson: I met the two Italian owners in a airport hotel, and the meeting kept going on and we built the relationship. They'd met our team, but they were really headed the other way. [00:30:30] And I committed to. They would keep running their business, that we would keep it in their location, and this all made enough business sense that.

Scott Clawson: They would have the ownership of the r and d of these unique product lines, and we held true to that. To this day, and it's a little bit maybe outside our structure of what would be look on paper wise, but the business has gone from 5 million to over 50 million. It is one of our super [00:31:00] performing assets in terms of technology.

Scott Clawson: This was an area where it was also a technology oriented company. That spread. So now what do you think happened to all these other owners in Italy that when we started doing more programmatic m and a, they know this firm, they'd call 'em up and these guys are like, you can trust Colligan. They haven't changed what they said we would do.

Scott Clawson: I. And they've invested. And of course there's deals that what you're gonna do is a little different. Maybe you're integrating and getting a lot of synergies, but if you do what you [00:31:30] say you're gonna do, and you become known as a programmatic m and a, and you can put points and dollars of return on the board for people that can have fun as part of it.

Scott Clawson: But that generally only happens in my view when it's decentralized. If you're a big corporate of hemo. I don't think it works. Very decentralized. I'm a You're like

Kison: highly decentralized. Well,

Scott Clawson: I'm a firm believer. My leadership, DNA, whether it's taught from my dad long ago, to Danaher, to everything else I've learned [00:32:00] is empowerment.

Scott Clawson: You wanna push that down as far as you can. Of course, we have systems around, again, integration, due diligence, and the transaction that's controlled, but people can learn that and get it. Showing. We have all these business units with a common theme around the world performing quite well,

Kison: and it's fun. It takes hard work to fill that reputation.

Kison: And I like the, what I'm hearing about the approach I wanted to ask you about buyer led m and a because. I've been publishing a lot of the content around buyer led m [00:32:30] and a, and it's something I've observed from watching organizations like yours that may start off with a process they stumbled on. It's a seller led process, but then once you start running m and a at scale, you have to be buyer led.

Kison: You told a lot of it already where you have to have such a clearly defined strategy. There's a clear criteria. Now you've got folks that are proactively finding businesses that fit that criteria versus just engaging bankers and being reactive towards it. But what I was curious about was like, as you move through that [00:33:00] actual execution, uh, decentralized sounds like a lot of it, you really keep localized.

Kison: Are there other things that you do to just fit that theme of being buyer led to ensure the success of the deal post-close?

Scott Clawson: I believe the main one is having core competency in terms of talent that are doing pipeline work, and that helps then you be buyer led 'cause you are implementing that with relationships.

Scott Clawson: To me, that's a key. I'm on [00:33:30] several boards and I've talked a lot about m and a and generally I'll sit there and just say, well, are you gonna get programmatic m and a when you got Take Ahmed? You got people like Ahmed and deal people that know how to do due diligence and transactions all in once in a while for dollars and all that.

Scott Clawson: So building that competency and then having the credibility, I do think are the main key. I'll give you another great example about buyer led m and a that happened in a [00:34:00] region of our business that's also a business unit within a business unit here in the us. They had a pretty good pipeline person trying to be buyer led, calling people and so on, but that was it.

Scott Clawson: And so I said, no, no, no, no. Who do we know in the industry? Retired. I mean, these are companies of one to 2 million of revenue and it's like, oh, so and so we bought his business two years ago. What's he doing? I knew the guy. Yeah, let's get that guy going part-time. And all he wanted to do is go back to his relationships.

Scott Clawson: He's tired [00:34:30] of just sitting around playing golf. He's buyer led and he's walking in somebody's dealership. So you need to do those type of things are the key. And then get your team. GMs wanna be buyer led because they get rewarded for it.

Kison: It's like you have to start from the early in the process to have proactive culture then allows you to build that as you progress through the deal.

Kison: Like the same thing, like doing your diligence and controlling your timelines and how do you plan for integration to make sure that goes smooth.

Scott Clawson: Exactly. There's a [00:35:00] whole process on that front end and that then. Deals the culture. I like what you said, the culture of being buyer led, but how do you

Kison: keep things to fit Culligan versus like straying out of your guardrails?

Scott Clawson: A lot of the review process early on on deals as they get to LOI, a lot of that, I give a ton of credit to. Shaw who leads our global m and a and his regional leads to catch if [00:35:30] people get outside the guardrails. And believe me, if you're rewarded on m and a, you will want to do some deals at times that may not be as strategically fit.

Scott Clawson: And for our case, water services that are growing in these very big markets, but. And I'll give you an example. In water, there's a, there's companies that do hydro panels that pull water vapor from the air and turn it, remineralize it and turn it in water very early on. Sounds pretty cool, right? [00:36:00] Sounds like college should be in that.

Scott Clawson: We had these devices that we can put out in the middle of nowhere, but that's not our core yet. It's early stage. It may or may not work. It's a different kind of segment. It sounds, I've had to say no to certain things. I don't really need too much anymore because the team does. So that's how we do it, and that you do need to have that discipline somewhere, and we do it by, these are the attractive markets.

Scott Clawson: These are the guard rails, which are water services. These [00:36:30] areas are a tech deal, but we're not doing VC too early stage and we're not doing something in some geography. We haven't targeted yet

Kison: this new emerging innovation. Do you sit there and say, Hey, maybe we should have five 10% of resources. You've done that?

Kison: Yeah. You sort of look at that. We're two or

Scott Clawson: three deals that will take a early position. To bet on it, but not have to overly run it. And some are working and some we're gonna probably lose our investment on.

Kison: So there's a discipline to stay focused, but then there's this view of let's not let the [00:37:00] things exactly get away from us.

Kison: We'll sort of resource allocate accordingly to Exactly.

Scott Clawson: We're a little blessed in this regard because any new technology ends up having to come our way if they want to get to the markets because we won the ground game.

Kison: I don't wanna pick on the meet here. 'cause obviously you've kept him around long enough that he must be worthy.

Kison: Um, but you know, for, let's just broadly speaking, for a head of corp dev, you're CEO, building out programmatic m and a, what's a head of corp dev doing essentially to impress you? [00:37:30] This is a person that's really nailed a role. This is why they've impressed me.

Scott Clawson: Okay. That's a great question and it's a easy answer.

Scott Clawson: They're gonna understand and do a lot of just what we've been talking about, so that's the easy answer. But in addition, they are just really astute and experienced in the parts of the m and a machine we've set up. So if you take Amit, he's really good at the due diligence transactional. And the [00:38:00] hiccup so he can see that.

Scott Clawson: He can feel it. If it's a real big deal, he's in the middle of it. 'cause you can't miss on that stuff. But he also is really great at setting up this m and a machine and being comfortable that they're in our case because we do so many deals that they're in each region as pods and is a great leader about it.

Scott Clawson: And the success has been excellent at process and playbooks and strategic thought, and then him be able to go deep when needed. [00:38:30] In general, a lot of corp dev or just m and a leads, they're really good in one area, but they don't have the breadth that's needed to run programmatic m and a or you wanna do it all at corporate.

Scott Clawson: In our business, that wouldn't work. Right, right. In some businesses it could, but

Kison: I'm not a big believer in it. Um, so leadership is a huge component. Being able to build out a process and getting ahead of problems.

Scott Clawson: Yeah, and being involved. He reports to the board every quarter. He knows where we are in our [00:39:00] targets, and

Kison: he directly reports up to the board.

Kison: He would, would pour it

Scott Clawson: out at a board meeting with us. Oh. Oh wow. So he's

Kison: okay.

Scott Clawson: The value driver of this is huge. So it's not long, but he owns all of that. So when we say we're doing all these deals, he knows every one of 'em. And I walked in the other day. Walking by his office. And this had come up to a bu a question about what we needed to pay for a deal.

Scott Clawson: And I was just asked about, and I said, Ahmed, send me X, Y, z, the last eight deals in this area, in these regions, [00:39:30] multiple boom. And just let us know the strategic thought on that. Two hours later, the data. But then he has this strategic thought about it. So when a big deal comes up. The differentiator for us with ah, is he's also very just smart, strategic.

Scott Clawson: We've had him since 2000. He was my first hire for the programmatic m and a. If you asked him how long it took us to get him, and then we had to wait for, we got Advent on board and he was the first hire and I always joke with him about it. Like, how many deals did you do at IR ing? [00:40:00] Saw around, he was like, in the last six years, I don't remember, like a couple.

Scott Clawson: Now look. Yeah, he's a star. I know. Now I'm, but we don't divert him either. We don't need him. We got other people working on ir. He could do a lot more, but this

Kison: is great. I feel like he's got his neck exposed more than you do. I'm now, I'm starting to feel bad for the guy you should take him out for

Scott Clawson: on the weekend.

Scott Clawson: For sure. There you go. I love him. Hey, do you run across regulatory challenges? Not generally, no. We're very careful about that. We have.

Kison: I just didn't know. Now it's like the talk of the town, especially with all the [00:40:30] markets you play in, we're

Scott Clawson: very aware of and made sure we're. Adhering to being very sound in those areas.

Kison: Uh, let's talk pe I want to go back to this transition that you went from advent to BDT as your capital partner. You mentioned that different approaches, like you mentioned Advent, was an as hands-on where BDT is more hands-off. Just curious if there's anything else that differed their approach when it comes to supporting the m and a vision.

Kison: You have

Scott Clawson: the last three [00:41:00] partners here at Colligan. Centerbridge Advent, B-D-T-M-S-T 'cause they've merged with Michael Dell's office. I was able to really choose our partner in those cases because we had several PE firms around the deal, and that's been a blessing. It's not always happened, and I appreciate the confidence that was given to me to say, we're near the same area of price.

Scott Clawson: Who do you think would be the best partner relative to B-D-T-M-S-D? They have added tremendous value. In all the general ways, [00:41:30] good board members, astute, all those things, but longer term capital, their funds 13 years, they love our type of business, which is compound grow, keep compounding. We don't have as much time on plenty of capital, little less leverage.

Scott Clawson: So their capital timeline and structure has been very positive for us. That just aligns everyone and. The type of investors they have are incredible [00:42:00] because they are owners of businesses. Their investors tend to be big businesses that were privately held, and that's what they are. They're investment fund for the private client versus institutional investors.

Scott Clawson: These are people that did well make money, so they help a business in a different way. That's been great. They're international. They like any of the PE firms, they have a network. If I needed any help, I'm one call away from having five people at B-D-T-M-S-D working on it [00:42:30] to get back to us. And of course they challenge us in all those things, but their relationships around the world have been, I'm telling you, a game changer for us that generally you don't see as much, for example.

Scott Clawson: We had a fairly sizable acquisition we wanted to do and BD in certain of these target markets. It happened to be in Europe, and when we were getting near the end of putting our deal together, they asked me, is there any market you want us to have a co-investor in more than others? And I said, [00:43:00] yes. These two within a month after close, we were going to Europe, meeting with a company through their relationships that I would've never.

Scott Clawson: And we were able to buy that company fairly sizable, only because we had a network of people in that company that were invested in BDT that were really reputable private businesses. The sellers like, oh yeah, I know all of these people here in so and so country. I [00:43:30] trust them and I'm gonna meet with BDT and Scott.

Scott Clawson: They might not have met with me. That's pretty great. Interesting. You don't get that all the time. So

Kison: if you had the opportunity to pick your private equity partner, what would the top things be that you would look for?

Scott Clawson: One of course would be the relationship trust fit there with the people you're working with.

Scott Clawson: That should go without saying, two would be their alignment to the strategy of the business and the future. Three would be. Value [00:44:00] add to that strategy, value add, all those things. And most all will say they do it. But for example, with us just on this three, we wanted to go more international and needed a firm that would support that B-D-T-M-S-D Advent did before they were gonna do it.

Scott Clawson: If I'd gone to some other firm, they may be like, oh, you know, a little cautious here or there. They're like, let's go. So they were gonna add a lot of value on it for are they willing? To have a [00:44:30] strong, independent members of the board. I don't wanna have only a bunch of financial investors on my board, well, operating partners.

Scott Clawson: My board has real CEO people on it, and some of these investors in them are actually family businesses, investors, so they actually made their money by running. So that's another area. How much you want them to be hands on or not is another criteria that you want to make sure fits with management.

Kison: This is great.

Scott Clawson: Those are the things that quickly come to mind [00:45:00] that are really important to me, but they, they need to add value and they, those things are where it's at.

Kison: Relationship, trust, alignment to strategy,

Scott Clawson: challenging and value creation to that strategy. If Advent had not pushed me. I saw the need with that plastic, but they then pushed and said, no, let's do work.

Scott Clawson: Let's change this company from a water treatment with some drinking water to a global water service company that takes care of drinking, softening [00:45:30] anywhere you are. And that was because of Advent. And by the way, a couple board members, a couple board members that were independents.

Kison: See people talk so bad about private equity.

Kison: And then I love private equity. Some good examples. They're. What about the other part? I guess let's think like capital allocation and you got money that you can invest towards organic versus inorganic growth. How do you think through that? Then we talked a little bit about the key partner helping with some of the structure in the backend, but on the front end, how are you thinking about capital [00:46:00] allocation

Scott Clawson: evolved over the last 15 years to move more emphasis and capital allocation?

Scott Clawson: I wouldn't say, I would say emphasis, not exactly dollars to organic growth. As you know, the times have changed some around earlier in my career doing inorganic growth, growing ebitda, being efficient, do great, make a lot of money. Now, the best companies are growing organically as [00:46:30] well as programmatic. I believe you need to be balanced, and if not, in today's market, 2025, we have a higher emphasis on organic growth than inorganic.

Scott Clawson: Now we got inorganic growth nailed, and we call it our m and a machine, but that does come. At the expense if you're not careful, especially if you're doing it fast of focusing on organic. So our capital allocation looks at both. We grow really well [00:47:00] organically. We have for years. We of course, spend more capital on that unless we are in a like mega deal year than the programmatic m and a.

Scott Clawson: But programmatic m and a alone or m and a alone is not the best recipe for value creation if you don't have organic growth. And that just gets into all of the things I've learned and we do well here at Colligan around the business system and focusing on breakthroughs of organic growth and so on.

Kison: Have you seen like the risk from overlying [00:47:30] on m and a or Oh yeah.

Kison: Synergies to hit performance targets?

Scott Clawson: We've experienced it and when we do as much as we have, it's logical that when you do a lot of m and a, that it could take your eye off the ball within these businesses, whether it's one big business or like us. A lot of different BEUs with the same purpose. So we have seen that that can happen and uh, that's where our business system and emphasizing organic growth is much or more than in organic [00:48:00] really is important.

Kison: What about like the integration efforts? Because I've heard of roll-ups where they're off to a great start, but then integration ends up being the bottleneck. They factor in all these synergies in their models. Integrate them fast enough. Yeah.

Scott Clawson: Or some of 'em, they don't integrate it. They're just a roll up and then they tell you that they're integrated.

Scott Clawson: And you get burnt there because you find out you just bought a rollup of 15 different companies or whatever. Yeah. A

Kison: backlog of integration work to do.

Scott Clawson: Yeah. That's one of our playbooks. You have to,

Kison: is that part of like investing or in [00:48:30] organic or is that, you know, just being good at m and a is making sure you budget to integrate the company

Scott Clawson: being good at m and a, make sure you integrate the company and that separately about separately you're investing in organic.

Scott Clawson: 'cause you know what happens if you do this deal? You have some synergy number. You gotta hit that. Everybody like, what's a synergy? All right, it's 10 million. You better hit it. Okay? That makes the model work. All that, everything you've done and talked about in your work. But what really happens is [00:49:00] if you're not careful, and this, I've seen this happen.

Scott Clawson: Okay, hit your synergy number. Make sure you do your top line, suffer some or like you're doing whatever to do. And the capability build underneath isn't happening. But two or three years down the road you find out like that worked, but we're not growing as much as we should. So that's a more difficult business initiative to do.

Scott Clawson: But that is the, the holy grail is make sure that you're growing [00:49:30] organically, doing programmatic, but your numbers are like. Whatever you're growing organically, plus two or three inorganically. But if you don't, then you hit synergy numbers and lose capabilities and you've seen that all over the place, big deals and others, two or three years later, people are like deal's not working out.

Scott Clawson: Part of that is you gotta build capability as you do it, and we build that into our model. So one thing we do is, and we get the model and then we say, oh no, what capabilities do we need to do to make sure we integrate [00:50:00] well? That could be finance capability. We're buying sometimes family businesses and that, and we put it in the model and the model kind of sometimes goes a little bit down and then up.

Kison: So this scenario that you want some level of consistency in executing, you're doing like 60 to 80 acquisitions a year. How the hell do you do that across all these geographic regions? That is different cultures. I can't imagine even having these different leaders on one call understanding each other.

Scott Clawson: That's the core competency we've built. It's a [00:50:30] general answer, but that's, it's a really good playbook. So if I brought in AM Shah said, just pull it up, give us your integration playbook. It's really good. Now it's not too detailed. We massage it. Four size of bu because you can't roll out an integration playbook that has a hundred line items for a $500,000 purchase revenue.

Scott Clawson: So you're buying something for, okay, one times revenue, whatever. They don't need. [00:51:00] I mean, you gotta have, so we have all that figured out. Then we've trained and have good people in the areas, and then the BU leader there locally, wherever they are, has to say, okay. And once in a while, they're going up the flag pole saying, this integration is too much for this company or too little.

Scott Clawson: It's governance, but it's governance within the pod that then goes up.

Kison: You'd love to get just general advice for CEOs or corp dev teams that are looking to shift from being opportunistic to really building this [00:51:30] repeatable m and a model. What are the one or two key things that should make sure they don't screw up

Scott Clawson: for those really looking to do great programmatic m and a?

Scott Clawson: There are several important things. First. You gotta build the capability and the muscle of the organization. Of course, you need to make sure your core businesses are strong where you do it. We talked about how to build that capability with the corp dev pipeline and so on. And then you need to ensure you really mapped out the strategy, [00:52:00] the target markets on.

Scott Clawson: So you have strong guide rails, and generally I think companies do that pretty darn well. And then after that, do you have. A playbook or due diligence and transactional close and people that know how to do that, and then integration after and people dedicated to that and then finally isn't married together with the actual business unit leaders, incentives and desire and comp [00:52:30] plans.

Scott Clawson: 'cause at the end of the day, m and a ends up in a business, especially programmatic and programmatic m and a always ends up in a business. Any misalignment of that really hurts. And then if you have that set up and build this culture and DNA, you then have what I like to call the m and a machine. The reason we call it the m and a machine is it's a flywheel that keeps turning and works on its own with good corporate governance,

Kison: strategy process, leadership [00:53:00] alignment.

Kison: Scott, I know we're hitting on time, but I gotta ask you, what's the craziest thing you've seen in m and A?

Scott Clawson: The craziest one was years ago. 19 95, 96, I was doing m and a first biz dev job I had, I was the biz dev person in central Eastern Europe. We were looking for partners to make products for Coca-Cola, Pepsi, bottlers in the local market.

Scott Clawson: 'cause they wanted to be local. And that was a time when you had a lot of accounting and consultants reaching out. We can [00:53:30] show you these partners. And I ended up meeting people at a big show that said that a great partner in Bella Russia that made a bunch of these products happen to be bottle caps. We organized a trip and off I went to Minsk Bella Russia.

Scott Clawson: Two hours we get to this state owned factory in the middle of nowhere in a huge buildings like football, fields of buildings in the corner of some machines making these products, and it was freezing cold. I'm like, there is no way [00:54:00] we're gonna be here. But the worst thing about it was, this is in Be Russia.

Scott Clawson: I had to stay at the kind of hotel attached to the company and it was so cold. I was, I literally took all of my clothes out of my suitcase and was laying them on my shit covers to add more warmth. And then the next morning for breakfast, they were drinking vodka shots. I'm not kidding. The people trying to sell me on this deal.

Scott Clawson: I always remember that. I'm like, that was one trip. It was probably three [00:54:30] hours from Cher Noble or something. That was pretty, pretty crazy. We go through it for the hunt of the deal, where we go for the hunt

Kison: of the deal.

Scott Clawson: There's some other ones, you know, until

Kison: you see it, that's why you gotta go see it. You gotta

Scott Clawson: go see it.

Scott Clawson: You gotta be out there. Another one, when we were tracking a beachhead and we found out we were losing it. This was a pretty significant size for us. Over 10 million of ebitda. It was an owner and his son, he owned a business for 40 years. Started it and I'm like, we were losing it. They were visiting who they were gonna sell to [00:55:00] in the us, this European company.

Scott Clawson: I said to my team, where are they? One of 'em knew this seller fairly well and said, I'll meet you at the airport. This happened to be up in Minneapolis. And I stopped whatever they did and flew up there. They gave me three or four hours before they were gonna fly out and just told 'em why we were a better deal, that they could trust us.

Scott Clawson: Like I told you before, that we weren't gonna change the game on them that we're culligan [00:55:30] 90 years of history. And by the time they were getting on their plane, they said, okay, we really like me. Frankly, like our process, I. Committed not to sign with the other company but to have us visit them the next week.

Scott Clawson: And we ended up buying them a month later. Wow. And today they're a fantastic company. But if somebody, that one, it needed me 'cause it was a 65-year-old owner who's like, if I don't get on that plane, we don't own that business today. My team does this a lot [00:56:00] more than me. It's not about me. But that was another great story and especially 'cause that business, this was several years ago.

Scott Clawson: It's just done great.

Kison: That's like the moral of all of m and a. It's about relationship and trust.

Scott Clawson: It is so much about it, and we've been blessed that we have trust in the market. And when you have trust in the market, then the sellers check. Now we tell 'em, call people. Sometimes, you know, you're doing a lot of integration, so that makes it a little different, but it works.

Scott Clawson: So it's been fun. It's been very fun here.

Kison: Scott, this has [00:56:30] been an awesome conversation. I thank you so much for helping me take the time and helping me become better MA scientists.

Scott Clawson: Well, thank you. Appreciate what you all are doing and the work you're doing.