After keeping a low profile during the past few years, business-to-business direct marketer Takkt America is looking to see and be seen.
Why? Because Takkt, formerly K+K America, is seeking acquisitions.
“We believe growing the company’s visibility will help increase our business opportunities within North America,” says Takkt worldwide CEO Felix Zimmermann. That not only includes potential acquisitions, but also recruiting new employees and business partners.
Takkt America includes b-to-b brands C&H Distributors and Avenue Industrial Supply (Canada), which both sell plant and warehouse equipment, and Hubert and Central Restaurant Products, which target the food service and hotel sectors. The National Business Furniture (NBF), Alfax, Dallas Midwest and OfficeFurniture.com brands sell office equipment.
Still, Zimmermann, who is based in Stuttgart, Germany, where the company is headquartered, says Takkt is not well known in North America. That’s a problem, since he aims to prop up its corporate portfolio on this side of the Atlantic. The company has grown through acquisitions, he says, but they have been spaced among several years.
Its most recent purchase was Central Restaurant Products in April 2009. Takkt America acquired National Business Furniture in January 2006 and it bought Hubert in 2000. Takkt also purchased Conney Safety, a marketer of personal safety equipment and first aid supplies, in 1998, but sold it in October 2007.
Half of the company’s growth since 1985 has been organic, the other half through acquisitions, Zimmermann says. That’s one of the reasons the company is now trying to raise its profile.
A key objective, naturally, is further growing Takkt’s North American revenue. “We expect growth in the M&A market in the future will support this strategy,” he says.
Zimmermann also believes the company’s low visibility has caused it to miss some acquisition opportunities. This includes private deals and transactions completed by M&A intermediaries, he notes.
What’s more, Zimmermann says, “our strategy is to balance the company’s businesses worldwide. We do not want our business concentrated in one area of the world.”
Growing beyond Europe
Takkt, which was founded 65 years ago in Germany, today operates in more than 25 countries. The product range across its subsidiaries comprises more than 160,000 items, including warehouse equipment, classical and design-oriented office furniture and accessories, and sales promotion items for the retail, food service and hotel industries.
About 60% of its business is based in Europe and 40% in North America. Takkt has more than 2,000 employees, 3 million customers worldwide, and distributes more than 50 million catalogs and mailings per year.
The name Takkt comes from the German word “takt,” which, roughly translated to English, means “in sync” or “in step with.” (The company added the additional “k” to reflect its biggest European brand, Kaiser Kraft.)
Zimmermann, 45, first joined the company in January 1999 as managing director of finance for Kaiser Kraft. He was named chief financial officer of Takkt AG in July 1999. Zimmermann left Takkt in June 2004 to become chief financial officer for Celesio AG, a European pharmaceutical distribution company owned by Haniel. But he returned to Takkt in May 2008 to be deputy chairman of Takkt AG, and chief operating officer of the-then K+K America. Zimmermann became worldwide CEO of Takkt in June 2009. K+K America became Takkt America last year.
Should an acquisition opportunity present itself, “we are positioned to act quickly,” Zimmermann notes. “We have the financial resources to follow through at any time.” The company’s cash flow in 2010 was $93 million, a significant increase over the prior year.
This is important, Zimmermann says, because Takkt’s primary use for cash — besides dividends and debt repayment — is acquisitions. “At the present time, the company can support an acquisition of about $250 million,” he says.
What’s more, “We believe our post-acquisition strategy is appealing to many potential business owners,” Zimmermann says. “We take a long-term view of the business; we do not purchase a company with the intention of selling it in three to seven years.”
For instance, Takkt has owned C&H Distributors in Milwaukee for more than 20 years, along with Cincinnati-based Hubert for 11 years.
So then, why did the company sell Conney Safety after nine years? Takkt’s product strategy has centered on equipment, while Conney focused on consumables within the occupational safety and first aid markets, Zimmermann says. It decided Conney’s business was inconsistent with Takkt’s long-term direction, and sold it to a private equity firm for $48 million.
Thinking global, acting local
Another key part of its strategy is maintaining existing management teams after an acquisition. “We give them autonomy,” Zimmermann says, “and they continue to make decisions on logistics, supply chain, database marketing, Internet strategy and everything else.”
Indeed, the U.S. businesses Takkt has acquired “are not the U.S. version of German operating units,” says Lee Helman, managing director with investment firm Financo. “Takkt has proven to be a successful operator and acquirer of b-to-b catalog and distribution businesses.”
In addition to Takkt’s long-term perspective and retention of local management with acquisitions, the company is also willing to invest in the businesses it buys, says Dave McKeon, president of C&H Distributors.
And while Takkt lets local management run the businesses, it’s there to provide guidance and support, McKeon notes. When a business development project comes up, corporate will assign staff to help plan and implement it.
For example, McKeon says, a team from Stuttgart partnered with Hubert to bring its business to Europe. Hubert mailed its first catalog in Germany in 2008; it went into France in 2009 and then to Switzerland in 2010.
Zimmermann visits the U.S. division presidents every other month, and McKeon says he speaks to him weekly. “He is very accessible.”
The three U.S.-based presidents, which, in addition to McKeon, are Kent Anderson of National Business Furniture and Bart Kohler from Hubert, speak at least monthly or when necessary. And they see one another throughout the year at various North American board meetings, according to McKeon.
Recessionary measures
Although Takkt is all about growing, like most companies it had to pull back during the recession. “We implemented many measures, such as short-term capacity adjustments that we had used in similar circumstances in the past,” Zimmermann says. But these efforts “would not be sufficient in this situation.”
So Takkt in July 2009 started its Focus & Growth program. “We knew the company had immediate expense issues to be addressed,” Zimmermann says. At the same time, “we wanted to invest in future initiatives that would benefit the company as the economy improved.”
The objective of Focus was to review the value contribution and potential of all activities, processes and structures. Takkt made adjustments quickly; before the end of 2009, the company had:
- Halted Topdeq’s U.S. activities to focus on profitable European operations. (Topdeq had been a start-up of a company Takkt owns in Europe.)
- Closed one of C&H’s three warehouses (but expanded another to take the additional volume).
- Made several adjustments to its business in Europe, including overhauling its marketing approach in Estonia, closing its warehouse in Haan, Germany, and cutting back staff at a production site outside of Duesseldorf.
For the Growth part of the program, the company looked for ways to increase revenue faster than the market. It documented all growth opportunities submitted by the Takkt companies, Zimmermann says. “We then prioritized them, funding those that offered the best opportunity.”
Projects implemented during this time included the acquisition of Central Restaurant, Hubert’s expansion into Europe, introducing the German industrial supply brand K+K into Russia, and starting the Certeo brand.
An online office equipment company, Certeo launched in Germany in late 2009. The company is planning to expand Certeo’s product line to include industrial equipment. Certeo last year expanded into Austria and Switzerland, and this past January opened in Russia.
All of these moves helped Takkt grow revenue last year from about $960 million in 2009 to $1.062 billion in 2010. Its North American sales went from about $411 million in 2009 to $443 million for last year.
Continue on Page 2: Easing into Asia
Easing into Asia
Takkt has increased its presence beyond Europe and North America with recent start-up businesses in China and Japan. “We entered the markets using the company’s leading European brand, Kaiser Kraft,” Zimmermann explains.
The Japanese operation started in 2003, and China followed in 2006. Takkt has since made significant progress in both countries, he says.
Japan is a more mature market, he says. “Direct marketing is not new; there is an infrastructure that supports its needs. The market is competitive — Japanese customers also have high quality expectations.” (See “Learning Japanese,” right, for more.)
But in China, Zimmermann says, “direct marketing is underdeveloped and partly unknown.” Due to a lack of trust in direct marketing channels, “Chinese customers desire putting a face to a company.”
And mailing lists in China, if they exist, are of poor quality. Businesses come and go frequently, and addresses change often, Zimmermann says. “There are also quality issues with logistic providers and with some locally sourced products.”
So Takkt had to adapt some parts of its business model for China, Zimmermann says. For example, “we are using outside salespeople to create customer relationships and to explain how the direct marketing model works.”
What’s more, he says, “we spend much time manually generating and managing customer information. This effort includes ongoing phone contact with customers confirming that their information on file is accurate.”
Takkt has increased its partnerships with local suppliers and logistics providers so they can learn to support a direct marketing distributor. And each company is operated on a daily basis by a local manager. “It is our philosophy that they know best about local requirements,” Zimmermann says.
Eyeing the Internet
Back to Takkt’s quest for acquisitions: What exactly is it looking for? “We are interested in companies that can help Takkt grow its Internet businesses,” Zimmermann says.
“Our experience has been that the development of the Internet in North America is a few years ahead of Europe, and we see an advantage in bringing increased knowledge gained in North America to Europe.”
Takkt is also looking for companies that can be introduced throughout the world. For example, Zimmermann says, “when we acquired Hubert, its operations were confined to the U.S. Today it operates in Canada, Germany, France and Switzerland — with more countries planned in the future.”
What are the specific necessities a b-to-b catalog/Internet company needs to be successful?
“Companies like Takkt market products that customers do not think about often, nor purchase more than a few times every year,” Zimmermann explains. “To be successful, you need to know your customers.”
For instance, he says, “Are you able to view your company’s business through your customers’ eyes? You are a small part of the total business customers transact every year.”
You need to be there when customers need you, he notes, “with the right products and prices they know you will stand behind. These products need to be readily available, and received by customers as promised.”
And businesses must frequently explore new markets to grow. For instance, Takkt is considering expanding in the education and environmental protection markets.
Would Takkt ever consider expanding into consumer sales? Not likely, says Zimmermann.
“It is proposed every few years, since some of our companies have products with some consumer appeal,” he says. “But we want to stick with what we know best.”