How to Kill a Company: Anatomy of a Leveraged Buyout

I found this article while researching my DiAcro #4 bender, a few years ago, which was made by Houdaille Industries. DiAcro has since changed hands at least twice, that I am aware of.
Reading it will give you a pretty good idea of the mind set of Wall Street and the Executive Suite at the time.

Washington Decoded: How to Kill a Company: Anatomy of a Leveraged Buyout


Rex

It's worth nothing that such "far left" (sarcasm) publications as Forbes, as well as other wall street mainstays, have been voicing doubts about these constructions for some time. Like 20 or 30 years. And of course, even with the recent election, you don't hear about the buyout and turnaround artists (sometimes including Mit Romney) who create jobs or make companies more successful at least some of the time. Partly bias, but also, there's not much news value in 'shrewd people working really hard have turned iffy venture into profitable one' - because, well, the working hard and smart thing happens all the time.

Another thing to remember about LBOs and the like is that they often befall entities that are in very deep trouble anyway. (I can't say about Houdaille)

I think the deeper reality is in that an economy built up with relatively large ventures like ours is, most workers are the mercy of senior management and large equity holders, as well as the economy as a whole. Whether it's being run into the ground, making products nobody wants, being made irrelevent by a market or technology change, or just having company growth stall because of maturity (see the current Microsoft hoo ha), most of us for most or all of our careers will have only limited influence on large orgs.

bjorn toulouse said:

I found this article while researching my DiAcro #4 bender, a few years ago, which was made by Houdaille Industries. DiAcro has since changed hands at least twice, that I am aware of.
Reading it will give you a pretty good idea of the mind set of Wall Street and the Executive Suite at the time.

Washington Decoded: How to Kill a Company: Anatomy of a Leveraged Buyout
Rex

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Basically a company who, like so many other American large companies, had a staff of arrogant managers, greedy workers, and out-moded products was split up? Good. Sounds like the kind of heard culling that keeps an economy vital.

Notice how they SOLD OFF all the different divisions? Alot of the time, that means someone with thier head out of thier ass bought the up operate at a profit after some re-work. It wasn't all bad.

And then there is Kodak. Can't blame that one on the workers. They had it all, including digital and royally F****D it up.

Cornilsn said:

Basically a company who, like so many other American large companies, had a staff of arrogant managers, greedy workers, and out-moded products was split up? Good. Sounds like the kind of heard culling that keeps an economy vital. . .

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Lots of times I've seen, it's only a few hired hands at the top who need "culling." It starts with a failure to invest in products, production, and people (in order to inflate profits and bonuses). Do that for a decade and a company becomes less competitive. Next step is for a LBO outfit to structure a deal (almost a bribe) that enriches the folks that caused the mess in the first place -- and pretty much screws shareholders, suppliers, customers, workers, the surrounding community, taxpayers picking up pensions, etc.

There are some LBO outfits that actually want to operate a company; but most these days won't enter a deal if they can't see a way to sell off assets, use the company's own cash, tax advantages, etc. to cover their "investment" right up front. Then they shine the turd that remains for an IPO and a double dip. Point being, it's getting harder to find financial firms that actually want to operate rather than cash out.

Mazak killed them all this article is about is the vultures picking over the bones.

The story of Houdaille's demise is best understood by their acquisition of Burgmaster and what they did to gut it.

Mazak (then Yamazaki) did copy their machines (the #1-D in particular, I think) but that was almost incidental once the founder Burg was out of the picture. He was the Gene Haas of 1950 and his mechanical genius and understanding of the machine tool business was replaced by a bunch of empty suits. The whole sad story is in the book When the Machine Stopped by Max Holland. I wanted a hardcover copy for my library and was able to find one on Amazon. Ironically, it came wrapped in a Japanese newspaper.

Objectively there is some merit to the idea that Houdaille was "culled." They were a conglomerate of old-technology manufacturers, Burgmaster being just the best-known because they made machine tools. Like most of the US machine builders who were still around in 1980 they failed to grasp the possibilities of CNC (such as a whole new machine architecture using a single spindle and toolchanger) and their design approach was doomed from the start. With the suits in charge at that point and shutting off the R&D money, a race to failure was guaranteed. I'm not sure the leveraged-buyout firm can be blamed for that.

No matter what the industry, be it manufacturing, service, transport, or information, you can tell they are in trouble when the top managers are attorneys. When a lawyer becomes your employer's CEO, you should polish up your resume. Regards, Clark

Burgmaster did grasp the cnc machineing center concept and produced many fine machines I know several that are still producing parts (I own one of them).

4 axis machines with ridgid tapping and tool changers Mazak took this tech while under a partnership with them and ran with it.

Oldwrench said:

The story of Houdaille's demise is best understood by their acquisition of Burgmaster and what they did to gut it.

Mazak (then Yamazaki) did copy their machines (the #1-D in particular, I think) but that was almost incidental once the founder Burg was out of the picture. He was the Gene Haas of 1950 and his mechanical genius and understanding of the machine tool business was replaced by a bunch of empty suits. The whole sad story is in the book When the Machine Stopped by Max Holland. I wanted a hardcover copy for my library and was able to find one on Amazon. Ironically, it came wrapped in a Japanese newspaper.

Objectively there is some merit to the idea that Houdaille was "culled." They were a conglomerate of old-technology manufacturers, Burgmaster being just the best-known because they made machine tools. Like most of the US machine builders who were still around in 1980 they failed to grasp the possibilities of CNC (such as a whole new machine architecture using a single spindle and toolchanger) and their design approach was doomed from the start. With the suits in charge at that point and shutting off the R&D money, a race to failure was guaranteed. I'm not sure the leveraged-buyout firm can be blamed for that.

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Heavey Metal said:

Burgmaster did grasp the cnc machineing center concept and produced many fine machines I know several that are still producing parts (I own one of them).

4 axis machines with ridgid tapping and tool changers Mazak took this tech while under a partnership with them and ran with it.

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Any chance to see a pic of that machine? I am a Burgmaster enthusiast from way back, having owned, rebuilt, and depended upon several turret drills for my existence. I will also admit to a distaste for Mazak, based in no small part on their role in the displacement of the US machine tool industry in the early 80s, and I will never buy one.

That said, Burgmaster/Houdaille should have been the one to "pick up the technology and run with it." But they didn't. Sometimes you just aren't in a position to do it even when you know timing is everything. That's a recurrent theme in the history of machine tools...and of the auto industry, and of weapons, and of just about anything else we could think of since Eli Whitney shortened lead times. I have been in that frustrating position myself but I have come to accept that life's a bitch and sometimes you gotta fold 'em.

I take some satisfaction in knowing there had to be absolute fury in Japanese boardrooms at the rise of Haas.

Mine is a vtc 330 like this:Google Image Result for http://www.perfectionmachinery.com/assets/item/details/28825_2.jpg

I have the toolchanger and all the sheet metal off it for clearance so it looks pretty rough. They are hard to find they run foreaver and noone wants to get rid of them.

You mostly see them in big plants like Letourneau and Lebus mine came from Joy in houston the only reason the got rid of it is because it was sabatoged by union hand.

bjorn toulouse said:

I found this article while researching my DiAcro #4 bender, a few years ago, which was made by Houdaille Industries. DiAcro has since changed hands at least twice, that I am aware of.
...Rex

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Yes, DiAcro was split off from Houdaille, sold a few times, but is now back in Minnesota, where it originally came from. It is now located 3 miles from where I live, and has been doing very well with it's new owner for over a year now. The same # 4 bender that Rex has is still made right here in Minnesota with parts cast and machined right here locally. Parts and accessories to fit almost all DiAcro machines ever made are also still available. So in the case of the DiAcro part of Houdaille anyhow, I would say the company has been too tough to kill. It is not only surviving, but seems to be thriving.