Transcript of Interview with Joe Appelmann, president/CEO, Stock Building Supply
This interview with Joe Appelmann, president/CEO of Stock Building Supply, took place on Sept. 8 in Appelmann’s Raleigh, N.C., office. ProSales editor Craig Webb asked the questions.
What Is Stock Today?
ProSales: What’s your elevator speech now on what Stock is and what it hopes to be?
Appelmann: I’ve been out for seven weeks traveling. It’s so refreshing to get out in front of customers and associates and thank them for hanging in with us. That March 6 announcement [in which Wolseley announced it planned to exit its control of Stock] was gut-wrenching for all of us. And our customers had told me at numerous lunches and dinners that “The reason we stuck with you is because your people said you were going to be here.” As hard as we worked here to find a new owner, I cannot say enough about the folks in the field and what they did to keep this business together. It’s an often-used cliché , but this is a local business, no matter how big you are or how big is the local market. Sometimes I think we lose perspective on that. This management team, unfortunately, was very inwardly focused throughout this entire sales process and you kind of lose that perspective. So it’s refreshing to get out in the field.
I think what’s most important, if you asked me what’s different under new ownership, is the difference between publicly traded and private equity. It’s a little bit about focus. They [Gores Group, the new 51% owner of Stock] want to simplify the business. You look at what Wolseley wanted Stock to be, especially in the last 18 months of ownership, their point was “Hey, we want you to be a very diversified business. We want 40%, 45% of your business to come from new residential. We want you in commercial. We want you in something else.” That’s pretty hard to do for a company that for 19 years before that was focused on residential. All our expertise is in residential, whether that’s in single-family, multifamily, repair and remodel. That’s what we know how to do. So that’s one of the biggest things, to refocus on the residential piece of the business.
I think the other thing under Wolseley (is that) they were a very acquisitive company. We bought 80-plus companies in the 20 years I’ve been here. And a lot of times what that does is that you don’t focus in the markets that you’ve acquired. One of the real differences now (is that) under private equity it’s a longer view. They’re not worried about quarterly results or six-month results. They’re worried about how do we unlock the potential in this business over the next 36 months? How do we build out each of the markets that we’re in? How do we become the best supplier, recognized by customers in that market as THE place to go for building products and services? So that’s the elevator speech that we’ve been giving.
Q: You mention 36 months. Is there any particular reason why that number came up?
A: The average hold for Gores’ portfolio companies is about 34 months. They really look at a 36-to 50-month window to get a business up to full potential to realize its investment, the returns that they’re required to do for their limited partners. I will tell you they’ve got a great track record of never exiting a company until it’s a value proposition for the next owners. They are remarkably good at that. And they’ve been really good partners for us.
I’ve been excited about what they bring to the organization. They run a little thing called Glendon Partners inside of Gores. This is where all their operational expertise is–ex-CEOs, ex-COOs, and they are very, very sharp. And they’re really helping us be better in the business. They have some views from outside the industry, things that work. It’s been a really good for us coming from Wolseley.
What’s Different?
Q: If I were a builder of any size–your answer may vary on that size–and I’m used to having Stock come to me and seek my business, do you see any changes that Stock will be approaching me as that customer? New programs, new ideas, even who makes the call?
A: I see more of a focus on saying “What can we do to help you?” This comes back to the local market, and saying “What aren’t we providing today? How do we make the investments to do that?” Is the right investment to offer more services in the market, especially as the market rebounds? Is labor going to be tight–is that where you’re going to need help? Is it in product lines? From a vendor perspective, it’s “How do we help vendors launch new products in a market? How do we be the source for doing that?”
Different builder sizes need different things. Custom builders, which is our largest builder segment, that’s a much more engaged relationship. Sometimes with the nationals, and the nationals don’t need all the services that a custom builder may need, you have to service that customer differently.
