What is the size of success? Many small business owners dream of growing from one or two people to an entire team. But a larger business means changes in communications, management style, infrastructure, finances, and client relations.
One common way for a company to quickly grow is to merge with a larger organization, but that choice, too, brings growing pains and consequences, says Donald Derewecki, a transportation consultant and partner in a small firm that recently merged with a national consultancy.
Throughout his career as a consultant in materials handling logistics, Derewecki has worked in large and small companies. As the president of Gross and Associates, a materials handling consulting firm based in Woodbridge, he grew his company from three to ten people before the firm’s April merger with TranSystems. Now he is the vice president of a 1,400-person business, with 45 offices in several states.
Derewecki’s story provides a rare glimpse at the process of growing a small company into a larger one and will be part of his presentation, “Moving Your Consultancy to the Next Plateau” on Monday, November 17, at 5:30 p.m. at the Marriott-Forrestal . Cost: $45; to register call 908-233-6265, or E-mail email@example.com.
Derewecki, who has over 30 years of experience in the transportation industry, began his career in the U.S. Army’s transportation office in the 1970s. After leaving the military he honed his skills in distribution and operations at companies such as Pathmark and E.J. Korvette department store. He eventually opened his own consulting firm, then joined Gross as a partner more than 20 years ago.
New opportunities. Merging with TranSystems offered the Gross and Associates team “an opportunity to improve our scope of business and expand our practice. We wanted to improve on our own level of professional competence and work with a wider variety of projects,” Derewecki says.
Gross & Associates had specialized in designing material handling operations in manufacturing, warehousing, and distribution. The merger was a particularly good fit, Derewecki says, because his company’s area of expertise “fills an important link between TranSystems’ work in facility design and management and supply chain consulting.” The services offered by Gross and Associates complements TranSystems broader focus in the transportation industry, which includes architecture, engineering and planning, as well as security and real estate.
Gross and Associates brought more than just expertise to the table during the merger discussions, says Derewecki. Its client list includes a number of medium sized companies, plus several Fortune 500 corporations, such as U.S. Steel, Abbott, Bristol-Myers Squibb and Lego. However, it was the new opportunities that the merger offered that attracted Derewecki the most, he says.
The merger process. Derewecki was first approached by TranSystems with the merger proposal late in the fall of 2007. TranSystems, says Derewecki, has often used mergers with smaller companies as a method for growth, and because of this, it already had developed “a formal process and formats” that Gross followed throughout the discussions.
Because both companies were privately held, “the discussions were strictly between the partners in the two firms,” says Derewecki. A letter of intent was signed in spring and the merger was finalized on April 29.
The results. Six months later Derewecki is satisfied with the way the two companies have combined their management styles. There was no downsizing involved, so all 10 of Gross and Associates’ employees are still at work, essentially continuing in the same jobs they had before the merger took place.
“TranSystems’ philosophy is ‘If it ain’t broke, don’t fix it.’ We have continued our successful track record, so we have pretty much been allowed to continue the same processes we had already put into place,” he says. “What the merger has given us is the opportunity to work on projects we otherwise would not have been able to.”
The nationwide staff, with offices in a wide variety of locations has brought greater marketing opportunities, more business development, and the ability to collaborate on a greater variety of projects, he adds.
Losing control. In any change as major as the merger of two companies, however, there is also a downside. Derewecki and his other partners are no longer owners. Instead they are now shareholders, which means that decision making is now a more complex process.
Policy decisions can often take longer to put into place, and the national network of offices also brings with it additional administrative requirements that were unnecessary in the small, 10-person firm. However, “everyone in our office had also worked for larger corporations, so this came as no surprise. We were all used to it,” he says. “We all realized that the merger meant that we would have to give up a certain amount of control.”
“The decision to merge is very much dependent on the circumstances of the owners of the smaller firm,” he says. “They must consider their own personal economic situation as well as the professional opportunities before they can decide if a merger makes good sense for them.”