When discussions started about Elder Implement being the subject of Farm Equipment’s 2012 “Dealership Minds” project, the dealer group was comprised of five John Deere locations scattered throughout eastern Iowa. It was a solid choice as a dynamic business with a story to tell about transforming itself into a major force among equipment dealerships in the Midwest…
In 2007, Elder Implement’s revenue from the five stores grew by nearly 17%, followed by a 27.3% increase in 2008 and 21% in 2009. With some necessary inventory adjustments, 2010 saw only a 3% rise in revenues. The merger with three other John Deere dealerships in November 2011 raised the new eight-store Precision Equipment group revenues to $100 million with expectations of growing by another $50 million in 2012. (*indicates Elder Implement revenue only)
Elder had earned Farm Equipment’s Best-in-Class dealership award in 2010. The judges who chose it as one of the three best operations in the $50 million-plus revenues category noted, “Elder Implement had the best absorption rate of all the large dealerships nominated (77%), the second highest return on assets (12.67%) and an exceptional 3-year growth rate (48%).”
But by the time visits and interviewing got underway in early November, Elder Implement had merged with a three-store group of John Deere dealers, bringing the total to eight. Its name was changed to Precision Equipment. This transition gave the seven Farm Equipment editors even more to explore in preparing this 2012 “Dealership Minds” report.
Five Years in the Making
This merger is a story that was written over a period of many years. How it developed presents a interesting take on how larger dealer groups will be managed in the future.
It began with plans that are a half-dozen years old. While it has its roots in John Deere’s emphasis on consolidating its dealer network — or as Precision Equipment’s Chairman Ron Farrier puts it, “Grow or go” — Elder Implement’s owners, Tom and Chuck Poeltler, put this merger into motion long before they knew who they might merge with or acquire.
They started by recruiting top-notch management talent, who weren’t necessarily experienced in the ways of farm equipment. That started with the hiring of Randy Amosson as aftermarket manager in 2007. He was promoted to general manager of Elder Implement’s five-store group a year later, and expansion planning was underway.
When the Poeltlers stepped away from the day-to-day workings of the business in 2008, Amosson set up shop in an office away from the dealerships themselves. He then began pulling together a “Senior Leadership Team” to get the company ready to grow.
The team includes Amosson as CEO, Dave Dahms as CFO, Pat McCrabb as vice president operations and Matt Poeltler as vice president of marketing & advertising. Incidentally, none of the Senior Leadership Team is financially vested in the company.
Amosson says the management model of Precision Equipment is “a lot different than the hands-on working entrepreneur model of the past.” As dealerships get larger, planning takes on a larger role, and more resources, — including time — are required to meet the needs of larger farm operations. He cites precision farming technologies as one example that requires a level of investment that only larger dealer groups can provide.
“The whole philosophy of how we as a leadership team work together is different than many other dealerships,” says Dahms. “But we’ve proven in the last couple years that the model works. If we hadn’t, Deere wouldn’t have supported it in this merger.”
Both executives say that it wasn’t easy for owners who were the heart and soul of their business for 30 years to step aside and say, “I’m going to turn my baby over to you guys.” It’s a huge leap of faith.
It was that transformation at the top that needed to take place for the rest of the organization to step up and meet the challenges of a merger.
“In most of the mergers, the prior ownership group is still involved day in and day out. This is a different creature we’ve created here. But we believe you’ll see more of this management model in the future, especially when you start bringing multi-store dealerships together.”
A Partnership, Not a Buyout
Executives on both sides emphasize that the formation of Precision Equipment was not an acquisition.
“It’s different than an acquisition,” says Dahms. “A merger is like a marriage, and you better well understand all of the nuances going in because you’re going to live together after the fact. It’s not at all like an acquisition where one party comes in and says, ‘Here’s how it’s going to be, folks.’”
For two fierce competitors to lay their swords on the table, put their pride aside and say, “Let’s do this,” isn’t an easy action to take. It’s especially difficult for entrepreneurs who set out early on to be their own bosses and call their own shots.
Some idea of how this was accomplished was evident on the night before the editors scattered to various parts of eastern Iowa to visit different Precision Equipment locations.
It was Amosson who invited the entire Farm Equipment editorial crew to dinner, an unexpected but welcoming gesture.
Thinking it would be the seven editors and a couple of their executives, none of us had expected to see more than a dozen staffers from the new dealership group at the restaurant in Muscatine to greet us. It was their way of creating a comfort level for everyone who would be involved over the next several days. It set the tone for the rest of the project that will continue well beyond when this report goes to print.
While Precision Equipment continually stresses the similarities of the two dealership groups, it’s clear these had been two different organizations.
The merger brought together the five Elder Implement Iowa locations in Muscatine, Mediapolis, Durant, Houghton and Winfield, which were owned by Tom and Chuck Poeltler. The merged partner stores were owned by Ron Farrier, Carl Wulf and Chad Reed, and included Farmers Implement in Washington, Jefferson County Equipment in Fairfield and Mowers and More in Ottumwa.)
For one thing, Elder Implement was far more structured as an organization than the Farmers Implement group. As Elder completed each of its earlier acquisitions, the new location was folded into the larger group and renamed with the Elder Implement brand. They utilized the latest business information systems and administrative operations were centralized in Muscatine.
Conversely, as Farmers Implement, Jefferson County Equipment and Mowers and More were united, each maintained its own identity and operating practices. As Chad Reed, one of the group’s owners says, in many ways the dealerships operated “off the cuff.”
“The new structure is going to be a great thing for us. The new business system is going to make us a much better dealership.”
By and large, though, both groups shared many of the same values, according to Dahms.
“The philosophy of both companies was fairly close,” he says. “The groups were similar in age, as was the manner in which they went about their business over the years. We had market share that was up against each other so the five owners were very competitive with one another. Both companies were very well run. There were qualities and best practices each brought to the table from an integration standpoint.
“Our biggest challenge is merging best practices together to end up with a very well run business. The fact that our territories are joined together now sets up a very strong business to grow down the road,” says Dahms.
Economy of Scale
Beyond John Deere’s push to consolidate its dealer network, the Senior Leadership Team says the merger that led to the formation of Precision Equipment is just another sign of exciting things to come.
“You need to be a certain size to be able to afford to develop the infrastructure that a dealership needs in place today to provide the services needed by our customer base,” says Amosson.
Dahms adds, “The merger provides Precision Equipment with the ground floor and financial strength to take this business to the next level where our supplier’s sights are set. Now we can look at investing in things like a call center. We can do things that take a significant amount of capital to accomplish. Now, we’ve got the wherewithal to do it.”