Buying and Selling Machining Businesses

By Lloyd Graff

I’m writing this blog to announce a slight shift in my business career, which has been evolving this year.

Several longtime clients of Graff-Pinkert have asked me to help them find machining businesses to acquire and other owners have requested I find them a buyer for their businesses because they felt that I had the right network and skill set to do it. My initial inclination was that I’m purely a machinery dealer, not a business broker. But then I thought, why not try this. Perhaps I can add value for some people who I really care about. If I hit a dead end I’ll know soon enough. Currently I have four deal deals in process and have completed two.

Lloyd Graff, Owner of Graff-Pinkert and Today’s Machining World.

I have not approached this task like a traditional business broker who would contact private equity groups because my clients have preferred that I not publicize their decision to the world, thus jeopardizing their long-term relationships with customers and employees. Such a broad gage approach can also be toxic as far as tipping off the seller’s competitors who are good at sniffing out situations and taking advantage of them. Despite nondisclosure arrangements that supposedly insure anonymity in the market, a business broker soliciting offers is going to inadvertently leak a potential seller or elicit rumors.

I have been able to keep a lid on leaks and rumors by connecting with prospects directly, because I have stuck primarily within my extensive network of relationships within the precision machining industry rather than try to cover the gamut of businesses in the marketplace. I also have focused on companies doing $20-million-in-sales or less, because I do not feel comfortable right now with bigger transactions.

One trend which has surprised me is how many foreign firms are highly motivated now to enter the American market in this field and are looking for businesses in our sweet spot. Our extensive network of users, suppliers and other dealers worldwide has served us well in this search. To Europeans, South Americans and Asians America truly looks like the land of opportunity, and in many cases their existing customers are asking them to do business here.

I don’t want to take on a lot of projects, because they are quite time consuming and I want to be able to give them the attention they deserve. I would like to work on 6 or 8 a year that I think I can shepherd to conclusion.

I may not be long on mergers and acquisitions experience but I know the people in the machining business. It appears that my ability to “talk the talk” and really listen to people explain their needs resonates today in this field.

This is a fascinating new gig for me, and I have Noah and Rex Magagnotti adding their knowledge and networking to help make it work.

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Swarfcast Ep. 18 – Jerry Levine on Why Global Warming is Not a Problem

By Noah and Lloyd Graff

Scroll down to listen to the podcast with Jerry Levine.

In today’s podcast we interviewed Jerry Levine. A chemical engineer, Jerry Levine’s working career stretched from polyester to politics. He led the team at Amoco Chemicals that conquered the production problems in making polyester in the 1960s.

Jerry then learned what it was like to live under Communism when he helped set up a polyester plant in East Germany well before the Berlin Wall came down.

He later returned to Amoco’s corporate office in Chicago, finding his niche as a lobbyist for the company and “Big Oil.”

Jerry holds the view that Global Warming fears have been fueled by faulty and sometimes deliberately contrived data to protect scientific jobs and reputations, and to build political careers. He feels that ardent advocates of Global Warming theories often have “no growth” philosophies which mask hidden Socialist agendas.

Question: Do you believe global warming is mostly caused by human activity?

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Why I Didn’t Vote

By Lloyd Graff

It’s November 6, and I’m sitting at Starbucks writing this piece, across from the polling place I chose not to vote at in 2018.

For over 50 years I have voted at every opportunity. I’ve voted for Republicans, Democrats, Independents and Idiots. But this year I’m not going to be an idiot and participate in an exercise that does nothing positive for me or my community and wastes almost two hours of my precious day.

In my America of 2018 the political system has evolved into a fat duopoly (a dual monopoly) of parties that vie for the spoils from the willing masses who lemmingly abet them.

Maybe I would feel differently if I had just one actual race where I felt my vote would matter, but in my Chicago south suburb of Olympia Fields this year the political institutions, Democrats, Republications and a cynical press have totally turned me off. For Illinois Governor I have two centimillionaires who have been throwing dirt at each other for six months. Bruce Rauner, the Republican, has been an impotent failure trying to move an utterly recalcitrant legislature. J.B. Pritzker, the Democrat who inherited a real estate fortune, seemingly has done very little in his life except “live large”—in his case 300 pounds worth. For my choice for Congress I have none. Robin Kelly, a pleasant lady and Democrat who I wouldn’t recognize if she was standing in front of me at Starbucks, is unopposed. She is a professional unknown, perfect for my locale which elected Jesse Jackson Jr. for a decade before she inherited the job.

I have come to see our National and Illinois political scene as a well-orchestrated charade game played by the insiders of both political parties. It appears they do hate one another, and they fight hard for the right to collect the spoils of power.

Photo courtesy of fee.org

The lobbyists will pay greater tribute to the winners than the losers, but the sad fact is that neither party really cares about the poor and sick and dispossessed because they are regarded as just tools to be used to amass power and win the GAME.

Donald Trump is an interesting intruder into the political duopoly, but he has embraced the Republican Party and they have embraced him to stay in the game. Trump has done a lot of good things for the country in two years, but his narcissism and ego make him prone to major miscalculation in the world arena. If I could vote for Trump on today’s Illinois ballot I would vote, but on today’s ballot there is nothing for me to vote for. So here I am at Starbucks, bitter that America has a political system that rewards greed and voter laziness.

I will watch the returns come in tonight hoping for a stalemate in the Congress. Trump needs restraint, and a Democratic House will provide that. A Republican Senate will restrain the lefty loonies in Congress and hopefully keep the economy on track.

But until we break the grip of the haters in both parties and attract some people who actually care about doing good, not just keeping power and accumulating spoils, I think I’ll just boycott elections and drink my coffee.

Question: Does the state of American politics make you sick?

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Swarfcast Ep. 17 – Making it in America with Armand Barnils

By Noah and Lloyd Graff

Scroll down to listen to the podcast with Armand Barnils.

In today’s podcast we interviewed Armand Barnils, plant manager of the U.S. division of Ventura Precision Components, a multinational precision machining company headquartered in Barcelona, Spain.

Armand grew up on the outskirts of Barcelona and studied Industrial Engineering in Spain. Through a foreign exchange program he came to the United States and earned a Masters Degree in Industrial Technology and Operations at the Illinois Institute of Technology.

At age 23 he moved to Pasadena, Texas, just outside of Houston, to work at Ventura Precision Components. Two years later his boss left, and at just 25 years old he became the shop’s plant manager.

In the interview Armand recounted his life’s journey from Barcelona to Chicago to Pasadena, Texas, and opined on the career opportunities he believes are unique to the United States.

Question: Do you believe in the American Dream?

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Trick-or-Treat Economy

By Lloyd Graff

The mavens and savants are struggling with lots of economic numbers coming in that do not conform to popular wisdom.

We have a very tight labor market right now, but the wage increases are merely bubbling up at a 2% per year pace.

I have to admit this number does surprise me because Amazon just raised everybody at least a buck an hour, and the minimum wage law, which used to be an issue for the angry liberals, is now a forgotten artifact in a competitive economy.

People in the food-serving business do have to pay more or they will have nobody to flip the burgers, but in the industrial economy I have been surprised that the wage push appears to be subdued.  People are just getting by with fewer people than they used to, because hiring is so difficult.  A lot of people who are joining the production workforce are fresh faces at lower wages than the retirees who are exiting.

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Investment by middle-sized business is softer than one would expect with 3-4% GDP growth in the economy.

Bigger companies, particularly a lot of foreign firms, are investing major money in factories, equipment and training but not small and mid-sized firms.  For independent business people the scars of 2008-2009 are still palpable.  I think many older business folks are still in a “recovery” state and very cautious about acquiring debt to expand.  Also, the tax law favors Type “C” corporations over “S” corporations which are common for small businesses.

Big companies, whose managers are mandated to grow their companies without having to spend their own cash, are putting up new factories and buying others.  Small and midsize firms find it harder to borrow and are inclined toward conservatism.

For those wanting to sell out, they need to build “EBITDA” to command a decent price, and often the willing buyers are private equity firms that want to milk the acquisitions to quickly pay down debt then flip them to the next willing group.

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Donald and Melania Giving Candy to Trick-or-Treaters at the White House.

The stock market is sliding down.  This should not be terribly baffling after nine years of buoyancy.  When the Dow was over 26,000 I found myself checking my retirement account every day.  For me this was a sure sign that we were headed for a plunge.

Looking at it coldly, the Fed has been whacking the market incessantly with rate raises.  The short-term rates go directly at my lending line, making me wince quarterly.  Interestingly, the 10-year bond which dictates mortgage rates has been relatively kind to us because zillions have poured into that bond from around the world.  Nevertheless, mortgage rates have moved up faster than the 10-year has, and the new and used home markets are sluggish.  I think that many people, correctly or not, view the home market to be out of reach for what they want and expect.  One significant reason for this is the choice by many owners to rent their homes by the day, the month or the year because CD rates are paltry and demand for rental housing is robust.  The amount of owner-occupied housing is falling in America, a phenomenon few predicted 5 or 10 years ago.

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We are in a period when automotive is stagnant, housing is mediocre, rates are rising, wage growth is modest, stocks are falling, yet small business confidence is at record levels and much of the Press says America is a mess.  Pretty weird.

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I’ll take another shot at explaining what is going on.

The U.S. economy is running on borrowed money.  The tax cut made for bigger deficits, but the happy fact is that all the borrowing is well within our means – if the economy keeps growing and folks are confident.

The big jump in military spending has given us more extra juice.  Will the glee over defense splurging go on forever?  Doubtful, but for now it is a plus.

Business owners, especially small business owners, like Donald Trump, tax cuts and lighter regulation.  The New York Times and CNN hate this fact, but it is true for now.  I think the stock market drop is a hedge by Wall Street against a Democratic victory in the midterms.  If the Republicans get to 55-45 in the Senate I think we’ll quickly see stocks jump 5-10%.

If you’ve read this far you have absorbed 600 words of Lloyd Graff’s opinions.  Do you agree?  Are you confident or pessimistic?  Are you making more money and saving it or buying a new F-150?  Have the higher interest rates soured you or do you ignore them?  Sock it to me.

Question: Is your confidence in the U.S. economy rising or falling?

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Swarfcast Ep. 16 – Bill Cox on the Evolution of a Machining Business

By Noah and Lloyd Graff

Scroll down to listen to the podcast with Bill Cox.

In today’s podcast we interviewed Bill Cox, owner of Cox Manufacturing in San Antonio, Texas, a job shop that makes parts for a variety of industries—oil and energy, medical, and defense to name a few.

Bill’s father started the company in 1956 but died when Bill was age 12. The evening of his father’s funeral a customer had the audacity to ask Bill’s mother if he could buy the company. She asked Bill that night if he was interested in going into the family business and Bill said he was. From that day forward Bill’s mom, a sharp business woman in her own right, taught him the management side of running the company, while the guys in the shop developed his technical skills. By his 20s Bill was taking the helm at Cox Manufacturing.

We at Graff-Pinkert have had the pleasure of dealing with Bill for decades, on both the buying and selling side of the equipment trade. He continues to impress us with his business savvy and grasp of the trends in the machining business.

Question: Are current wage levels too low to attract good enough good people for machine shops?

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Why do I care so much?

By Lloyd Graff

The World Series between the Boston Red Sox and Los Angeles Dodgers starts tonight in Beantown.

I’ll probably watch, but I may listen to a podcast or write or play Words with Friends. But if the Chicago Cubs were in it this year I would be watching with rapt attention and texting my son-in-law, Scott, and Noah. I’d be living and dying with the team I love so much.

Why do I care so much?

I don’t know the players personally. They change every season and often a lot during the season. Many of them are from the Dominican or Puerto Rico and barely speak my language. I doubt I could have a meaningful conversation with most of these young kids who have devoted their lives to refining their swings or their sliders. Yet I spend hundreds of hours a year obsessed with how many games they win, their on-base percentages, and the spin rate of their breaking pitches.

My daughter, Sarah, is a Rabbi in Palo Alto, and every year in her most important sermon she talks about the Cubs at some point. It has become a trademark for her, a part of her brand, and I know I am partly responsible for her mixing Cubs and religion. For me and her, the Cubs rooting is akin to a religious experience.

Jackie Robinson safely steals home plate in 1955 under the tag of New York Yankees catcher Yogi Berra in the eighth inning of the World Series opener at New York’s Yankee Stadium. Photo courtesy of the Orange County Recorder

The Cubs are certainly secular and do not rely on a higher power, but the importance of ritual imbues both baseball and religion with a habit-forming routine. The routine and the history of both, ties families together and gives them endless topics of discussion and argument. Both invite converts yet do not accept them readily. A White Sox fan who claims he or she has embraced the Cubbies is regarded as untrue to his own faith and cannot easily be accepted as a “real” Cub fan.

I sometimes wonder how I became such an ardent Cub fan. My father did not grow up with baseball. His parents were immigrants from Eastern Europe. Sports were irrelevant to them.

But my mother, Thais Kassel, grew up within walking distance of Wrigley Field. Her father, Sam, loved the game and especially the Cubs. Sam Kassel’s mother owned a little grocery store, and Cubs players used to buy their booze there. My grandfather actually met Tinker, Evers and Chance of double-play fame in 1908 at her corner grocery.

Some of my earliest memories are of mother and grandfather, and talking about Jackie Robinson and Ernie Banks with them. I remember going to a Cubs-Dodgers game. The Cubs were terrible, but I saw Robinson, Roy Campanella, and Duke Snider play, and Jackie Robinson stole home. I don’t remember much about my 0-10 years other than baseball, either talking about it or playing it.

My mom took me to a few Ladies’ Day games. Twenty-five cents to get into the Park. Baseball bound my mother and I together until she died in 1990.

But there’s more to my love of the Game than family and tradition. The nuances, the subtleties, the strategy fascinates me. In the recent National League Championship Series Craig Counsell, the Milwaukee Brewers’ manager, used an unorthodox approach with his pitchers. In one game he started his left-handed pitcher Wade Miley and then pulled him after one batter to try to fake out the Dodgers’ manager, Dave Roberts, on lineup matchups. The Brewers lost the game.

In the seventh, and deciding, game he used his most-potent weapon, pitcher Josh Hader, in the third through fifth innings thus losing him for the decisive final part of the game. The Brewers lost the game. Counsell was trying to finesse his lack of starting pitching, yet he had his best starter, Jhoulys Chacin, starting that game. People will argue about his strategy for years. It’s one of the beautiful things about the game.
I’ll be reading Cubs blogs all winter. Scrutinizing trades. Hoping the pitchers’ sore arms heal. God willing, 2019 will be our year again to celebrate.

Question: Do you still love baseball, or do you see it as yesterday’s game?

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Swarfcast Ep. 15 – George Breiwa on Machining Vaporizers

By Noah Graff

Scroll down to listen to the podcast with George Breiwa.

About two months ago I got a call from a company asking for a price on a Traub TNL18 on our Graff-Pinkert Website. For those unfamiliar, Traub makes arguably the heaviest, most expensive and advanced CNC Swiss machines on the market—the “the Hummer of CNC Swiss” one could say. I asked the caller what his application was, thinking it was a medical part to justify such an expensive machine, but the caller told me it was for making a unique vaporizer that had no moving parts and no battery.

George Breiwa started his company DynaVap to produce a mechanism called a VapCap that gives smokers of tobacco and other substances (one legalized this week in Canada) an alternative to smoking. People have built vaporizers for a long time, but what makes DynaVap’s VapCap unique is that while other Vaporizers require a power source usually from batteries or a wall socket the VapCap operates using heat from an external source such as a lighter or candle.

In the interview Breiwa discusses DynaVap’s evolution from making its first pieces on South Bend Lathes to ordering its first new Traubs. He explains his philosophy to make simple yet elegant parts using complex CNC equipment which he hopes will make an impact.

You can learn more about DynaVap at www.dynavap.com.

Question: Can a solo inventor with a South Bend Lathe still change the world?

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Swarfcast Ep. 14 – Scott Livingston on Combining Cycling and Citizens in His Machining Business

By Noah and Lloyd Graff

Scroll down to listen to the podcast with Scott Livingston.

Scott Livingston’s Grandfather Horst, after whom Horst Engineering Company in Connecticut was named, often talked about bicycles with Scott during his childhood.  Cycling was part of Horst’s life in Germany before he fled from the Nazis in 1938 and came to America.

Horst started his machining company in 1946, and Scott and his family run it today.  While the core business is now aerospace products made on Swiss screw machines and thread-rolled parts, a growing piece of the business is a niche product for bikers, toe spikes.

Scott and the Horst company have meshed a passion for cycling, especially the growing sport of cyclo-cross, which features many laps of short-course racing on pavement, wooded trails, grass and steep hills.  Cyclo-cross requires the rider to dismount and carry their cycle.  Riders usually end up muddy but smiling, riding sturdy bikes with fattish tires.  Good toe spikes are a must, and Horst’s are popular all over the world.

Scott and his family are regulars on the race circuit, and Horst sponsors a team.  Scott’s wife, who is also an ultramarathon runner, and his children join in the competitions.

The vision of Scott’s grandfather to develop a cycling product for his machining firm has been realized by Scott, and cycling has led to many networking opportunities for the company to find kindred spirits for Horst Manufacturing’s growing business.

Question: Have you been able to combine athletic interests and work?

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How to Lose a Customer

By Lloyd Graff

You never know when life will teach you a lesson when you least expected it.

I was at the local Farmer’s Market in Homewood, Illinois, last Saturday.  I was hoping to buy the last good peaches of the year.  I surveyed the sellers’ wares, and nothing looked spectacular.  I finally found a batch that appeared okay.  I asked the farmer, a young woman from South Haven, Michigan, how the peaches were.  “They’re good, last ones of the season,” she said.  So I bought them.

I took them home, left them out overnight and tried one the next morning.  Awful.  Mushy garbage.  I threw them all out.  I made a quiet vow never to buy another ounce of fruit from her again.  It was not just that they were bad. It was that she had to have known they were bad, yet sold them to me with a straight face. I am a bit of a fruit fanatic.

The next day I went to my favorite farmers’ market to buy apples for the winter’s applesauce.  I went to my favorite fruit vendor, Mr. Hardin of Hardin’s Orchard, west of Kalamazoo.  I bought a bushel and a half of apples from him and then asked if he had any good peaches.  I’ve been buying from him for 10 years, and he always tells me the truth about fruit.  If he’s selling blueberries and too much rain made them look plump and delicious he’ll tell me to wait a couple of weeks when the good ones will be ripe. Hardin knows his apples, and I rely on him.  He told me his peaches were sweet and delicious, and they were.  Every single one.  He earned my business for another year.

By the way, Hardin is the busiest vendor at the market every Sunday. It was a business lesson relearned on peaches.  If you want long-term customers always be straight with them, especially the less-experienced ones who may not know what they don’t know.  Don’t promise more than you can deliver.

Mistakes will always be made.  When Graff-Pinkert resells used machinery we do not get any guarantees from the people who sold us their no-longer-needed machine tools.  Sometimes they answer us honestly if we ask the right questions.  Actually, most people are straight if you know what to ask them and ask it in the right way.  But at an auction rarely do the sellers volunteer information, particularly if it is negative. But if you are in the business of trying to develop long-term relationships you have to tell people when the peaches are mushy when you know they are.

Question: What stories do you have about being duped?

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