I’ve been interested in K&K Screw Products since I sold the founder of the company his first three Davenport screw machines a million years ago. There have been several ownership changes since then. The company now has more than 200 multi-spindles and changed owners once again in December.

One private equity company sold the business to a bigger private equity firm this time around. CapitalWorks out of Cleveland had owned the firm (now KKSP) for five years, paid down the debt used to buy it, utilized the depreciation rules, improved the company by upgrading its data management, and facilitated two plant relocations. It plumped up KKSP’s EBITDA (earnings before interest, taxes, depreciation, amortization), and racked up juicy gains for the equity partners, which included management.

It was a textbook private equity deal and I was keen to find out the ins and outs of the game from an insider. Fortunately, Todd Martin of CapitalWorks was happy to discuss the deal with me.

Todd Martin of CapitalWorks Private Equity Firm

His private equity firm has partners who came out of the manufacturing world, some have sold family businesses, others have come out of corporate America like him (an Alum of GE). He has a wide network of folks who pitch deals to his group and numerous contacts to quickly find key managers who might be crucial in making acquisitions successful.

I was surprised when he told me that his group usually puts up 50% equity and 50% borrowed money into its acquisitions. I had thought that it would push 80% in borrowed money, but his belief is that less leverage makes for a safer investment, particularly in the early stage of ownership. If things are going well, they might recapitalize as they did with KKSP, two years into the deal.

Martin says that the key to a private equity deal is rapid payback of debt, increasing EBITDA, and use of of the tax code to limit taxes. CapitalWorks usually likes to have top management members take a stake in the company, whether they are inherited from the previous regime or recruited from the outside. Skin in the game definitely focuses the mind on the endgame, which is usually a sale of the company. In KKSP’s case it was sold to Mill Point partners, a New York firm with deeper pockets but a similar focus on manufacturing.

I asked him if larger companies sell for a bigger multiple of EBITDA. He confirmed that is often the case. The management requirement effort for a company with less than $10 million in sales may reduce the multiple to two to four times EBITDA, while a $100 million-dollar company might bring 7-10 times. Martin emphasized that firms that merge to get to the higher sales number often shoot themselves in the foot because they overshoot their managerial competence. A safer strategy may be to pick up smaller companies just to acquire customers and skilled employees. This is something KKSP did under the CapitalWorks ownership.

Todd Martin ended the interview by relating a story about a private equity hotshot from Wall Street with a Harvard MBA who came to a potential buyout meeting with a briefcase and credentials, but no socks. The nuts and bolts owner of the business in play was unimpressed. “Next time find somebody who wears socks,” he told Mr. Martin.

Private equity is the name of the acquisition game today in manufacturing, but you still have to know what you are doing—and wear socks.

Question: Would you prefer to work for a private equity firm or an individual owner.

We all absorb things from our childhood that literally wire our cerebral cortex and remain with us as we mature. There are images, sayings, emblems of fear and instigators of smiles. We soak up stories and develop a narrative that frames our lives.

As I thought about writing this piece the line I remembered most vividly from my father while growing up, of a thousand things I heard from him, was, “You’ve always got to make the nut.” To him that meant you had to cover your costs every month. Losing money in business was FAILURE. It was just about the worst thing you could endure short of death.

I was reminded of this after hearing a captivating interview with Sara Blakely, inventor and owner of Spanx, a fabulously successful young company that germinated when Sara cut off the feet of a pair of pantyhose and envisioned a new undergarment that nobody else had imagined. She was interviewed by James Altucher whose podcast I highly recommend.

One of the first things she talked about was her nightly dinner table conversations with her dad. He used to ask her, “How did you fail today?” This was not to tear her down, but to get her comfortable with the idea of failure. She got comfortable with failure when most kids were trying to ace every test or hit a home run every time up at bat.

She also became comfortable with embarrassing herself. Later, she even tried to be a stand up comedian, even though she wasn’t great at it.

Her father was trying to help her understand that failure wasn’t like death. It was a setback, something to learn from. Something even to laugh about – not the end of the world.

This was very different from the narrative I grew up with. I felt like I was the “designated winner,” and I was always expected to be the best. Failure was for other people.

Not that I was always successful, but success was always expected. Just like my father always had to “make the nut,” I felt like I always had to be successful to be valued, though that may not have really been the case.

Sara Blakely’s experience of having a parent normalize failure, though not extol it, was much healthier. Being able to experience disappointment without withering or blowing up seems like an ideal way to grow up healthy and be comfortable taking risks.

Through the years, I’ve had plenty of failure. I’ve lived through excruciating periods when I didn’t “make the nut,” and my life did not end in disaster.

In retrospect, I wish I had not gone through childhood and high school always being “successful” even when I knew in my heart of hearts that I failed often, like almost everybody else.

I also feel sad for my father who was so terrified of losing money in business, of not “making the nut” even for one month. He was always desperate about economic security, though by most standards, he had nothing to worry about financially.

“Failure” is such a subjective word. Sara Blakely’s father attempted to frame it for her in a positive way. If he truly succeeded at it, I think he was one of the very few.

Question: What was one failure you had this week?

New Year, new opportunities. I foresee a flurry of activity in 2018 in acquisitions in the machining world. Recently one of the largest screw machine operations in the country changed hands. KKSP Precision Machining based in the Chicago suburbs was sold by its owner, CapitalWorks of Cleveland, to Mill Point Capital of New York.

CapitalWorks bought KKSP in 2012 with management participation. They successfully integrated the Monterrey, Mexico, plant which has around 25 Davenport screw machines with the Chicago and Wisconsin plants. The Wisconsin plant is in Pheasant Prairie, just across the border from Illinois. KKSP also has a plant in East China, Michigan.

Graff-Pinkert sold K&K Screw Products, KKSP’s predecessor business, some of its first Davenports in the late 1960s. Today, the company has over 200 of the little dynamos producing 280 million parts a year.

Davenport Screw Machine

The Davenport machine is close to my heart. My father had a Davenport shop during and after World War II. Earl Brinkman, who had apprenticed to Mr. Davenport, the inventor of the original 5-spindle automatic, took a liking to my dad and helped him acquire the machines and get them running in 1942. Brinkman made a personal appearance at the inauguration of our new Oak Forest machinery warehouse in 1984.

Some people believe that the 3500-pound 5-spindle Davenport automatic won World War II for the Allies. The rigid Germans, despite their renowned engineering prowess, only ran 4-spindle multis during the War. Americans, running shells on the little Davenports with an index time of one second, slaughtered the Nazis in efficiency.

The basic brilliant design of Mr. Davenport and the improvements of Earl Brinkman are still very much alive, just ask the folks at KKSP.

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I did not vote for Donald Trump because his impulsiveness scared the heck out of me, but after 14 months in office he has been remarkably successful. Yes, his behavior is unconventional, even erratic and scary, but the results are certainly positive in many ways.

From a business standpoint, many people in the machining arena changed their view of the world almost immediately after the election. It was a signal that the extremely corrosive attitude of the Obama administration toward business, especially represented in its oppressive regulation, was over for now. This has proved to be true. The EPA bureaucracy has really eased up. There is still enforcement, but the attitude has shifted from “gottcha” to “you need to improve this.” Citations are much less frequent.

Equally important is the phenomenal rise of the stock market in 2017. Virtually all asset classes gained in value last year. Unemployment dropped to 4%. Oil production grew to a rate of 10 million barrels a day, the highest in 47 years. The tax bill of 2017 is a major positive for American manufacturing just with its depreciation rules. The pass-throughs for LLC firms are an improvement, though more of a break would have been nice.

I still think Trump is scary, but what a remarkably successful or lucky first year he has had.

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Today’s Machining World is moving into an exciting new arena, Podcasts. Noah and I will soon be interviewing some really fascinating people in the machining realm and disseminating the audio on Podcast smartphone apps. In recent months I have really gotten hooked on this radio show format. I think it will work well for us, and I am really stoked about trying something new. There is a flavor and feel that comes through on an audio interview that you just cannot capture in print.

Don’t worry, the blog will continue; but I think the Podcast will be a terrific addition.

Question: Has President Trump been successful in 2018?

Every day another prominent guy is forced to admit how his desire got the best of him. Today I must reveal my secret passion. I have had a lifelong affair with fruit.

I was reminded of this a couple days ago when I was in the produce department of Bizio’s, my local fruit seller of choice. He had THE BLUEBERRIES. I am very fussy about all my berries, and I usually shun blueberries in December in Chicago because they shlep them in from Argentina or Mexico and by the time I buy them they are flat and tasteless. But occasionally in December and January Driscoll Blueberries arrive and they are plump and taste like the best of Southwest Michigan berries in July. Really, they are even better, because they come so unexpectedly, and from Mexico no less.

When I find them I’m like a bear with a honeycomb. I want them all. So I buy almost every little carton on the shelf, price be damned, because these are my treasures of winter.

I love almost every berry at its peak. Frankly, I love almost every fruit in season.

This past summer I went absolutely bonkers over watermelon — Black Diamond seedless, to be specific. For almost eight weeks I was virtually delirious for those 15 pound bundles of dark pink joy. I sliced the melons into big sensuous chunks and pigged out for breakfast, lunch, and after dinner. Probably gained five pounds over two months on my Black Diamonds, but worth it.

Then there is my apple period. August, September, October, I infest the local farmers markets checking out the reddish treasure. Honeycrisps are my faves, but I’ll accept anything except the most vile apple on the planet, “Delicious.” Has there ever been a more inappropriate adjective for a fruit? If a farmers market seller even grows Red Delicious I will avoid them like Measles. Why even have a tree if it gives fruit as utterly cardboardy as that sickly variety that should only be exported to China for Pandas.

If there is an antidote for awful apples it is perfect pears. Bartlett’s are rather prosaic for me, but they are succulent and tasty, sliced any way you want. Wonderful with a soft cheese. Anjou are a little Franco, but just as marvelous, and a Bosc if peeled will duel the best of them. But for me the princess of pears is the Comice. The skin is a little rough like the Bosc, but if you hit the ripeness on the button, that pear has no peer. They sell for a premium, but the flavor of a Comice puts me in blissful state. Can you ask for more from any fruit?

I am a nut for fruit from trees. Oranges are back in season now and I am going bananas for Mandarins with the stems left on them and the spectacular Cara Cara orange, which is a cross between a grapefruit and a blood orange. Sweet and a little sour at the same time with a marvelous pink color.

I cannot leave out the often overlooked grapefruit. Texas Ruby Reds are back in season and I am an avid buyer. They take a little time to section, but nothing good comes without effort.

I’ll finish my fruity ode with my love of strawberries. I am suffering at the moment because I haven’t had any decent strawberries in months. Unlike the blessed blueberries that come out of nowhere for a week or two in December, winter strawberries are invariably crappy.

Our family is taking our annual pilgrimage to San Diego over President’s weekend this year. February is right at the beginning of strawberry season in southern California. I pray that the berries won’t be late because we devour a flat each day. We buy them at a local farm stand, and they are “to die for.”

My regrets to peaches which I adore over their oh so short season, but I had to leave out something.

And Pomegranates. Sorry, you are just too seedy.

Tell me about your fruit fetish. I am still exploring.

Questions:

What are your favorite fruits? Why?
What fruits do you hate?

For the last 10 years my general sleep pattern usually consisted of going to bed sometime between 12:00 A.M. and 1:00 A.M (sometimes later) and waking sometime between 7:45 and 8:00 A.M. When I awoke usually the first thing I’d do was grab my cellphone to check emails and text messages in bed. I get a lot of emails from international customers and I was interested to see what opportunities were percolating worldwide. Then I would roll out of bed and do my bathroom stuff (often skipping the shower to save time). I’d throw on some clothes, skip breakfast (I would usually eat some oatmeal when I got to the office) and head to work at about 8:20 A.M.

In the last two months I’ve changed my morning and evening patterns during the work week because I’m trying to get more productivity out of each day and hopefully lead a more fulfilling life. I make myself turn the lights out sometime between 11:00 and 11:30 P.M. I keep my cellphone in the bathroom with the door open, as opposed to keeping it on my nightstand. That way I can hear it if someone is calling with an emergency late at night, but I won’t be tempted to check it if a foreign customer sends me a text message at 3:00 A.M.

Noah’s cellphone in bathroom

In my new morning ritual I wake up at 7:00 A.M. sharp everyday. The snooze alarm and checking email in bed is prevented by the phone being in the bathroom. I jump out of bed immediately to turn off the alarm on my phone and amble into the shower which revives me. I also find that a shower often triggers my brain activity. I start coming up with new ideas and plotting what I need to accomplish the coming day.

After showering I eat some eggs while the phone still remains in the bathroom off limits. I spend five to ten minutes listing in a notebook all of the tasks I want to accomplish that day. Then I spend approximately 15 minutes writing down 10 new ideas. The ideas can range from new inventions to new types of businesses. Perhaps I’ll make a list of ways I can get out of my comfort zone or 10 things I feel gratitude for. Not until after I’m done writing down my ideas do I get to check emails or texts. If I don’t get to lay out my day’s plan and write down my 10 ideas the day feels out of balance.

My new goal is to go to bed even earlier so I can wake up earlier and get more sleep. Scientific studies show that peak brain performance occurs in the first few hours of the day. Scientists also say that if a person receives eight hours of sleep he has the potential to be three times as creative as he would with less sleep. Also, when I read about famous high achievers it seems like most of them average eight to ten hours of sleep. My problem is that time feels so scarce. I feel like I already don’t have the time to do all the things I want to do after work such as working out, cooking dinner, spending time with my girlfriend or working on creative projects. How will I have enough time with one less hour in my night. My hope is that when I start getting more sleep and waking up earlier my new found efficiency will give me a net gain for my day’s productivity.

Question 1: What is your morning ritual?

Question 2: Are you an early riser or night owl?

It’s holiday gift giving time for those of us fortunate enough to be able to do it.

Let me make a suggestion. If you have children or grandchildren young enough to be read to, find a book that you would love to read to them, buy it and then read it to them when they are preparing to go to bed. And read it with GUSTO.

My favorite books these days are by the fabulous American illustrator and writer Mo Willems. The beauty of his works is that they are both extravagantly illustrated in vivid colors and enormously entertaining for both kids and the pseudo adults who read them. They lend themselves to exaggerated dramatic rendering. My older grandchildren know them by heart, but they love to hear me stumble through them as they wait for the punch lines, which I do with over the top zest while they launch into riotous laughter.

That is the beauty of a great kids book. It can be heard 50 times and it gets better with each telling, if the storyteller gets into it.

This is why a Mo Willems book beats a video game by a mile as a gift. The video game is a one-way present, but a book like Goldilocks and the Three Dinosaurs and Nanette’s Baguette are totally interactive fun.

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I find it fascinating how “analytics” are changing the sports I have always loved, baseball and basketball.

If you have watched a basketball game lately you will have seen how it has evolved into a game of 3-point attempts and drives to the hoop. The stats tell us that midrange jump shoots are a loser if they comprise more than 50% of the shots put up in game.

If you watch the Golden State Warriors and Houston Rockets you see the trend being played out successfully. Both teams have tremendous 3-point shooters to execute the plan and coaches who gladly embrace the approach.

Boston with Kyrie Irving now has the point guard who can make the strategy work, though his outside shot is not as beautiful as Steph Curry’s or James Harden’s. The Cleveland Cavaliers with LeBron don’t have the perfect personnel to execute this drive and kick out strategy, but they may by the end of the season.

The baseball version of the drive and kick for the 3-pointer is the walk and homer approach. This year you saw more players take walks and change their swings to hit home runs because the analytics told teams it was the way to win.

It is possible the ball was juiced a little bit, but the primary reason that there were so many homers this past season was that the players changed their swings to elevate the ball when they hit it. They also took a lot of pitches trying to tire out the pitchers and look for the right pitch to jack.

Of course, the defense reacted by hunting for ground ball throwing pitchers and 100-mile per hour relievers. The baseball cliché is that it is a “game of adjustments,” and in this case that is certainly accurate.

Personally, I miss the turnaround jump shot at the free throw line in basketball and small ball with bunts and stolen bases in baseball. But the beauty of sports is that they constantly evolve. With the Japanese Babe Ruth, Shohei Otani, coming to Major League Baseball in 2018, who can pitch and play outfield to take advantage of his power hitting, we will be seeing a new kind of player. I can’t wait. Hopefully he’ll be with the Cubs.

Question: What is your favorite children’s book?