To the Rescue

Tactical Minds

Quite simply, Tactical Minds rescues failing companies. “We believe we have a formula that will work with any distressed company,” Tactical Minds CEO Charles D. Zuckerman insists.

The private equity firm swoops in and revamps, restructures, and re-engineers a company to transform it from a failing business into one that is both profitable and stable. “We are pretty flexible,” Mr. Zuckerman says of the team’s approach. “We can invest or we can consult or we can do a combination of the two.”

There are three key factors that Mr. Zuckerman looks for when considering a potential turnaround. “Number one, it is important that the company has some sort of infrastructure,” he explains. “Two, I look at their sales. Three is the market.” What doesn’t he worry about? The executives. “Because if they don’t conform to where we need them to go they no longer stay there.”

As soon as Tactical Minds steps in, the team zeroes in on what the ailing company does best. “You must figure out what they do right and build on that,” Mr. Zuckerman explains. Creating effective lines of communication is also crucial. And, throughout the rebuilding process, supporting the company’s people is foundational. “We actually focus on making the employees and the executives a lot better,” Mr. Zuckerman explains. “Yes, we do make money. We are profitable. But, we actually care. And we train people to care about the companies they are in too.” This is an extremely effective strategy, he explains, because employees and executives who care about their companies will work hard to pull the business up, even when sacrifices are required.

And sacrifice is very often required, especially by the executives. “In every company we’ve ever walked into, the CEOs, presidents, and owners all tend to pay themselves a lot more than they should get in the market,” Mr. Zuckerman explains. “They don’t pay themselves according to performance.” Furthermore, many of the executives Mr. Zuckerman works with have a history of maintaining their own pay while simultaneously rolling back employee salaries. This stops as soon as Tactical Minds takes control. “We don’t allow it,” Mr. Zuckerman says bluntly. “When I do a rollback in salaries I do it across the board – including ourselves. We always make sure that we take the largest rollback.” The idea is that management will only be truly involved and invested in the company if their pay actually reflects their performance. “That is our philosophy. And employees who don’t [agree] don’t last – whether they are presidents, financial people, or investors. That is what makes our company very, very unique.”

Likewise, Mr. Zuckerman believes that employees should benefit once the company’s numbers begin to improve. “Once the company is making profitability, we share the profits with all employees through bonus plans and incentives,” he reports. “Our core values are embodied in this approach. We put company first, shareholders second, employees third, and CEOs fourth. Before any business decision is made, we ask ourselves one question: does this make us a better company? If we cannot answer that question, we don’t make that decision.”

Taking care of suppliers is also of utmost importance. “We make sure that suppliers ship to us and get paid and continue to work with us going forward,” Mr. Zuckerman says. This is far more important than many people realize, he adds. “Most people who run companies tend to not worry about the suppliers and the suppliers are the first ones that they stop paying. But the ones who put you out of business aren’t necessarily the banks. It is the suppliers who put you out of business.”

Tactical Minds’ strategies have proven remarkably effective and the company has a solid history of success. “I have done a number of turnarounds,” Mr. Zuckerman points out, “and I have never failed.” Thorburn Flex and Jempak are the two companies that the team has most recently revitalized. For the last fifty years, Thorburn Flex has been an industry leader in the cost effective design, development, manufacturing, and supply of high quality custom flexible piping and ducting systems to be used for solving specific pipe and duct motion problems. However, after decades of achievement, the family business fell on hard times. When the bank called a loan and the company couldn’t pay it, Tactical Minds was brought in to work toward a solution.

The team rolled up their sleeves and got to work on a quick succession of significant changes. “Within a year and a half, 90 percent of the debt was paid off.” This was no small feat considering the company was millions of dollars in the hole.

As always, the team immediately implemented its number one strategy. “We focused on what that company does best,” Mr. Zuckerman reports. “And that’s what we worked on.” Thorburn Flex had some great assets, including an experienced team of experts, leading edge R&D, and a long history in the business.

Tactical Minds also worked closely with suppliers to ensure a smooth recovery. “We made deals with them,” Mr. Zuckerman recalls. “They offered us discounts.” Suppliers were motivated to come to the table, he explains, because if Thorburn Flex went bankrupt, it would have cost the suppliers far more than the deal did.

And, of course, cuts had to be made. “We terminated a lot of employees,” Mr. Zuckerman says. “We did a fair amount of outsourcing.” For example, much of the company’s product is now manufactured in Malaysia, increasing efficiency and reducing cost. “Today the company has fewer than half the employees we had when I got there,” Mr. Zuckerman reports. “But the sales are still the same. Our gross margins more than doubled.”

The remaining employees are all reaping the benefits. In fact, when Mr. Zuckerman gave out bonuses last year, every individual received the same amount of bonus, whether they were top executives, or people on the factory floor – including the CEO. “I gave out the same bonus to everybody in the company,” he recalls, and the company’s new financial success has in fact raised salaries across the board. “They made more money in the last two years in raises than they ever did in the twenty years they were working there,” Mr. Zuckerman insists. “And the company made more money within a year and a half of my being there than they had in the past ten years combined.”

Jempak’s focus was on making private label detergent and dish washing soaps before Tactical Minds came on board. After stepping in, the team’s first move was to rebrand the business. “We rebranded into an R&D company which means we can licence,” Mr. Zuckerman explains. The strategy has been remarkably effective. “After we rebranded the company our margins have increased significantly.” As a result, the team has been able to pay down the company’s debts and move forward. “When we got here, Jempak had over 20 million dollars of debt,” Mr. Zuckerman reports. “Today we are slightly under nine – and it’s only been two years.”

Getting to this point has taken a lot of hard work – and capital. Tactical Minds has invested almost $13 million into Jempak. Seven million went into new machinery, the rest into working capital. In fact, Mr. Zuckerman is so sure of the company’s potential that he invested one million dollars of his own money. “We put our money where our mouth is,” he insists. Now, the value of the company has already increased threefold. “When we got here, the share value was zero because it was bankrupt. The share value today is close to three dollars,” Mr. Zuckerman reports.

Both Thorburn Flex and Jempak are well on their way. Tactical Minds set the bar high for both turnarounds – and has already begun to hit many goals. In fact, the team always aims to take a company to the highest mark – no matter how low it has sunk. “I don’t look at what the company’s gross margins are compared to the industry average,” Mr. Zuckerman explains. “We always look at what the top company makes in that industry and I seek to hit that target.” The reasoning is simple. “We never look at industry averages because I always believe that a company must strive for and achieve excellence. And we have never not hit a target in any company that I have been involved with.”

The targets are not easy, he admits. “But they are realistic and achievable.” Tactical Minds has already shown that it can hit the targets that have been set for Thorburn Flex and Jempak. In fact, the team is already eyeing new opportunities. “We are on the lookout for new companies now.”

July 16, 2018, 6:48 AM EDT

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