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President & Chief Executive Officer
Diamond Systems, a holding of
The Talon Group
Detroit, Michigan
Sectors: Private Equity
Status: Search Completed
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THE OPPORTUNITY
For more than seventy years Diamond Systems, a $43 million
dollar privately held company, has been a driving force
throughout a niche of the agricultural industry. Known for the
continuous introduction of technological advancements, the
company’s revolutionary products have positively impacted egg
grading, packaging and breaking operations throughout the world.
Poised well for both product and market expansion over the next
five years, the company is currently seeking an experienced
President/CEO who can grow top-line revenues, while improving
bottom line margins, thus positioning Diamond Systems as the #1
supplier of egg processing systems in the world.
This opportunity would be well suited for a seasoned
President/CEO who would appreciate the entrepreneurial
environment surrounding Diamond Systems and the operating
autonomy provided by ownership. Furthermore, the fact that this
is a mature, profitable business with long-term “value oriented”
capital backing could be additionally appealing.
Many reasons may lead an experienced President/CEO to explore
this unique opportunity. Perhaps a candidate is working for a
publicly traded company whose focus is bent on meeting quarterly
earnings estimates rather than managing for maximum long-term
value. Another candidate may be employed by a large holding
company that provides extensive operational oversight which
often infringes on a candidate’s management style. Still another
executive may be attracted by the opportunities involving
international growth and product expansion. While another may be
motivated to pursue a career path leading to group oversight
within the private holding company that owns Diamond Systems.
The right candidate will be attracted to the company’s people,
its products and the tremendous potential for growth. This is
truly an exceptional opportunity for the right leader.
THE
COMPANY
History:
With its heritage extending back many years, Diamond Systems has
a notable history that sheds light on the culture and technical
innovations of the company.
In 1934, Everett Keen of Vineland, New Jersey, began developing
equipment for the poultry industry, which included feeders,
watering equipment, egg washers and graders. With the addition
of Tony Siciliano in 1942, Keenco developed the first true
automation in egg production. During this same time period but
in a different part of the country, George Bliss began
experimenting with electronic blood and crack detection. He
merged his ideas with Clarence Page of Detroit, Michigan, in the
1950’s to form Page-Detroit.
In the 1960’s Diamond International, a multi-billion dollar
packaging, paper, lumber, match and machinery business purchased
Page-Detroit and Keenco. The new company became known as Diamond
Systems.
By the late 1960’s and throughout the 1970’s, Diamond Systems
was installing many large systems around the globe. These major
projects occurred in Europe, Japan, Australia, the Middle East,
and North America. The major projects, along with international
market exposure, accelerated Diamond’s research, knowledge, and
services to the global egg industry.
In 1983, Diamond Systems became a private company through a
management-led, leveraged buyout. Also, that year the company
introduced a revolutionary new concept in egg grading, the 8200
egg processing system. Over the next 3 years, the company
installed 100 of these systems and the 8200 system became the
industry standard. In the years following, Diamond Systems
increased their international efforts and gradually began
penetrating the grading and farmpacking markets in England,
Holland and Spain. Additionally, the Latin American market for
Diamond’s products began to rapidly expand.
In 1986, the company was purchased by its current owner, Talon
LLC, a Detroit, Michigan based private holding company that
invests in middle-market size industrial companies with revenue
ranging between $10 million and $100 million. Unlike most
private equity funds or turn-around firms, Talon invests its own
capital with a “value oriented” long-term horizon. It should be
noted that operational talent is not a current part of Talon’s
management team, and as such, a new President/CEO will be
expected to run Diamond Systems as if they were its
owner/operator.
Today:
With 70 years of experience and success, the company today ranks
#2 worldwide among suppliers of egg processing systems and is
gaining on the #1 position. The business is both profitable, and
in most respects, stable. As such, this opportunity will afford
a President/CEO the time to make the right long term decisions
for the company and its shareholders, rather than being subject
to the “immediacy thinking” required in turn-around situations
or competitive market/price wars.
Company revenues are currently in the range of $35-45 million
dollars, but are subject to fluctuations due to the volatility
of the U.S. egg market. Recognizing this, current management has
made several key improvements to increase financial stability.
First, they have transitioned manufacturing operations from
being fully integrated to being assembly focused. Secondly, they
have made several operational improvements, including laying the
foundation of a quality system and implementing lean principles
throughout the plant, e.g., cellular manufacturing and kaizen
teams. Furthermore, both current management and ownership
recognize the need for increased market penetration in Europe
and product diversification, which will be a central focus for
the new President/CEO.
Diamond Systems currently employs approximately 120 individuals
and manufactures its product lines in a 150,000 square foot
plant in Farmington Hills, Michigan. Additional sales, parts and
service locations are in Europe, Latin America, and Asia. The
company’s product lines are in 3 main areas:
• Farmpackers gather and pack unsorted eggs at the farm
production units at a rate of 25,000 to 72,000 eggs per hour.
• Grading Systems load, wash, inspect, weigh and pack eggs into
cartons and trays at a rate of 10,000 to 150,000 eggs per hour.
• Breaker - Seperators load, wash, inspect, break and seperate
the egg yolks from the egg whites at a rate of 1,000 to 144,000
eggs per hour before pasteurizing, drying or freezing.
The company enjoys a leading
market share for several product segments in the Americas, while
in other product segments and geographic regions of the world
the market share is less than 20%.
Throughout all markets the company
continues to maintain its reputation for “taking care of the
customer” which is so critical in the fraternal industry in
which it operates. As such, a prospective candidate will
appreciate the dynamics of a “relationship driven” industry
rather than one that is driven purely by price.
THE POSITION
Diamond Systems is currently seeking a new President/CEO due to
the retirement of the company’s current President/CEO, Dick
Dibbs. It should be noted that Mr. Dibbs is committed to a
successful transition period and will be available for support
and assistance, should the new President/CEO so desire.
The President/CEO will oversee all operations of Diamond Systems
and will be based in Farmington Hills, Michigan. The position
will report directly to Jim Agley, Talon’s President, and will
directly manage four executive vice presidents of the company -
Craig England (Sales & Marketing), Doug Flege (Engineering),
Jeff Day (Finance/Administration) and Ron Merlino
(Manufacturing).
The President/CEO’ s performance
will be measured by the execution of his duties and the ensuing
financial results related to setting strategy and vision,
building culture, leading the team, and allocating capital as
explained below.
Strategy and
Vision:
A primary duty of the
President/CEO will be to set, implement and manage all aspects
related to strategy for Diamond Systems. In doing so, he/she
will rely on previous planning and current insights of senior
management and will receive select input from ownership. The
following are key strategic issues that will be addressed:
• Developing and managing a global growth strategy for the
business. With a leading market share in the Americas, most
short term growth for the company will occur in Europe, where
its products hold a 20% market share. Given the cultural
diversity of the region, varying quality standards and packaging
preferences for each country, the new President /CEO will
address Diamonds Product offerings and adjust each accordingly.
In Asia, where 70% of the market is for non-automated equipment,
the new President/CEO will address longer term issues of
strategically aligning the company with these emerging markets.
• The growth of underdeveloped product lines. The company has a
line of egg breakers/separators that are technologically
superior to their competition, but which have been neglected due
to a traditional focus on egg graders. With additional attention
and resources, the company believes they can leverage their
technology and reputation to become a provider of turnkey liquid
egg processing systems and pasteurization facilities.
• The increase of adjacent revenue streams via joint ventures,
licensing agreements or acquisitions. Traditionally, Diamond
Systems has focused on supplying the most technologically
advanced egg grading, packing and breaking equipment. In the
future, the company would like to incorporate additional
equipment such as conveyors, automatic palletizing and packaging
equipment into a complete system offering.
• The continued development and implementation of a quality
management system. In recognizing the need for improved quality
throughout all areas of the company, management implemented a
quality operating system. Over the last two years a formal
quality department has been established and procedures have been
implemented. However, the system is still relatively immature
and is underperforming. As a result, the new President/CEO will
need to focus on further refinements in order to substantially
reduce both internal and external quality costs.
• Improved inventory management. The basis for which orders are
placed, how much is ordered and the timing surrounding orders
are all areas that need to be significantly improved on.
• Enhanced leadership development and increased morale. With a
need for increased bench strength and management competency
throughout all levels of the organization, a training and
development program would be welcomed by all. Effective
delegation and competent hiring/promotion practices are also key
focus areas. Additionally, the new President/CEO will focus on
increasing cohesiveness among staff and creating a work
environment that is fun and exciting to be employed within.
Vision:
The President/CEO will communicate their vision throughout all
ranks of the company so that the entire business will be aligned
and operating according to this vision.
Building Culture:
The new President/CEO will continue to develop a team oriented
culture within Diamond Systems. They will strive to build a
culture of openness, cooperation, and collaboration in an
environment that focuses on continuous performance improvement,
employee empowerment, responsibility, and well-being.
Leading the Team:
The new President/CEO will create measurable performance
criteria for the executive team and will hold each member of the
team accountable for their performance. He/she will recognize
the importance of retaining the key performers in the business,
developing the “B” employees and encouraging non-performers to
seek alternate employment.
The President/CEO’s success at team-building will be measured
through scheduled lunches that Talon’s President, Jim Agley,
regularly shares with each Vice President. Regular team
assessments will help track the team’s progress and hone the
President/CEO’s abilities to keep the team performing at its
best.
Capital Allocation:
The new President/CEO will set budgets within Diamond Systems
and will manage the company’s capital in a manner that parallels
shareholder interests. They will fund initiatives which support
the growth strategy, and ramp down initiatives which lose money
or don’t support the growth strategy. Of particular interest to
a prospective candidate might be the availability of Talon
capital, which is available for growth initiatives provided that
plans are presented and accepted by Talon’s management.
The President/CEO will be responsible for providing monthly
management reports to Talon LLC, detailing progress against key
strategic initiatives. Additionally, the President/CEO will give
full business reviews on a quarterly basis to Talon’s Executive
Committee.
QUALIFICATIONS
The right candidate will preferably have prior experience as a
President/CEO and will be able to successfully meet the current
challenges of Diamond Systems as noted above and reflected below
in the required qualifications.
The right candidate will have an impressive track record of
accomplishments in the following areas:
Top line revenue growth: The right candidate will have prior
experience in developing and managing a global growth strategy
for a manufacturer of custom configured or “built to order”
capital goods. (Preferably they have experience in “food
processing equipment, although this is not mandated.) They have
an understanding of international business practices and
understand the cultural nuances of the European marketplace.
Prior business experience in acquisitions and/or joint ventures
is also highly preferred as the company has placed an emphasis
on product diversification.
Improvement of bottom line margins: In improving bottom line
margins, he/she will have experience and involvement in business
process improvements, including:
• Quality: Although the candidate might not have had direct
responsibility for directing a quality system in past positions,
they been involved in the implementation or continued refinement
of a quality operating system. They will be familiar with the
principles of TQM and will be able to foster the understanding
and acceptance of a quality operating system that will decrease
warranty and service costs resulting in increased customer
satisfaction and loyalty.
• Inventory Management: As a needed area of improvement within
the Diamond Systems, a candidate who has prior experience in
attaining balanced inventories is required. Knowledge of Pareto
Analysis, Just-In-Time (JIT), and Material Requirements Planning
(MRP) and the application of these principles within a custom
engineered, “built to order” environment would be of particular
interest to the company.
The right candidate will be capable of encouraging “boundaryless
behavior” within Diamond Systems, which will enable departments
to work more closely together rather than in vertical silos.
Prior experience in transitioning a business from a vertical
hierarchy to being structured horizontally around key business
processes would be of specific interest to Diamond Systems.
The right President/CEO will have a strong record of effective,
collaborative leadership. He/she will have put their time and
energy into developing people within prior places of employment.
As a result they will be able to mentor the management team of
Diamond Systems in the areas of effective delegation and
individual empowerment, thus allowing the next generation of
leadership within the company to develop and emerge.
The right candidate will have strengths in the areas of
strategic planning and monitoring. He/she will look to the
future for change and be able to identify short, medium and
long-term trends within the current/future product and market
areas.
An engineering degree is highly preferred in this position, but
not an absolute. What is required is someone who has strong
technical inclinations. Diamond Systems designs, manufactures
and services a highly automated, engineered product that is
specific to a customer’s application. As such, a candidate who
understands high speed automation and is technically oriented
will be able to maximize his/her contribution to the company.
Additionally, someone who has a strong engineering skillset will
be able to assist the company in further enhancing a product
development program.
PERSONALITY AND MANAGEMENT STYLE
Specific Preferences:
Talon LLC is a private holding company that is currently
structured without any operational executives. As such, the
candidate will need to be extremely independent in their
operational style. Additionally, they will need to be tolerant
of Jim Agley’s involvement as an informed shareholder in the
business.
Given the “value oriented” investment philosophy of ownership,
the right candidate will have a temperament that fits ownerships
risk/reward profile. He/she will be able to think from a
shareholder’s perspective and encourage this type of thinking
throughout the management team.
Currently, there are some disagreements among some members of
the management team, related to the implementation of a quality
program. As a result, the right candidate will possess mediation
skills and will be able to resolve any differences between
senior team members and keep them working together in a common
direction.
Ideally the new President/CEO will be coming from a business
that is somewhat larger than Diamond Systems, but is “hands on”
and will thrive in a “small company” environment. They must
possess a high degree of energy and passion about their work.
The right candidate is considered by others to be very creative.
He/she likes complex problems and in the past has come up with
solutions that resulted in meaningful growth for their employers
and shareholders.
General Preferences:
At the core, the new President/CEO will be a “principled leader”
and will exude integrity and honesty to the highest degree.
He/she is progressive in nature and maintains an insatiable
desire to improve themselves and the company on a daily basis.
He/she will have passion for knowledge and will look forward to
learning about the egg business in fervent measure.
The right President/CEO will possess a high degree of
intellectual firepower, combined with the ability to communicate
exceptionally well. The new President/CEO will preferably have a
strong appetite for outreach. He/she will be accessible and have
an “open door” management policy. They will be skilled at
relationship building and will be visible and available to
employees, customers and key suppliers.
The right individual is confident in their decision making
skills and history has proven them right. They are collaborative
in their approach and foster respectful, open discussions,
carefully considering opposing viewpoints and perspectives.
THE LOCATION
It is quite probable that the right candidate has enjoyed living
in a locale similar to Southeastern Michigan, an area with
“Midwestern” values and metropolitan accessibility. Perhaps the
candidate grew up in Michigan, Illinois, Indiana, or Ohio and
would like to return to their roots. Regardless, they will value
the quality of life in the Midwest and see it as a great place
to live.
Located in Southeast Michigan, Farmington Hills is situated
within minutes of the Detroit River, Lake Huron and Lake Erie.
Water recreation for eight months of the year abounds. Boaters
enjoy the beauty and vastness of these beautiful Great Lakes,
while the sportsperson may take advantage of plentiful fishing
in these waters all year long.
Known as “The Fraternal Twins”, Farmington and Farmington Hills
offer an atmosphere that fosters business growth and progress as
well as an exceptional standard of living for its 95,000
residents. The Cities make up a total of 36 square miles,
consisting of a unique balance of historical charm and a sense
of high-energy business growth and progress. With an average
home price of $192,000, this community offers living
accommodations 20% less than the national average. Situated in
the heart of Southeastern Michigan, the Farmington/Farmington
Hills region offers accessibility to major thoroughfares.
Located at the crossroads of Interstates 696 and 275, our
corporate and residential communities find access in and around
Southeast Michigan to be easy.
For the individual with a love for
the arts, Southeastern Michigan has much to offer. The City of
Farmington is home to the historic Farmington Civic Theater,
fully restored to preserve its 1940's flair and décor.
Surrounding areas offer music and theatre at such well known
places as the Fox Theatre, Detroit Symphony Orchestra, and
Detroit Institute of Art, just to name a few. Southeastern
Michigan, rich in history and culture, is also home to many
museums and cultural exhibits.
For the sports enthusiast, the Detroit area has much to offer.
Detroit is well known for its NHL Stanley Cup team, the Detroit
Red Wings and the NBA Champion Pistons. Detroit is also home to
a MLB team the Detroit Tigers and an NFL team the Detroit Lions.
Additionally, the area was host to the 2005 MLB All Star Game.
In coming years Detroit is scheduled to host the 2006 NFL
Superbowl, the 2008 NCAA Midwest Regional Finals and the 2009
NCAA Final Four.
With over 125 golf courses, Southeast Michigan has been ranked
#8 in the country in courses with real estate according to the
National Golf Foundation. Golf Digest has rated Michigan as the
12th best golf destination in the world! The area is also home
to the Buick Open (Warwick Hills Golf Resort), 2004 Ryder Cup
(Oakland Hills Country Club) and Ford Senior Players
Championships (TPC, Dearborn).
Residents of Southeast Michigan
place a great emphasis on quality education for youth and adult
students alike. In addition to a number of highly acclaimed
private institutions, Southeast Michigan is home to two Big Ten
schools: University of Michigan and Michigan State University,
as well as other top rated universities: Oakland University,
Wayne State University, and the University of Detroit.
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