Since 1933, Trinity Industries has grown from two struggling propane tank companies into a multibillion-dollar diversified manufacturing company. Early in its history, it acquired some of the most illustrious names in American industry: Mosher Steel Company, Equitable Shipyards, and railcar designs from the Pullman Standard Company, to name a few.
Today, being in the rail transport and inland barge businesses provides considerable diversity for Trinity’s portfolio; railcars and barges move many different things, such as cars, petrochemicals, agricultural products, and construction components and supplies.
But in September 2014, the company acquired the Meyer Steel Structures business for $600 million, its biggest dollar acquisition ever, establishing for Trinity a leadership position in the electricity transmission business.
Modern Counsel: Some companies go years, or even their entire life cycle, without making an acquisition. But Trinity has been purchasing other companies since its inception. What did the company hope to gain from the Meyer purchase?
Jared Richardson: There are a lot of different ways to describe what we do, but we are essentially a manufacturing company, or, as I like to tell people, “We build big steel stuff.” Meyer Steel, a leading North American electric-tower manufacturer, also builds big, heavy steel products. We already had a small business in electric transmission towers, and we like that industry. When Meyer was put on the market, we saw it as an opportunity that doesn’t come along very often. It enabled us to expand an existing business line and step into a leadership position in an industry we view as solid and long-term. Even though we’re best-known for railcar manufacturing, we want to strengthen our presence in less cyclical businesses. Meyer will help us do that.
MC: In his book about Warren Buffet, Lawrence A. Cunningham says two of his management maxims are to “stick to your knitting” and “commit to the long term.” It sounds like this deal scored on both those points.
JR: Yes. Meyer was a great fit. It was a very strategic transaction for us, a long-term play and a big part of our diversification efforts. Another thing we look for is operational leverage. Trinity was already building large steel products, so combining with Meyer enabled us to become even more productive and efficient.
MC: What were some of the steps involved in making the deal happen?
JR: To pull a deal like this off requires early identification of the internal team—which includes people from HR, IT, payroll and accounting, facilities management, manufacturing, marketing, sales, and legal—and a very clear assignment of tasks. You have to be organized, focused, and not take your foot off the pedal. Legal’s role was to oversee and conduct due diligence; help prepare and file all of the required documents in connection with the Hart-Scott-Rodino Act (due to the size of the transaction); draft the purchase and transition services agreements; and spend two weeks in face-to-face meetings. Our outside counsel, K&L Gates, provided invaluable service. They were responsive and thorough throughout the entire process.
MC: You’ve been through many acquisitions—both as a law firm associate and in-house at TXU Energy, which went through a $45 million leveraged buyout by private equity firms in your tenure. How did this one compare?
JR: It went very quickly—just seven months from start to finish. We decided to make the move in February 2014, and the deal closed in September. It was an auction process, which helped accelerate the time frame. There were very few stumbling blocks. I’ve worked on some acquisitions that required inordinate amounts of paperwork. One deal I did years ago required 250 documents for just three bullet points on the closing checklist.
MC: What did you learn from working on this deal?
JR: One of the perspectives you get in-house that you don’t being part of the outside counsel team is that you are there to see what happens after the deal is done—after everybody shakes hands and pats each other on the back. As outside counsel, you move on to the next deal almost immediately. You hope that you’ve structured a deal that will be good for both sides, that you’ve minimized the likelihood of post-closing disputes, and that you’ve put the company in a position to move forward and be successful, but you’re not actually involved in the integration phase. You care much more about those things going well when you’re directly involved, have a vested interest in the company’s success, and work with the affected employees every day.