Episode Transcript
[00:00:03] Speaker A: Welcome to INa Insights, where prominent leaders and influencers shaping the industrial and industrial technology sector discuss topics that are critical for executives, boards and investors. InA Insights is brought to you by Ina AI, a firm focused on working with industrial companies to make them unrivaled. Segment of one leaders to learn more about Ina Aihdev, please visit our website at www. Dot ina dot AI.
[00:00:40] Speaker B: Good morning. Welcome to our next episode of the Titanium Economy podcast series hosted by INA Insights, where we talk with industry leaders and icons to explore a wide array of topics including the macro economy, business strategy, technological and operational transformation, and the broad outlook for the future. I'm your host Nick Santanan, CEO of Fernbi Group and today we are delighted to have Darren Ash, CEO of Salmon Enterprise and Salmon's industrial. This is a company which is headquartered in Dallas, Texas. Salmon Industrial is a wholly owned subsidiary of Salmon Enterprises focused on investing within the industrial sector and maintains a diverse portfolio of investments including wholly owned businesses, assets and project level partnerships. Representative investments includes BRICS industrial solutions and sitepro rentals. As of 2022, Salmons Industrials was almost nearing $1.5 billion in asset management, over $1 billion in revenue, more than 50 locations across multiple countries, approximately 4000 employees given more than a million dollars to charity and the list goes on. As a quick background on the parent company, Salmons Enterprises Inc. It's a diverse holding company composed of financial sectors, financial services, industrial equipment rental, estate, real estate investment and infrastructure businesses operating in five countries. Headquartered in Dallas, Texas, Sammons was established in 1938 with approximately $7 billion in annual revenues and over $118 billion in asset. Sammons is one of the largest privately held companies in the US and in 2022, Sammons plus placed 44th on the largest privately held companies in the US list, an amazing feat on Darren Darren serves as the CEO and executive committee member of Sammons Enterprises. He has been with Salmon since 2006. Darren's joined the company with 17 years of experience in public accounting, private equity, consumer products, manufacturing and professional services industries. He served as a CFO for Salmon's enterprise for nine years prior to accepting the role of the president has been on the Salmon enterprises board since 2015.
Darren, welcome to our podcast. We are super excited to have you and we are looking forward to to talking to you about Sammons and your journey today.
[00:03:12] Speaker C: Thank you Nick for having me. Pleasure to be here.
[00:03:14] Speaker B: So Darren, let's start talking about Sammons industrials. Could you share with us the company's overall strategy and value proposition and sort of to put you in a spot, what are your top priorities when you wake up in the morning.
[00:03:28] Speaker C: Thank you, Nick. Good question. So our value proposition is we are a private company. Always have been, always will be. Long term perspective, true long term investment horizon. Really strong and positive culture. Something we're most proud of is our culture. Decentralized form of governance. So we operate with a very lean holding company, and we try to push down accountability and ownership down to the local management level. Employee owned, which we're very proud of. We'll talk about a little later. And I like to tell people we make good partner. We believe that one of our best attributes is we're a good partner. Our priorities for this year, as we look at the year, there's a lot of economic uncertainty, which we'll talk a little bit about. I think for me personally, it's around capital allocation. When I wake up in the morning, I think about our leadership teams. Do we have the right teams, the right people on those teams? Do we have the right capital allocation allocated to various businesses that we own? Do we have the right strategies for each of those businesses? So those three things are kind of percolating in my mind each day about each of the businesses.
[00:04:32] Speaker B: Aaron, you sort of triggered a thought in my mind. The Sammons business model is pretty unique. And I know you talked a little bit about it, and I'm going to ask you more questions on that. But before I go into that, can you share with us how the salmon's family of companies fit together in the overall portfolio, and how have you been able to scale them successfully to date?
[00:04:52] Speaker C: So today, we're composed of what we call verticals. We have five investment verticals, if you will. And those are just ways, I think we organize the business, if you will. Those verticals include financial services, real estate, industrial infrastructure, and investments. And we, over time, have had different verticals, different companies inside those verticals, if you will. But we are organized around those five verticals. Currently, I would say our ability to grow those has been largely organic. We've done some m and a, which we'll talk about, but we really look for businesses and teams that can build organic growth through those businesses. And we've had a really great track record of building inside there. Again, as I mentioned in the beginning, we don't have an exit strategy. So we're unlike a PE firm. We don't have a finite time in which we look at investments. So we generally look at investments, and when we underwrite them, we are looking at them from a true long term hold portfolio perspective. Some businesses in our portfolio today, we've owned for over 50 years. So that is the kind of time horizon we're looking at. It is challenging to build value over 50 years. Right. So things change. But our teams have done a tremendous job, and we're really proud of that. We're really proud of businesses that we own today.
[00:06:16] Speaker B: So, Darren, you said you don't have an exit strategy. You like to hold companies forever. So when you think about M and A, what attributes, what criteria do you really prioritize when you look at new companies or new platforms or new micro verticals in the Samus platform?
[00:06:33] Speaker C: This is a very difficult question. Right. Complex question here. So we have found that our best success has come when we're doing m and a activity that's in the business we're already in, or what we would like to call adjacencies near what we're already in. We will look at businesses that are outside of our current platforms and our current verticals, but we believe that there's a higher level of risk around those. Obviously, we don't know those industries, our teams don't know those industries as well. So we're very, very careful through that. The keys, I think, around M and A, in my opinion, are, you know, don't. Don't be emotionally tied to the. To the transaction. You know, you need to be able to step away and be objective around the acquisition. We try not to pay for synergies, all of them. That's a, that's also a hot button in the negotiation process. I get that. But, you know, we try to look at the business under the. Under the lens of us owning that business, perhaps with that management team. Sometimes the management teams we're talking to that are selling the business simply don't have the capital to continue to grow the way we want to. And so, ideally, what we're looking for is a really strong management team running a business that's somewhat similar that we know about, adjacent to our current business, that has strong ideas about how to grow that business, but don't really have the capital to do so. And so we're able to come alongside that group, empower them, bring them into sort of the portfolio of Salmon's companies, provide capital, provide some oversight. I would say we have a very light touch oversight. So we are very decentralized and we empower our teams, as I said earlier, with a lot of latitude. So, ideally, we would find a company that would need capital. We bury that up with our, our capital model, if you will, and we found that's a very, very successful model.
[00:08:28] Speaker B: So Darren, obviously you guys have been very successful with your m and a strategy. Would you say you think along the lenses you just talked about, whether it's a new vertical or an add on to Briggs and Sitepro, or is it, you say, look, Nick, it's exactly the same approach we use in both, which is companies which need capital and which, honestly can scale up for a long, long period of time.
[00:08:50] Speaker C: Yeah, I think the approach varies by sector. Sometimes there may be some tuck in acquisition that we are filling a strategic area of our business that we like to have. Other times it's a growth opportunity, sometimes it's a geographical coverage opportunity. So I think it varies quite a lot on what the purpose of the business and the acquisition might be.
[00:09:14] Speaker B: That's very helpful, Darren. So maybe I'll sort of shift a little bit to the future. Obviously, it's hard to look at the crystal ball, but I think we can say with high level of confidence, we're probably going to live in a period of two eyes, right? High inflation, or higher inflation and higher interest rates. What's your outlook for the industry overall, given this new platform or the new playing field?
And especially as you look at your portfolio investments, how do you think they're positioned to navigate through the cycle? Is it playing more offensive or is it going on the defensive?
[00:09:47] Speaker C: Well, I want to first say we don't have a crystal ball, so if you can find that for us, I'm very interested in talking to you. So we do get a lot of input from various perspectives around general economic perspectives. We have deep insight into the economy through our insurance portfolio and the investments it owns. We have quite a bit of information coming through that sector. I would say that a key for us is a prudent, managed capital structure. So we do believe in leverage, but we believe in what I would call a reasonable or moderate amount of leverage to leverage our equity and our capital. We're not over levered. In fact, some of our best deals have been done in the worst of times. Right. So I'm not hoping that to occur. I don't wish a hard landing here or a deep, deep economic recession, obviously. But one of my favorite sayings from Warren Buffett is, be fearful when others are greedy and be greedy when others are fearful. And so we try to be patient. We try to be positioned from a liquidity perspective and from a capital perspective to be able to act and take action when an opportunity comes along. So we're obviously not hoping for that to occur necessarily. However, if that does occur, I really believe our teams and our businesses are well positioned to be successful in the downturn.
[00:11:12] Speaker B: Darren, you had mentioned before your m and a strategy. Listening to that and listening to your sense of what the future could be and which we all so believe, I would sort of say your strategy is probably putting you in a sweet spot for the coming few years or decade. You don't know whatever it is, where the markets are and where the capital requirements are going to be. So given that, how are you thinking about m and a going forward? Is it going to be more of the same? Is it going to be different? How are you thinking about your m and a strategy going forward in the sense of, is it more a lean forward? Is it more about should be thinking about it?
[00:11:51] Speaker C: Yeah, great question. M and a requires discipline and I think it requires us to be focused. I think our strategy going forward will be very focused on the verticals we have. We have some very strong growth aspirations over the next seven to ten years, so they're quite lofty. But we believe we've got the verticals and the investments and the management teams built to enable that growth. So I would expect us to primarily, largely stick to the sectors and verticals we're already in. We believe there's plenty of opportunity there. Your book outlines lots of opportunities that we believe are also there. So we hopefully will remain very disciplined around that approach and stay within the verticals we have now. That said, we are looking at a new vertical. We're trying to be educated. We're trying to stay up to speed on those things. So I think in combination with us being very disciplined, we probably will have some sort of education process and research process around what could the 6th vertical be at Salmon's enterprises. Right. And that's more of a longer term view, but we don't want to put our head in the sand. Right. And believe that what we have today will always work. So we're constantly trying to learn and explore other opportunities in other sectors while being also very disciplined in the actions we take around M and a very.
[00:13:14] Speaker B: Helpful Darren, maybe now I would love to switch to a couple of your portfolio companies, BRICS and Sitepro rentals.
You had a front row seat to the global industrial manufacturing dynamics through BRICS. Can you share how the company navigated through the supply chain challenges? And some people would argue it's still happening. How have you navigated? How are you navigating it? Given all the supply chain descriptions we.
[00:13:38] Speaker C: Faced, we were very impacted. Like most companies around the world coming out of COVID there was a strong rebound that rebound, then produce this extremely strong demand and restarting of the global economy effectively. And as you know, the supply chain was delayed and getting up to speed probably is still delayed getting up to speed fully. Now, along with that price increases, inflation occurred, right, because the shipping costs, the demand for parts and products, we couldn't get them. So the cost goes up. Fuel went up significantly in 2022, particularly in the early part of 2022. Our businesses, though, are very interesting. We represent several oems around new equipment sales. And when those new equipment orders could not be delivered on time, our customers looked to us for rental opportunities. So our rental business in 2022 was outstanding. And so we were able to fill a customer demand and need there by being ready for that, having a rental fleet ready. So when the customer needed additional equipment, if you will, and could not get that from the OEM through us, that we were able to rent them equipment. So the overall rental sector, if you will, has been very strong in 2022. So that's just one way we were able to pivot from a supply side selling to our customer, to a rental business to our customer, which we've been in for a long time and will remain in other things like Brexit. One of our businesses has had to deal with Brexit and the complexities and that change, and they've done quite well with that. But these global impacts do impact businesses around the world, and so we're not immune from that. Certainly, we've had some very difficult conversations with our customers, in many cases around pricing, and we try to do our best to be fair around that and not reactionary. But as you know, wage increases, fuel increases, parts supplies, services, been a pretty substantial increase in a lot of those costs. And so we have to take that into our equation and in some cases, pass that along to our customers. So it's like many other companies, we're not alone in this. It's been very challenging, but I'm really proud of our management teams and their diligence and their work around monitoring these costs, being proactive around the cost, and being creative around solutions for our customers that we're able to deliver in the face of those costs and short supply.
[00:16:06] Speaker B: So, Darren, on the flip side, your new acquisition sitepro Rental, you talked about rentals becoming more bigger portion. Obviously, it's becoming a bigger and bigger part of the market. And there, there's a big driver, is a digital adoption. How do you use technology to drive better asset utilization? How do you match better supply and demand? And at the same time, industrial companies have been late to the game on digital transformation. Can you talk a little bit about what you have done and what lessons the listeners can take away on using digital as a disruptor or as an enabler to drive change?
[00:16:43] Speaker C: Yeah. Thank you. So I think the first critical decision we made was to separate what we used to call contractor rental, our general rental business, out of our material handling business and build a standalone business. Number one, we felt that business needed focus. It's a separate and distinct type of business. It needed its own branding, its own management team, its own strategy, its own purpose, if you will. And so we were very proud that we did that. We built it, named that company Sitepro Rentals. Our mission is to build the best rental company in the industry, and we have some big competitors in that industry, as you know, in that space. We're a small company, but our focus and mission is built, built around three primary tenants, people, service, and technology. People are everything. And without people, most of these strategies fail. Right. Service, it's a table stakes now. It's a requirement you must have. Technology is a very interesting play. We were able to take advantage of this startup company. We didn't really have any legacy issues to deal with. We had not pulled a bunch of companies together in an m and a roll up process. And we were able to take a clean sheet of paper and say, how would we design this technology approach with our customer interaction? How would we design this from scratch on a clean sheet of paper? We actually got to do that. Now, that's a little nerve wracking in some cases because you're having to kind of build out what that is. But it's also very exciting. We've involved our customers in that and we've been very creative. We've had some outside consultants help Domino's pizza. If you look at their application, they're delivering a pizza for $13 or $15. They're using quite robust technology to do so. And we sort of said, hey, if you can deliver a pizza for $15, we should be able to use this technology in our own business. This way. We're very excited about building a world class e commerce site where on mobile app where customers can do everything from tracking their fleet, they can control the fleet, they can track the telemetry around that fleet, where it is geographically, who's using it, when it was used, how long it was used, how it was used, and then we're also able to let them order new rentals online and through that app, stop rentals, take them off rent if you will, schedule a pickup, a delivery, and also all the way through to Bill pay, which were excited about. So we think that ease of use people are using their phone. Amazon has sort of set the bar here, the expectations around. Where is my rental equipment? It's on its way. Here's the gentleman that's going to deliver it. Here's where it will be. This is what it'll be picked up, taken away, etcetera. So Amazon's sort of set the bar for all of us, by the way, and we're attempting to deliver that same type of service to our customer. And we're excited about that. It is one of the benefits of being a startup and a new company is we're able to employ this world class e commerce mobile app to our customers. So we're rolling that out right now in sort of a beta version, and then we're excited. I think by the end of this year, we'll have that rolled out to perhaps all of our customers. We'll see how the rollout goes, and we're also getting feedback from our customers on the how to consistently and continually improve that process. So we're excited about that company. It's in a growth stage, but we're very excited about the opportunity Cypro Reynolds brings.
[00:20:05] Speaker B: That's pretty exciting. Darren, I'm going to be watching how you guys do it, because that's phenomenal. I mean, as you said, if you can deliver a pizza, $15 pizza, and do it, you're absolutely right. We should be able to do it in a much bigger market. So, Darren, there's a lot of exciting stuff going on in salmons, and you recently became the CEO. What do you think you envision for the company in the next five years? Ten years, 20 years? I'll let you pick the time horizon, but a much longer time horizon. What kind of a company do you envision Simmons to be?
[00:20:33] Speaker C: I'd like to say we would be a much larger version of the company we have today. I'm very proud of the company we have today. Our culture is fantastic. We're employee owned. We want to remain employee owned. We share success with our employees globally. Our ESOP is the primary tool we share that success with in the US, but we also have similar success sharing programs internationally. We're very proud of that. Philanthropically, we are very involved, and I'm extremely proud of our track record there and what our people are doing there. Giving up their own time and their own money, in many cases, their own talents to help people in need. So we're extremely proud of that. That's been a tenant in salmons dating back 50 plus years. So I would hope that we could build a company that is double the size we are today, but maintain all the traits we have. Today is my goal. And I think if we do that, and I believe we can, I will be very, very proud of that period of time.
[00:21:32] Speaker B: Fascinating. Darren, you've touched upon it a couple of times. You have a very unique business model. You're an ESOP. You're employing on talent matters. Talent always matters. But times like this, talent matters even more. Can you talk a little bit about how your business model is giving you a competitive advantage in the war for talent, in retaining good talent, acquiring, retaining, empowering them, and continuing to sort of get the best of folks and keep them going?
[00:22:03] Speaker C: It's worth repeating, people are everything. So without people, in my perspective, in my opinion, most of these businesses and strategies fail. Great leaders, great leadership teams, really great employees throughout the organization are the secret sauce of Sammons enterprises. We owe everything to the people at Sammons, across the world, across the globe, through every business. So I want to first thank them. I believe our ESOP model and our shared success model is very, very important. It's a key underpinning structure to that, empowering our people. We do share our success with our people in a material way, and we're very proud of that. And so we have found we're able to attract people with that sharing of success, with that partnering with them. I think also accountability and ownership are extremely important. So we, as I mentioned earlier in the discussion, we run a very decentralized form of governance and very decentralized, I should say. And people I find that are capable really are stimulated by that type of environment where they believe they own, if you will, that element of the business, and they're accountable to that business. And they truly behave in a manner which is consistent with our core values and also consistent with our growth aspirations and our value creation aspirations. So we want to empower people as far down the organization as we can, as close to the customer as we can. We think that's really important. So we're trying to make as few decisions as we can at my level, so that we meet our customers needs. Without customers, I remind people, quite often, without customers, there is no business here. So, you know, let's keep, let's keep them in our sites and make sure we're serving them well. Let's make sure we're doing that. Doesn't mean we're saying yes to everything all the time. That's not what I mean. But providing great customer service is valuable, particularly in today's times. And I think it differentiates us and our people when they feel empowered and they feel respected and they feel like we're sharing with them and engaging with them and they are. Since an EsoP owner, if you will, an owner of the company, I think that carries all the way through to that customer interaction. So I think that's our key. I think we stay with that process and we stay with those traits and I think we'll be just fine.
[00:24:28] Speaker B: Yeah, I mean, you guys have done an amazing, amazing thing of building samus to be a juggernaut, industrial juggernaut, an overall conglomerate in juggernaut. So I think there are a lot of lessons to be learned for folks as they're listening to you on how do you really leverage talent as a competitive advantage. Darren, maybe I'll sort of take now a big 180 degree pivot. As you know, myself and my colleague Gaurav, along with Ashutosh Pari, we wrote the book Titanium economy on the industrial sector. And sort of the overall theme on it, Darren, was this is a sector which is misunderstood, undervalued and unappreciated. You talked a little bit earlier on about industrials being one of the industrials and infrastructure being a couple of the verticals you focused on. What is your perspective? I mean, what do you think about the industrial sector? One, do you think what we said in the book is right? And two is, would you say there is a value to be gained for all of the players in doing something different going forward?
[00:25:24] Speaker C: Yeah. Well, I just finished your book a couple weeks ago. It was very well done. Very well done. I agree with a lot of the concepts you have in your book. Yes. Look, we're very excited about the industrial sector. It is one of our three key growth areas over the next ten years. And so we are laser focused on opportunities inside the industrial sector. I think there are many opportunities. There are so many niche companies out there that do like you outlined in your book, that people don't even know about that have created this niche space, create a great little business through innovation, through technology and through customer service. And so we. I'm very excited about the opportunity. We have to go find those companies. We have to partner with those companies, buy those companies, partner with them, invest in them, much like Fernway is doing, as you know. But I'm extremely excited. I think the opportunities there are abundant and I think they're out there. I think there are many talented creative leadership teams and executives that can come alongside with salmons come inside the Salmons portfolio that can deliver real growth for us. I think technology, as you mentioned earlier, is a key part of that. We perhaps can't do things like we've done them always in those sectors, but that's okay. I think we can be creative and look for new ways to deliver that good or service in a more efficient way, in a more creative way, in a less costly way for us and our customers. I'm extremely excited about it. I think there's lots of opportunities in the area. I know Fernway does as well, so we agree with that. And I agree with the premises in your book. I think it's very well done.
[00:27:01] Speaker B: Thank you.
[00:27:01] Speaker C: Darren.
[00:27:02] Speaker B: Maybe towards the very end we talked about the sector, we talked about salmons, we talked about titanium economy. The one thing we didn't talk about was you. So I'd love to sort of end the session with talking about your journey, Darren. I mean, give us a little more color about you as the listeners would love to know more about you personally.
[00:27:20] Speaker C: Well, thank you. You know, I'm honored to be the CEO of Samus Enterprises. It's a, it's quite an honor for me personally. I am excited about the opportunity here. You know, my personal beliefs are never stop learning, never stop improving the moment. I think you stand still, you're moving backwards in today's world. With chat GPT on our heels now and these large language models on the scene now, we've got to become even, even smarter as humans. So I'm keen on learning. I'm keen on continuous improvement. Personally, I challenge all of the folks that work with me to continue to improve. I think objectivity is really important. I try to view situations and opportunities and challenges as objectively as I can. I try to remove as much bias as I can from those we're obviously all inherently biased towards some perspective generally, but I try to view those opportunities and challenges and events as objectively as I can. I find the the outcome is greater if you do so. I also think you have to be willing to take risk, a measured risk. We can't grow and generate the types of returns Samus enterprises is seeking in a risk free environment. I'm not sure there is really a risk free environment anymore, frankly, but our return expectations are not the risk free rate, if there is one. We have to be prudent and smart about the risk we take, but we also have to be comfortable that I believe any form of investing you do in the business world involves risk and so you try to identify the risk. You try to measure the risk. You try to plan to mitigate the risk as much as you can. But at the end of the day, as you know, investing and building businesses and running businesses involves making decisions that involve risk. So we're working hard to, from a risk management perspective, to identify those risks. As I said, to be aware of them, to be looking for them, the what ifs and so on. But at the end of the day, you must take action and move on. And then finally, my, you know, my sort of core central theme is treat everybody with dignity and respect, always. So I try to, in my business life and in my personal life, I try to remain steady on that one. It's just to treat people with dignity and respect and fairness that they deserve. We're. We're all equals here. And I found that that tenant has served me really well in my business and personal career.
[00:29:43] Speaker B: So, Darren, the last question from my side as we conclude this, I'm sure you don't get a lot of free time being on the board, being the CEO of Simmons Enterprise, with all the things you talked about, assuming you have free time, I'm going to make an assumption here. What do you do in your free time?
[00:29:57] Speaker C: Well, there's not a lot of it. You got that part correct. I have four great kids, three of which are married. I have six wonderful grandkids. One more on the way, so a little boy on the way. So my wife and I primarily love time. Spending time with our grandkids and our kids and just hanging out with them and going on trips and just spending time with them is really rewarding. I like to exercise. When I do have some free time, I try to make that a routine that's difficult to fit in, obviously, sometimes, but I try to be consistent with that. I think health is a big focus of mine, and to be a good leader, I think you need to be in a good frame of mind, a good state of mind, and try to be as healthy as you can. So I'm trying to live up to that and exercise and be in a good state of mind, if you will, and be as healthy as I can be. So those two things, I play a little golf. I'm not very good. I always tell people I've played for over 50 years, and I'm terrible. So I enjoy that from now and again. But mainly it's exercise, spending time with my family, and that really probably consumes most of my free time.
[00:31:08] Speaker B: So, Darren, thank you. Thank you so much for joining the series. I'm sure the listeners are going to have a lot of great nuggets to take away from this. But as I said, what you have done personally and what Samons has done is amazing. And listening to you, it feels like the best is yet to come. So congrats for all the stuff you achieved to date and all the best for the next chapters. So thank you.
[00:31:29] Speaker C: Thank you, Nick and I really appreciate that. I do agree with you. We're very excited about the future, so we're very optimistic and we I'm personally very excited about the future of salmons. I think there's outstanding opportunities in front of us. And congratulations on your newest book. Well done and look forward to speaking to you again soon.
[00:31:47] Speaker B: Thanks, Darren.
[00:31:53] Speaker A: Thanks for listening to Ina Insights. Please visit Ina AI for more podcasts, publications, and events on developments shaping the industrial and industrial technology sector.
