Growth Strategy extraction from O'Neal Steel: A Business Built on Family Values
By Lauren Duensing of Modern Metals, A TREND Publication February 2007
Growth strategy
"Several factors drive our expansion plans, including customer needs, strategic plans, our vision of being the recognized industry leader, growth-minded owners, benefits of economies of scale, industry dynamics and diversification," notes O'Neal.
And the diversity is all carefully planned. When O'Neal makes an acquisition, it tends to look for a company with "strong management; an employee-oriented and entrepreneurial culture; good relations with customers and suppliers; strong profit potential; and geographic, product and customer segments that fit with current or expansion plan," says Mary Valenta, CFO. "We created a strategic plan with criteria in what we're looking for in an acquisition."
The company then is able to look for opportunities that match its needs. "One of the first criteria was some diversification from our traditional service center, although we continue to grow that business also. Diversification led us into the aerospace and other special alloys industries," she says.
After finding a company that fits and closing the deal, O'Neal takes a "barbell approach" to integrating an acquisition into its operations, says Valenta. "Strategic planning is meshed with O'Neal's strategy by the executive teams; sales, purchasing, operations, systems and processes remain autonomous at the subsidiary level; and administrative functions are assimilated by a cross-functional acquisition team responsible for areas such as risk management, cash management, employee benefits, incomes taxes, financial reporting, payroll, employee benefits and internal audits."
As part of this process, "many ongoing, functional communications and meetings are held across companies to share best practices, to ensure basic consistency and to provide guidance and resources," she says.
Managing all this growth isn't easy however, says Jones, "First of all, the acquisitions we have made in the past few years have remained independent." He notes that the companies have their own management and O'Neal hasn't had to devote a large amount of time to these acquisitions, as it would have if it simply rolled them into the O'Neal umbrella. "They are successful companies, and we just nurture them and help them grow," Jones says.
Another strategy O'Neal employs it help manage its growth is changing its structure. "We've gone to a more regional structure, whereas it years past, we didn't have to do that." Jones says that this has helped the company manage its growth. "You just have to delegate and we do that."
Branching out
To stay competitive, the company places a focus on maintaining relationships with suppliers, worldwide sourcing, excellent supply chain management and outstanding purchasing employees, says Jones.
"Many of the new industries we're in, such as aerospace and energy, have provided additional opportunities to expand internationally. O'Neal has one plant in Mexico, and now its subsidiaries have locations and sales reps all over the world, so the challenges are keeping up the growth," says Valenta.
In addition, more customers are expecting service centers to provide them with various types of value-added processing. Jones notes that first customers asked O'Neal to cut metal, then requested secondary processes and finally asked the company to kit the cut parts so they could go directly into assembly.
"It has been more of a migration," he says. "Through our sales force we go to the manufacturers and ask what they want from a supplier. It may not be a typical answer but that hasn't kept us from doing what they would like done."
The company does laser cutting; oxy-fuel and plasma are cutting; coil processing, including cut-to-length, slitting and blanking; shearing; sawing; rolling of plate, angles, structurals, bars, tubing and pipe; forming, welding (as well as a weldment division); punching; drilling, notching, machining and painting.
By having these capabilities O'Neal is able to reduce investment costs for its customers, as well as differentiate itself from other service center in the industry. "We offer a much broader range of capabilities to our customers than any other large service center in the country," says Jones. "Our company's roots were in fabrication so we've always been a service center that did a significant amount of processing for our customer."