At Beatrice, he found himself involved with new people and facing new sets of problems. "My challenge at Beatrice," he explains, "was devising a strategy for managing nonequity-owned businesses. Invariably, the nonequity manager hadn't buiIt the business and didn't know it the way the founder did. The trick was to get him to look away from the ledger for a moment and to look at the people, the systems -- what his company was actually doing."
Lovejoy spent more than a year in research -- studying business-planning manuals from General Electric, Xerox, IBM, and others, and conferring with business guru Peter Drucker -- finally producing a 70-page guide, The Industrial Division Business Planning Manual, which is still used at Beatrice.
The aim was to produce "business generalists," a "dying breed" that Lovejoy feIt had to be preserved.
One exercise he devised required the managers of his profit centers to produce a strategic business plan "without using any numbers." The purpose, again, was to force them to stop asking "How much?" and start asking themselves more important questions: Do you know your business? Do you know your markets? Do you know your customers? Good management, Lovejoy felt, should be much more than a "numeric exercise."
Frank Femali, Sauey's brother-in-law and his first employee, took over the operation of A-1. Being part of a huge, diversified organization (fiscal 1982 sales, $9 billion-plus) had certain advantages, Femali discovered. "It's kind of nice to know that, if you do get in trouble, you have a sugar daddy," he admits. Beatrice also sharpened A-1's management and marketing skills. "They taught us how to do more formal strategic planning and had us run our projections out further than we would have otherwise, " explains Femali.
But there were also disadvantages -- the paperwork, especially that required by federal regulations concerning publicly held corporations, proliferated, and corporate delays hampered the decision-making process "In a small company," notes Femali, "you sit in a meeting and say, 'What seems to be the problem here?' And somebody says, 'We need a machine tool,' and you go out and buy it.
"In a large company, you've got to put in a requisition, justify the return on insays Eemali, "and, if they had any doubts the recession took care of that."
Lovejoy wasted no time: "I went to [Beatrice chairman] Jim Dutt, and I told him I had been private and I had been public, and, right now in my career, private looked better. I told him I was interested in buying some businesses." The negotiations and efforts to find funding took nearly a month and gave Lovejoy cause to regret a remark about not wanting "special treatment."
"Beatrice had a target price that they wanted," Lovejoy explains, "and I had to go up to it -- they didn't come down one cent." As in other management buyouts, the corporation, familiar with the buyer's hunger, obtained a better price than an outsider might have paid. (One source pegs it at about $14 million.)
Lovejoy's search for money involved "some scrounging and scratching," but it eventually paid off. It not only gave him an opportunity to fulfill the dream of a lifetime, it also saved his life.
"The lending institution [American National Bank & Trust Co. of Chicago] required a substantial amount of insurance," he recalls, cracking his gum," and I had to take a physical, including a stress test The doctor came out and told me 'Well, the bad news is that you've got some clogged arteries in there. The good news is that we can do something about it.' " Lovejoy eventually wound up in the hospital, where he underwent a double coronary-bypass operation.
"If I hadn't decided to buy the companies, I might not be here today," he observes, his eyes betraying some lingering concern. But, 4 1/2 weeks after the surgery, he was back on the golf course at the Glen Oak Country Club in Glen Ellyn, Ill., putting them in from 10 feet out.
The deal with Beatrice, signed on April 29, effective May 1, included A-1; Acme Die Casting, a 150-employee company in Northbrook, Ill.; and Artistic Texturing, a six-person chemical-milling concern in Milwaukee. "Like A-I, Acme has a reputation for high-priced, high-quality aluminum and zinc die castings," Lovejoy notes like a proud new father, "and Artistic Texturing was something I'd bought for Beatrice to go with A-1. It makes use of a patented acid process to do precision metal removal -- it's another tool in the toolmaker's box." Acme, which provides components for the telecommunications industry (among its clients are IBM, Xerox, and AT&T), is the largest of the three, accounting for 65% of the income of Lovejoy Industries.
Management remained the same at each of the companies, but Lovejoy's entrepreneurial energy was finally free. "Between Friday, when Beatrice owned A-1, and Monday morning, when I did, we had two completely different strategies," he says. "They had to continuously report increased earnings because that's what the stockholder looks at, but, as a private business, I'm more concerned about cash flow, particularly with the debt we have to service.
"The shareholder wants the return, earnings per share, but the general manageris screaming, 'Give me the money to buy the equipment to become more productive to beat the Japanese.' Those are two of the principal opposing forces at work in the economy today."
Lovejoy also promptly invested in a CAD/CAM system that will eventually cost $2 million to $3 million but that puts A-1 back on the leading edge of mold-making technology. "There are only about 10 shops in the entire country with CAD/ CAM capability," observes one slightly green-eyed competitor. "Lovejoy's a very progressive thinker. He's going to get things going again."
Operating decisions are made more quickly now, and the paperwork has been cut substantially. "I don't want to over-burden my people with controls," says Lovejoy. "I want them to have the authority and the responsibility and risks associated with it."
Femali notes that the principal change has been "the quickness with which we can react" to developments in the market or industry. "I wish I could say that business had spiked up quickly after the buyout, but that wouldn't be true." (A-1 now has about 75 clients, a number of them Fortune 500 companies, and annual sales of about $8 million.) After a moment of thought, he adds, "I also think there's a closer feeling again."
Lovejoy continues to monitor the companies carefully while the three employees at Lovejoy Industries Inc. headquarters provide centralized cash management, profit-sharing, and banking and legal expertise. In general, though, he still practices the decentralized brand of management that he preached at Beatrice. "You have to give people a chance to succeed as well as a chance to fail," he observes, noting that the combination has worked well for him.
He leans back in his chair, cracks his gum a few more times, and, considering what he has accomplished, shakes his head in honest amazement. "It's been a helluva '82," he exclaims. "I quit my job, I bought three companies, I became a grandfather for the first time, and I underwent open-heart surgery.
". . . and the primewent down!" he realizes with a burst of laughter.
