The Farm Team
In the age of the hostile takeover, Charlie Leighton may be the friendliest acquirer around ("Tender Offers," September 1986). In any case, he has built CML Group Inc. into a $350-million company by creating an environment that has proved irresistible to owners of successful private businesses, including The Nature Co., NordicTrack, and Carroll Reed. As CML has grown, however, Leighton has found himself spending more time courting shareholders than wooing tomorrow's hot companies.
His solution: cultivate a "farm team" of promising young companies not yet ready for acquisition. Two CML staff members scour the country looking for undiscovered consumer-product companies with sales under $4 million and a target market of affluent, active 35-to-55-year-olds. CML offers management expertise and financing in exchange for an option to acquire the company in five years at a price based on earnings.
It was a deal that Lillian August couldn't resist. She had a successful small business selling country-style fabrics and wallpapers through mail order and licensees, doing annual sales of some $250,000. With $2 million from CML, August opened her first retail store in Westport, Conn., in 1987. "The store is a laboratory where we can refine the concept and build brand awareness," says Rob Yahn, one of the farm-team leaders. CML plans to help August open 20 stores over five years.
CML also invested $700,000 in Placewares, a Boston-based chain of stores selling space-organizing products. Venture capitalists had offered the founders, Lu and Maynard H. Lyndon, plenty of money to take the chain national, but they were skeptical. "Our warehouse was in frightful condition -- bursting at the seams," says Maynard.
CML agreed that the priority was to improve the company's operations. For that reason, its money went to new computers, inventory controls, and point-of-purchase systems.
Now, with their house in order, the Lyndons plan to move forward on their five-year plan to open up to 20 stores nationwide. Leighton, for his part, hopes that new players such as Placewares will "energize the bigger hitters on the CML team."
-- Elizabeth G. Conlin