Consider Our Name

{Q} Your company magazine describes Liberty Diversified as a portfolio manager of your group of operating businesses.

{A} Yes, that is correct for LDI as the ‘parent’ company. Our most recent strategic plan, however, identifies several other ‘driving forces’ that distinguish our individual business units, including manufacturing excellence, technology, being a low-cost producer, and the emphasis on products and services. Within our various divisions, we see all of these. 

{Q} Bring us back to portfolio management, which lends itself to certain skill sets.

{A} At the least, it lends itself to the recognition that we aren’t going to tie ourselves to saying that every business we have always fits, or that we won’t get into new businesses that we’re not currently in. The world changes so much faster than it used to. So, we need to recognize if it’s an industry, say, like health care, that we want to invest in, then we can move to do that without restraints. But there are industries we won’t invest in. We have consciously decided that we will not invest in industries that potentially could harm others—for example, tobacco, gambling, or alcohol.

I’m not suggesting that the people in those industries are dishonest or anything else. Those industries are simply outside our value proposition.

{Q} Your management discipline, then, is the strategic buying and selling of assets?

{A} Even though we’re the stewards of our company’s growth and security, initially we fought the idea of portfolio management. Why? Because we’ve always been about service and products. We love our customers. We bend over backwards for them. But at the end of the day, we do expect a legitimate return. We do expect growth. If that’s the case, we do want to look at the logical application of the assets we do have to employ.

{Q} A good portfolio manager cuts his losses sometimes.

{A} There are different styles of portfolio management. And we have shed assets. We sold Fidelity Products [in 1999], the second company we ever started. It was a mail-order firm selling items like file boxes through the mail. It was part of our key to success in the ’60s and ’70s. But when we got to the ’90s, we saw stores like Office Max servicing these needs, so we felt it was time to move out of that business.

{Q} Can portfolio companies do a makeover?

{A} I told one of my general managers that he had become very successful at adapting to the changing markets. He told me, ‘Mike, you probably won’t recognize the division five years from now.’ I asked him what he meant by that. ‘The market is changing so fast that we need to continue to adapt, even if it means moving away from what have been our most successful products,’ he said.

{Q} You want to drive sales from the current figure—around $400 million—to $600 million by 2010. How much of that growth will come from acquisitions?

{A} About half. That said, some of the organic growth, the internal growth, will come from the strategic formation of new divisions within existing businesses. Those new divisions won’t start out as big businesses, but hopefully will have enormous potential over a period of time. However, we’re not expecting returns overnight, so some of the growth over the next few years will also come through acquisition.

{Q} What is meant by a ‘new’ division? A new product? A new customer segment?

{A} All of the above. Consider our name: Liberty Diversified. The new divisions will come first from markets that we’re not currently in, such as health care, which we see as a growth market. We don’t have a lot of products solely or specifically for the health care market, but we think some of our existing products, such as seating, belong in that market. We also think that when we find a customer solution we should ask, who are the other customers that need that same solution? And if there are enough customers identified, we’ll create a new company around that solution.

{Q} In other words, you’re extending your reach.

{A} We feel strongly that we need to bring value to an industry to go into it.

{Q} For the other 50 percent of your targeted growth, describe your acquisition process.

{A} The discipline in our acquisition process has been honed over the last several years. We’ve done one to two acquisitions a year. We’ve learned many lessons. Sometimes, an acquisition is nothing more than a line extension. Sometimes, an acquisition is a standalone business, like GeoDeck, a composite decking company that we acquired less than a year ago. We’ve learned that it’s not just about products and the product knowledge; it’s also about the culture of a target company. Does it fit with the LDI culture? We have to dig into both the products and the people.

{Q} Will you be doing larger deals in the future?

{A} In the past, we’ve played in the $15 million to $20 million acquisition realm. Now, we’ll be looking at $40 million to $50 million companies. We also want to become more international, more global. We think 10 to 15 percent of sales should be international by 2010, up from about 7 to 8 percent today. That could mean making product overseas or selling domestically produced product to international customers. For example, we’re selling the GeoDeck product in Japan and have several other product offerings in Europe.

{Q} Do you have financial metrics for existing businesses or acquisitions?

{A} We look for 15 percent return on invested capital.

{Q} Is there a company out there that you aspire to be like? Who is the model?

{A} It’s a combination. There are great parts of many companies. For example, that Medtronic and General Mills continue to be viewed as great places to work is something I aspire to. There’s another element of Medtronic. I love the fact that they have a purpose they drive into their business. It’s all about the value of wanting to matter. Certainly, you have to make money to do that. But what is the legacy we leave behind? Have we left the world a better place? Have we developed careers for our people, not just jobs? Have we explained to our customers that we care about their success? If we haven’t contributed to putting more money on their bottom line, then we aren’t doing our job for them.

{Q} Liberty has about 100 employees at the corporate level. So, you’re not decentralized in the model of, say, a Warren Buffett, who famously has only a handful of employees at the holding-company level.

{A} We feel there is great efficiency in providing and sharing expertise. Plus, start-up divisions have access to expertise they couldn’t afford if they were just on their own. A strong IT department, for one. A transportation department that moves our freight all over. If the businesses try to provide those functions individually, they don’t do it as effectively. And finance. We have accounting departments in each of our divisions. But we only need one corporate finance group responsible for our banking relationships and the many other elements associated with finance.

{Q} Your vision statement says that Liberty Diversified aspires to be one of the world’s best privately held companies. What does ‘best’ mean?

{A} The answer depends on the audience we’re talking to. Employees will look at us as a great place to work, and know that we’re concerned about them and their families. For customers, it means that we’re a superior solutions provider. To our community, we want to be viewed as a great community citizen. It’s not just about the company, it’s not just about how much money we’re making. To the shareholders, we want to give them a legitimate return. But that idea touches not only on the monetary. It’s also philosophical and cultural. The Fiterman name is synonymous with the company, even though the family name is not in the title. Therefore, we recognize that it is more about the kind of people we want to be known as, not just about how much money we’re making.