Advice from the executive office.

An enduring feature of PIMA's International Management Conference is the President's Panel. Each year, PIMA invites leading executives from the paper industry and its suppliers to open the conference with their perspectives on the business of making paper. It is typically a very good and well attended session at the conference. This year's conference, held in San Francisco, California, USA, this past June, was no exception.

This column focuses on advice provided by two speakers: Arnie Nemirow, CEO of Bowater Inc., and Tom Lauterbach, president of JJ Plank/Spencer Johnston. Nemirow explained his four basic principles of mergers and acquisitions based on years of deal making and many transactions:

Rule 1: The CEOs of the buying and selling companies must directly negotiate key parts of the deal. "This must be done face-to-face," he said. "I have regretted the instances where I have not done this."

Rule 2: Lawyers, accountants, and bankers should have only limited roles in the deal. "We must remind these people that they are agents and not principals even if they think otherwise," said Nemirow. "Executives need to take responsibility for their own decisions and not delegate them to outside advisers. Too many bankers and lawyers create paralysis by analysis."

Rule 3: The deal must make strategic and financial sense. "Once a deal starts, it gains momentum. People want to finish it, but the numbers must continue to make sense as the deal develops."

Rule 4: The merger or acquisition must be executable in a reasonable period of approximately three or four months. "If no closure is in sight, the companies have a real problem," said Nemirow. "The CEO should know when to pull out of a deal. We have left many more deals than we have completed. If you must, simply shut off the lights and leave."

SMALL COMPANY SURVIVAL

Lauterbach spoke about the management challenges for a small supplier competing in the paper industry, characterizing it as being a "David among Goliaths." His company produces dandy rolls, bowed rolls, and spreader rolls. Over the past two years, it has been in "survival mode." JJ Plank worked closely with Beloit Corp. for 20 years, but Beloit's bankruptcy two years ago changed that business model forever.

Lauterbach used his company to illustrate his "Seven rules for small business survival:"

1. Don't resist change, welcome it. Avoid the "we have always done it that way syndrome" and remember that a small company can change easier than a large one.

2. Expand your core competencies. "We are moving from being a producer of dandy rolls and spreader rolls to our true core competencies. These are handling wires, stainless steel, and plastic, and putting them on round rolls. We are expanding up and out into other areas such as cylinder molds, deckers, cleaners, washers, forming rolls, and other rotating equipment."

3. Communicate to everyone.

4. Exhibit leadership integrity. Your best customers should receive the best products, services, and terms. Preemptively acknowledge any significant issues to your customers. Be predictable.

5. Gather strategic partners. Be creative in seeking and developing new agreements. "We have a joint venture in Europe and use subcontracted service agreements, supply agreements, sales/service alliances, and technology alliances with development/marketing agreements," said Lauterbach.

6. Manage your products. Know where your products and your competitors' products are in the product life cycle. Develop new ones and abolish old ones. Products must run longer and work better. Extend product run time and life cycles. Add value with "smart" products. "For example, we are producing spreader rolls that tell us about vibration and temperature," said Lauterbach.

7. Execute, execute, execute. Service sells. Be efficient, manage your products, and reward your experts. "Paper companies are actually becoming smaller as they consolidate," said Lauterbach. "We serve bigger paper companies with fewer internal support structures. The remaining companies need help on the service side so you must sell service. Hang on to your experts. They must be very good and, most importantly, better than the big companies' generalists."--Alan Rooks, editorial director, Solutions! magazine.

For information about PIMA's 84th Annual International Management Conference, June 29 July 2, 2003 in New York, New York, USA, visit pimaweb.com or Call 847-375-6860.