Building Acquisitions on Trust

It was 1994, and Molly Kellogg was guiding high-end bike trips across Europe when her father, Chuck, called. Their family business, Hubbard- Hall, had just bought a company, and he asked her to run the newly acquired division in Wilmington, Massachusetts.

Just a year after finishing her MBA, Kellogg saw an opportunity. “I could cut my teeth outside the mothership and learn to succeed or fail on my own,” she says.

Now, 30 years later, acquisitions continue to be a cornerstone of Kellogg’s career. Only now, as CEO, Chairman and President of Hubbard-Hall, she believes they will help the sixth-generation, 175-year-old industrial chemical business continue to grow.

Kellogg worked her way up the company, learning how the business ran and the intricacies of the chemicals it manufactured to treat metals. She saw how acquisitions could happen, expanding the business’s capabilities, and how they could fail.

“It’s like a sales process. You always have to remind people that you’re interested,” Kellogg says. “Fifteen years ago, a competitor/partner of ours was sold to a private equity firm.

And we asked, ‘How come you didn’t come to us?’ He said, ‘We didn’t think that you were interested.’ We told him, but he’d forgotten. The conversation has to keep going.”

Since becoming CEO 10 years ago, Kellogg has been searching for acquisitions, but she found little success initially. She’d talk to brokers, mergers and acquisitions firms, and competitors to gauge their interest in selling, but no deals worked.

Still, Kellogg kept the conversations going. Then, in 2020, everything changed.

Hubbard-Hall has made four acquisitions in the last four years. All the conversations and reminders — they finally paid off.

“In the one that we just finished, I’m their competitor. I’ve known them for 20 years, and we started the conversation a decade ago,” Kellogg says. “He didn’t like my number, I didn’t like his number. Eventually, the numbers came together.”

As the acquisitions came in, Kellogg learned many lessons. First, she’s learned that building trust is the most important factor in any acquisition. Each of the companies Kellogg acquired was a privately held business managed by its owner. All were concerned about what would happen to their business, products and employees, Kellogg says.

These executives wanted to know that they were selling to a good steward. Likewise, Kellogg says that Hubbard-Hall must trust that the businesses it acquires are well-built, a required ingredient for growth.

“We can put everything in a contract, and you can do all the due diligence, but I’ve got to trust it,” says Kellogg. “And the person on the opposite side representing their business, they’ve got to trust me.”

In a recent deal, trust led to the close. The two sides were far apart on a working capital number; they had already extended negotiations by a month, and the deal was down to its final Friday. Kellogg was playing in two hockey games that day — she played all four years at Princeton and was named captain her senior year — and received a call from her attorney between the games. More talk of extensions and extra time. Kellogg wanted to finish the deal now.

Between the games, Kellogg called the owner of the other business and kept it simple: “How about we go halfsies?” she recalls asking. They agreed to meet between the two numbers, and Kellogg got back on the ice.

“Underlying that deal was trust that we’ve both made a good-faith effort to get the numbers right,” says Kellogg.

Kellogg has also learned that deals are tenuous until they’re signed, which might take years. A lot of emotions are involved, she says, especially for sellers. It’s best to keep deals low profile with a small, internal team until the close, Kellogg says.

Once deals are done, it’s essential to ensure that the cultures are merged thoughtfully, adds Kellogg. Hubbard-Hall has been named a Best Place to Work for eight consecutive years with high cultural standards. After the acquisition, she knows that the newly acquired company will see a lot of change. To ensure a smooth merger, Kellogg says that they work slowly toward change, allowing new employees to become accustomed to the Hubbard-Hall way.

“It’s the right thing to do,” she says. “We’ve got to keep morale as high as possible.”

Long before this flurry of acquisitions, Kellogg had help from her Vistage group. She first joined a Vistage Key Executive group 25 years ago, changing groups as she moved up the ranks at Hubbard-Hall. In her current CEO group, fellow members and Chair Nancy Babine Kucinski have been pivotal in helping Kellogg learn more about acquisitions and asking tough questions about assumptions she’s made, integration issues and whether a deal’s financials will work.

Kellogg says Vistage has been helpful by allowing her to see acquisitions through the eyes of others. This was especially true during her first buy when she was still learning about deal structures and examining another company’s finances.

“Vistage adds color and depth to how I’m thinking about what I’m doing,” she says. “It may give me a new idea or take me down a road that I hadn’t anticipated. That’s the beauty of Vistage — somebody can present an issue that doesn’t seem like it has anything to do with my business or me. But I always learn from those conversations.”

Kellogg has also learned from her own mistakes during acquisitions of businesses in her industry. While buying another chemical manufacturer, Kellogg assumed that the company used the same terms as Hubbard-Hall. What she found was deeper complexity than she had imagined.

“We both used the same language but understood things differently,” Kellogg says. “In an acquisition, challenge yourself to make sure you understand the terms. I keep learning that lesson every year.”

Now, Kellogg says that Hubbard-Hall has two more potential acquisitions in the hopper. There’s another that likely won’t happen, but she plans to keep the conversations going — she’s learned that you never know what will happen years down the line.