Beanstalk Collaborative Offers A New Solution For Ownership Succession That Preserves Community Wealth

With the exit of the Baby Boom generation from the workplace into retirement now well underway, there is additional pressure for small manufacturing companies to have definitive plans for succession of ownership. That’s always a challenging proposition, even when there’s a family member or business partner willing to assume control. It becomes a nightmare when there’s nobody obvious to take the reins.

Historically in that case, the ready answer was to sell, especially to an owner of a similar business, a corporate buyer or a private equity consolidator. However, these kinds of business consolidations often result in either downsizing or closing the original business location, leading to significant job losses and negative effects on the local community.

Small manufacturing businesses are integral to the communities in which they reside, offering well-paying jobs and a sense of connection among employees, neighbors, and stakeholders. Preserving these businesses is essential for local economies and the U.S. economy as a whole. U.S. manufacturing contributes roughly $2.4 trillion to the U.S. economy and accounts for 11.1% of GDP. Small manufacturers, which comprise over 75% of total U.S. manufacturing companies, are economic backbones for their communities.

Now a unique startup is tackling those problems that arise from the lack of succession planning, and addressing the need to keep small manufacturing alive in communities. Beanstalk Collaborative Community Wealth, LLC, founded by three experienced executives from the manufacturing world, Troy Roberts, William Smith, and Ted Stolberg, was established specifically to “protect the legacy and take care of the baby” for owners who are nearing retirement. “Our careers have been about building manufacturing businesses and recognizing the benefits those businesses provided their local communities,” said Roberts. “Our collective experience provided the foundation for the firm’s mission, which reads, ‘Maintain and grow community wealth by partnering with manufacturing owners to preserve their legacies, and keep their businesses, jobs, and economic benefits in local communities.’”

The three founders were uncomfortable with today’s private equity model of consolidating smaller businesses that often results in the loss of higher-paying jobs and economic harm to local communities. “We appreciate that two-thirds of new jobs in the U.S. are generated by companies of 25 employees or fewer,” Roberts explained. “We’re looking to acquire smaller manufacturing firms with good management teams. Simply stated, our buy, build, and hold model means investing in people, the business, and its community.”

Beyond simply acquiring the business, Beanstalk looks to improve the company’s performance and growth opportunities. “We call it the ‘caretaker model,’” Roberts explained. “We perform a gap analysis, and invest in people, process, and equipment that supports productivity and growth.”

Beanstalk closed its first acquisition last October, purchasing Tolerance Tool, LLC, a manufacturer of molds for plastics injection and liquid silicone rubber molding in North St. Paul, Minnesota. “Almost two years ago, I learned from the previous owners that there was a prospect of an acquisition, because one of them wanted to retire,” said Greg Kolbeck, General Manager of Tolerance Tool. “We met with Troy and Bill from Beanstalk, and they made their pitch. I was somewhat skeptical. When I learned this was their first acquisition, I was even more skeptical.

“But we saw quick improvements. We had a competitive benefits plan, but since Beanstalk came in it’s been enhanced, with better PTO and better methods for making sure pay and benefits are competitive. One of the biggest improvements was an incentive bonus plan. I haven’t seen cohesiveness in our team that I see now for many years.”

“We would like to acquire several businesses a year and grow from there,” said Roberts. “We would like to do more acquisitions of mold-builders like Tolerance. Our plan is to hold them long-term and build our portfolio. Funding is not a problem, because there’s a very good risk-adjusted rate of return for Beanstalk’s mission-aligned investors.”

“It’s definitely been a very positive experience,” said Kolbeck. “We’re working on spreading our wings on our customer base now. There were lots of things I didn’t know during the transition, but 18 months in now I’ve learned a lot along the way. One of our owners is still somewhat involved, and the other one retired. They didn’t want to sell the traditional way–they took a lot of pride in what they had built.” That flexibility for the sellers is a big part of the Beanstalk model.

“Right now is very timely,” said Roberts. “Owners tend to wait too long to deal with the issue of succession, to the possible detriment of the business. Beanstalk is offering owners a path to liquidity and confidence that their legacy is protected, and their business and employees are in good hands.