Carlton Group Takes on Signet6

by James Gordon  on Monday, Dec. 18, 2006 12:00 am  

Bill Carlton, left, has started his second career as a growth mentor to Roger Snyder's Signet6 of Little Rock.

At the age of 57, Bill Carlton has just embarked on his second career. But it's not as though his first venture was a flop, as anyone who knows anything about Arkansas business can tell you.
Last September, Carlton sold Carlton-Bates Co. of Little Rock, the electronic components supplier co-founded by his father, to Fortune 500 company Wesco International Inc. of Pittsburgh.
Carlton had worked in the family business for 35 years, the last 21 of which he served as chief executive officer. During his tenure as CEO, the company's annual revenue grew 650 percent to $276.4 million, putting it at No. 26 on Arkansas Business's annual list of the state's largest private companies.
Having poured so much of himself into the company, Carlton admitted that deciding to sell was difficult.
"But there comes a time in history when you have to say, 'I think this is about the right time to do something like this,' and do it, regardless of the emotions involved," Carlton said.
Details of the deal with Wesco were not disclosed at the time, but when asked, Carlton confirmed that he sold for $250 million cash, a handy sum split among the company's few shareholders.
But for the first time since graduating from college, Carlton was out of a job, and he wasn't ready to retire. He had some commercial real estate, which he still owns, in Little Rock, Tulsa and Springdale, but he wanted a project he could sink his teeth into.
"I wanted to stay involved. I like investments. ... I like companies that are, not necessarily start-ups, but are in their embryonic stage where they can make quick decisions, they can take care of their customers and they can move forward at a much stronger pace," Carlton said.
So Carlton teamed up with Steve Allen, his former chief financial officer at Carlton-Bates, and Stephen Weintz, who has run his own business-consulting firm since 1994. The trio realized that they could offer expertise in management, finance and marketing: the disciplines that young businesses with growth potential should focus on.
"We found there is a need in the community of young entrepreneurs who start off, and they know a trade but they don't necessarily have a business background," Carlton said.
The Carlton Group was born. In the fall, the group started seeking potential clients, and a month ago they announced (as "Whispers" readers know) an agreement with their first, Signet6 Network Science Inc.
Based in Little Rock and incorporated in Delaware, Signet6 is a quiet telecommunication services company that has actually been around since 1991, when it was founded as Intelex by Roger Snyder.
Snyder, who's still the company's general manager, and Carlton believe Signet6 is poised for a major expansion fueled by tighter control of the company's financials and better leveraging of existing relationships with big clients. Carlton intends to mentor Snyder in taking Signet6's business model to the next level.
"I'm pretty old for going back to school at my age, I guess, but that is what I am doing. I'm back in school, and [Carlton] is the teacher," Snyder said.
Business Evolution
Carlton-Bates was founded in 1957 by Joe Carlton and Doyle Bates, who both previously worked as electronics salesmen for separate businesses. Between them, they had little more than $10,000 in startup capital and — as Bill Carlton told Arkansas Business in 1999 — "a lot of sweat equity."
Originally, most of the company's inventory consisted of picture tubes and vacuum tubes for television repair companies and smaller television parts for consumers.
After building relationships with electronic part manufactures, the focus of the company shifted to supplying the growing demand for electronics as industries around the state began to modernize.
But as the business grew, Bates and Joe Carlton struggled to agree on issues faced by the company. In the late 1970s, the company split operations between its locations in Little Rock, run by Carlton, and Fort Smith, run by Bates. Eventually the Carlton family bought out all of Bates' interest.
"My dad and Doyle Bates grew up together and were good friends. They decided at one point in time they would rather be friends than partners," Bill Carlton said.
A few years earlier, Bill Carlton had come to work in the family business fresh out of Baylor University at Waco, Texas, where he earned his bachelor's degree in accounting in 1971 and had worked in the school's new computer lab. When he took over management of the company in 1984, he applied all he had learned in school to improve the Carlton-Bates inventory management system, which eventually kept track of some 80,000 parts.
All the while, Carlton said, he kept his focus on serving his customers.
"Our margins in our industry were probably 2 percentage points better than anybody else, and the reason is because we showed our customers the service, and we showed value in those services," he said.
The 1990s saw tremendous expansion for Carlton-Bates, mostly through strategic acquisitions that Carlton oversaw. The largest was Acquired Resource Electronics, a division of NCH Corp. of Dallas, which was acquired in November 1999. That acquisition brought in about $60 million in revenue and 6,000 customers.
The experience gained from a dozen acquisitions laid the foundation for Carlton's future career as board-level capital adviser. With all he knows now, he believes he can help guide his clients through similar transactions.
"Deal-making at this level is very much a science and an art," Carlton said.
Method to Signet6
Signet6 isn't the type of company The Carlton Group set out to find. At first the group was looking for a three- to five-year-old company in the industrial, manufacturing or distribution arena, none of which defines Signet6.
Signet's predecessor, Intelex, started out repairing and reselling telecommunications equipment for companies like Nortel, Rohm and Lucent. Eventually, the company developed a solid base of about 2,500 customers.
But by the mid-1990s, Snyder said, he saw what was coming: Companies like eBay and Google would streamline the market and eliminate the value added by his company's ability to match sellers and buyers of the used equipment.
So around 1998, Intelex started shifting away from its original work as an equipment repairer toward providing professional services for voice-switching and voice-network management. Initially the company focused on service for Nortel and Avaya system services. Now the company works for clients such as three branches of the U.S. military, the Federal Aviation Administration, General Dynamics and Computer Services Corporation.
Snyder wouldn't comment on his company's annual revenue, but he said Signet6's 300 independent contractors provided technical support for such networks in all 50 states, Europe, Canada and the Caribbean. They are supported by the company's 25 core employees in Little Rock. The company hopes to be in Mexico soon.
"Our mission statement is to be a company that delivers telecommunications engineering, project management and network support on time, on budget anyplace, anytime," Snyder said. "Our real specialty is in the larger and the more complex type of work — that's where we really excel and focus on."
The philosophy that pervades Signet6's operations — and inspired its name change in 2004 — is called Six Sigma, a business improvement method used to systematically eliminate defects and raise the quality of output in any given process, sort of like a quality control system.
Six Sigma was created in the early 1980s by Motorola as an engineering management method. Soon, other companies like Ford, Sony, Texas Instruments, Lockheed Martin and General Electric began adopting the method.
Carlton said he was familiar with Six Sigma as a "lean manufacturing" approach and that it had been criticized as being a flavor-of-the-day for many years now.
"I think the secret to it is, if it works for you and you can apply it to your business, you ought to use it. If it is just something where you get up one morning and you say, 'Hey, everyone else is doing Six Sigma. Let's do it too,' I don't think that is a good reason to do it," Carlton said.
In fact, one of Signet6's most common services may be a perfect application of Six Sigma: saving critical networks.
Go VoIP, Young Man
The next big step for Signet6, according to Snyder, is voice over Internet protocol (VoIP). And it's no wonder: Recent market analysis has predicted VoIP use to skyrocket from 2.2 million to 19.8 million users by 2009.
"Voice over IP is finally exploding. It's been around for over 10 years, but there were problems with the quality of service, and there were problems with the lack of knowledge among engineers and technicians on how to install it and make it work effectively," Snyder said.
But with the next generation of VoIP equipment, according to Snyder, a lot of the problems have been fixed. Now wireline and wireless carriers seeking to take advantage of the technological advancements will need technical support for those networks.
That's where Signet6 plans to step in once it can line up more infrastructure and manpower.
Carlton said that, for now at least, his firm wouldn't directly finance Signet6's expansion.
"Now, I'm not saying we won't invest in Signet6. It's just at this point in time, we don't think that anybody should be investing in Signet6 because we don't think anybody knows enough about them."
In other words, The Carlton Group is investing its expertise in Signet6 to make it a company worth investing in.



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