by Kyle Massey
Posted 11/6/2017 12:00 am
Updated 2 weeks ago
Tim Morrison has worked for Oldcastle Architectural Inc. of Atlanta only since March, but he has already experienced some intangible benefits.
Morrison is CEO of Advanced Environmental Recycling Technologies Inc. of Springdale, a company that turns plastic and wood fiber waste into environmentally friendly composite building material.
AERT, previously a publicly traded company, was bought for $117 million in March by Oldcastle, the United States subsidiary of CRH PLC of Dublin.
Oldcastle’s deep pockets put AERT on a firm financial footing, something it has rarely had since it was founded in 1989. Oldcastle, before acquiring AERT, focused on concrete and masonry building material and products.
In late October at a builders conference in Nashville, Tennessee, Morrison said AERT’s association with Oldcastle gave it better recognition, something it often lacked when it was a small, struggling public company.
“There is an industry expert, and he was introducing someone to us at a show last week; the [expert] said he had always said we had the best product by far, hands down, no competition,” Morrison said. “With the new products we have got, we’re even better. We just didn’t have the marketing savvy and the marketing dollars to spend and even the brand recognition. All of that worked against us.”
The last decade had been a struggle for AERT, punctuated by two accidents in 2013. A fire in July of that year at the AERT Springdale facility killed a worker — the U.S. Department of Labor’s Occupational Safety & Health Administration fined the company $44,000 — and a week later a recycling silo in Lowell exploded.
The company turned a profit in 2016, reporting income of $2.2 million that was helped by a $1.1 million insurance settlement for the 2013 fire.
Morrison said the AERT leadership and workforce didn’t lose hope, continuing to churn out what he calls high-quality products even when money and growth expectations were tight. Morrison said a recently retired competitor complimented him because he had always expected AERT to fold under the financial pressure, but it never did.
“We had to do everything with money we could generate even when there was no money being generated,” Morrison said. “When it was all said and done, people who really know the history of AERT will say we have a pretty good team — one I’m very proud of.”
Morrison said the leadership of AERT realized things had to change when investing backer H.I.G. Capital of Miami announced in June 2016 it was planning to sell its holdings in the company.
At the time, H.I.G. owned 100 percent of the company’s preferred stock and 84.6 percent of its common stock. If H.I.G. wanted out, AERT indeed faced a tenuous future.
Morrison, also the chairman of the board of AERT, said the directors and leadership ultimately decided to put AERT up for sale. In August 2016, officials with corporate broker William Blair & Co. contacted more than 300 potential buyers, of which nine would eventually make bids.
Morrison said deciding to sell was tough, but he had to do what was best for the company’s shareholders and employees. Based on that criterion, Morrison said, selling the company was clearly the correct choice.
“You still have a big responsibility because you have to do the right things moving forward,” Morrison said.
AERT was familiar with Oldcastle, and not just as a competitor in a similar market. AERT President Randall Gottlieb, whom Morrison hired in 2013, was previously a vice president at Oldcastle.
Morrison, 58, said he had planned on retiring within the next decade and Oldcastle officials haven’t seemed to be pushing him out the door quicker than that. He said the working relationship between Oldcastle and AERT is still in transition but is going well.
AERT has almost 500 employees, and most of those are based in northwest Arkansas. The company’s sales team, which is more geographically dispersed, has merged with Oldcastle’s team.
“We’re still running on the game plan we had when they bought us,” Morrison said. “We haven’t had the need to change very much. They’re very interested in learning the business. We’re very new and different from anything else that they have.”
AERT’s research and development abilities were part of made it attractive to so many potential buyers, Morrison said.
The company had been working on some new products the past two years and introduced them just as the acquisition was being finalized. Morrison said consumers had repeatedly told him that composite material, especially those used for pool decks, would get far to hot for comfort in the summer.
So the AERT team developed a new feature on its material that reflects approximately 30 percent of the sun’s heat.
With Oldcastle’s large distribution network and marketing depth, Morrison looks forward to AERT’s products getting the attention they have always deserved.
Morrison said the new products have fired up the company’s morale, even though, he said, it didn’t take much of a hit when the company was going through the sales auction process. Morrison said AERT’s employees have been hardened by the tight economics of the past.
“The new products have re-energized the company. The process of going through and selling a company drains a lot of energy out of you,” Morrison said. “I spent a lot of time traveling and talking to people. Once that is done, it’s, ‘OK, now let’s move forward.’ The team here is tremendously resilient. They were used to having bankers and other people stroll through. It was just another day for them.”
Morrison said he was glad Oldcastle was the eventual buyer of AERT, although a couple of other bidders would also have made fine owners. He said Oldcastle is a manufacturing company, so it understands the business and seems interested in capitalizing on AERT’s strengths.
“There is a close culture match, as much as you can have between a multibillion-dollar company and a much smaller company,” Morrison said. “Before we knew who the eventual winner of the bid process was going to be, we were looking for [a company that built with non-composite backyard material] and hoped for someone who could provide us with a lot of resources to help. It ended up being the best of both. We wanted somebody who could provide some stability to the people here. It is 100 percent that way.”