Notes on Blackstone's Takeover of CMR

Pages: 5 (1318 words) Published: March 6, 2010
A lot of small local and regional companies
Compete in residential & commercial construction market
oResidential: custom cabinets & millwork for new & remodeled homes. $4.8B market in US in 1996. Only 15% homebuilders contracted for custom cabinetry for high-end home oCommercial $5B in US in 1996

Bought in June 1997 (founded 1975 as subcontractor providing custom cabinetry to homebuilders) •115 employees
$6.8M annual sales (top 5% in industry), 80% is from commercial (2/3 of projects) Goals:
$70M in sales by 2007 (10 years)
Increase profits & cash flow
Replicable franchised business model (footprint) generates $8 -15M sales, local sales & some local production •Having employee engagement
Company-wide Problems:
A lot of debt: note to previous owners &cash invested from Walter •Cash flow in commercial is slow since projects take 6+ months and get paid at end project Residential – Good news first year growth:

Project cycles are 4 – 6 weeks: helps with cash flow
Current organizational changes:
Invested in IT
Reconfigured the plant to improve productivity (how?)
Hired VP Sales
Hired 1st Commercial Salesperson

Commercial Work Process:
Commercial Framework: 3 roles involved
oOwner: ultimate customer and payer
oArchitect or designer: responsible for drawings
oGeneral contractor: turning plan into finished project by due date (could be by separate firms or by a single design-build firm) •CMR bids through FW Dodge & MSA (open markets)
oGot 75 – 80% projects that it looked at
oGot 50 projects/week
CMR goals:
obuild relationship with contractors to improve odd of winning open markets, and ocreate opportunities for negotiating bids among limited # of acceptable bidders oObstacles for these goals:
Contractor not used to having a salesperson contacting them. No other subcontractors have direct sales force Subcontractors come to Contractor’s “plan room” to get architectural info to bid •Project managers:

oEach manages about 6 contractors
oEach responsible for 18-20 active projects each worth avg $30-$80K (equivalent to $540K-$1.6M) oVisit field for accurate measurements, check if there is any conflict with plans on plumbing, electr, delivery, etc. oCommunication with contractors mostly via phone, 1/wk, more as material was delivered oSuggest changes to reduce cost, if applicable

oSpend lots of time on schedules.
oDisadvantages from current change: things take longer because now have to go through sales force oAdvantage: more info available on project performance

Residential Work
Sells under Mike’s Cabinet name
Showroom open 9 hours/day, 10 visitors/week
New home allowance to homeowners (HO) by contractor: $6K kitchen & bathroom cabinets •Takes 6-8wks before the HO arrives at CMR, by then possible short funds to upgrade •Most people don’t know what to look for in construction quality •Salesperson spends about 1 hour with HO to know whether to earn the job •60 minutes to shop for plans & drawing (3-4 revision before final) •30 minutes for estimation

45-55% HO arrived at showroom ended up placing orders
“hand-off” is not as clean as in commercial – HO wants to work with 1 person from start to finish •30% of re-doing layout after conversation with HO onsite (waste 60 minutes above) •70 contractors locally. Mike’s had 12 in the last year. Had worked with most of them at some points. Little marketing, business by reputation •Goals: Building loyal relationship with contractors to get referrals for customers

Developing InforCentral (workflow info)

Project Manager is responsible for:
Liaison between CMR & contractor
Makes sure internal departments are on track for jobs
Keeps InfoCentral accurate and up-to-date
InforCentral issues:
Shared info across company to make to “footprint” concept work •Resistance to use from both VP Sales & Salespeople initially •Software replaces admin work
Rely on...
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