Michael Kelly: A move into manufacturing

The months that followed dad's death in 2013 were an emotional and perplexing time. There is nothing in life that prepares you for death and there is no way of really knowing how you will react.

MacRoberts corporate lawyer Michael Kelly. Picture: Contributed

In terms of the business, the feeling of loss and sadness ultimately galvanised our sense of ambition and determination.

It is trite to say it, but to really succeed on a significant scale in business, you need to aim high. It is not enough to be skilled and work hard. That will only take you so far.

By the end of 2013, we agreed that true success could only be achieved when we had established a very substantial and brilliant business. Raising the bar significantly on our expectations; anything less would be failure. It sounds simple (almost daft), but your approach changes when you see things through that prism. With that in mind, we again looked to acquire.

The SME landscape can be an odd place. Egos play a crucial role (the importance and impact can be easily underestimated). I suppose key ingredients in business are money and power, so maybe that should not come as a surprise. As we canvassed the market for a suitable target we found many parties would not entertain a discussion, concerned that such a step would be viewed as an admission of weakness. For me, the converse is true. I would listen to any proposal. You never know what it might be. A reluctance to contemplate options for fear of misplaced perceptions of weakness strikes me as a much greater failing.

Just as we were getting to the stage of real frustration, an unexpected option came up; a manufacturer. Throughout the life of our business to that point, we had been a merchant. Essentially, the middle man between manufacturer and end customer. In relative terms, a simple model and we had enjoyed the flexibility and freedom that role gave us.

Manufacturing was something we knew almost nothing about, and we viewed it with a real sense of wariness. More complex, and more things to go wrong. A million miles from our comfort zone. But as we looked at the opportunity more closely, it increasingly made sense. The target manufactured a product our customers bought in large volumes. It was ancillary to our main product lines, so we would not disturb strong existing relationships with key suppliers, and we already had direct access to the target market. Within weeks we acquired the company in a share deal funded by cash off our own balance sheet. No debt. Life had certainly changed.

Very shortly following the conclusion of that deal, we became aware of another opportunity. Again, a manufacturer. Again, selling a product that many of our customers used, but this time the target was a more complex and challenging proposition. The target was staggering towards administration and had many problems. But the core business was good. They made a high-quality product, and had skilled staff. There was value to be unlocked in the right circumstances. Again, swiftly, we concluded the deal. This time, acquiring the business and assets from an administrator.

Over the space of just a few months, we had moved into manufacturing in a big way. In the process we took control of important lines of supply. This separated us out from much of our competition. To manufacture, but retain the characteristics of a merchant, meaning that we had a much greater depth of options and ability to service the needs of our customers.

It’s odd, but I see a lot of commonality between law firms (and other professional services) and industrial manufacturing. In manufacturing, your equipment is crucial. Under-investment and poor maintenance can severely limit your capacity to compete. The same is true for law firms. The core machinery is made up of lawyers (from partners to trainees). In an intensely competitive market, law firms must produce more high-quality product, on shorter timescales, and for lower prices (clearly, there are exceptions to this observation).

To do so, your kit (the lawyers) must be capable, willing and energetic (as an absolute minimum, they must work hard), and they must be maintained (trained, supported and incentivised). Not actually an easy package to deliver, but otherwise you are starting from a handicapped position that is very difficult to bridge.

In my final blog, I will explain where we stand now, and outline some of our hopes for the future.

• Michael Kelly is a partner and corporate lawyer at MacRoberts

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