Introductions

[00:02:00] Kison: Do we kick off with a little bit about your background?

[00:02:05] Michael Hoy: I grew up in Baltimore, recently had a birthday—just turned 52. So, I spent some time down in Florida near where you are. I grew up in the lumber business. At 14, I started in a lumber yard and have stayed in building materials for coming up on 38 years in January.

[00:02:30] Michael Hoy: I was in building materials, dealing with home builders and contractors, and eventually got into the direct-to-consumer world with the window business in the Baltimore-Washington area, one of Pella's largest distributors. It became kind of an obsession to try to understand how the consumer responded to marketing and the sales methodologies.

[00:03:00] Michael Hoy: There's really nothing better than seeing a customer's face after you finish a project and they're super happy with what you've done. So there was a whole new level of fulfillment that came from that. To be honest, the margins are much better in remodeling than they are in new homes—that didn't hurt either.

[00:03:30] Michael Hoy: I decided to put my effort there, and it brings me to Great Day today—some 10 years later, after I joined the company.

[00:03:45] Kison: And you do M&A deals there?

[00:03:50] Michael Hoy: Yeah, we've done a few. I go back to my days at Carolina Holdings and Stock Supply. They were in a mode of rolling up lumber yards and building materials manufacturers that were direct to the builder. I learned a ton of what to do. And I think even more importantly, a ton of what not to do. That’s really what brought me here. When we came to Great Day and determined that M&A was going to be an opportunity for us, we approached it with the idea of: Don't break a business that you buy.

Keeping Culture in M&A

[00:04:40] Michael Hoy: Every business has some degree of unique culture, unique processes—some of which it's really easy to judge from the outside, whether it's right or wrong, based on perceptions or experience. One of the things I learned not to do was to take a non-judgmental, be-really-curious approach to M&A, and really focus on: What is it that the people are bringing to the table?

[00:05:20] Michael Hoy: These businesses are very people-centric. They tend to have a lot of entrepreneurs in them—from the founders and leaders all the way down to the guy that's slinging a hammer. They tend to be somewhat of an entrepreneurial-minded person. And they all have a lot of opinions on how things should be done. And a lot of times, their ways were better than ours. So, I always felt like we needed to really be curious and not judgmental of the companies.

[00:06:00] Michael Hoy: That meant we needed to really get to know the people, build relationships, and build trust really early on—so that we could understand where the opportunity was for them and for us. We wanted everybody to win anytime we did a deal. And that’s the same process or mentality we take to every deal we do today.

[00:06:30] Kison: Don't break a business. Instead, learn from it.

[00:06:35] Michael Hoy: Pretty much. When you go into M&A, there's an opportunity to bring multiple organizations together to create value of some kind.

[00:06:50] Michael Hoy: And when you're in the private equity world, we have outside investors that are really amazing. They bring a ton of skill to us—skills that we didn't have. But we like to say that we're not a portfolio company because we're primarily owned and operated, a majority, by the entrepreneurs—the people that have been in these businesses.

[00:07:15] Michael Hoy: So, when you're a private equity company, you don’t know how to not call someone a portfolio company or a business not a portco. I think they don’t know how to not be private equity, and we don’t know how to not be entrepreneurs.

[00:07:40] Michael Hoy: We find that balance. And when you’re bringing businesses together, the value creation certainly includes economies and the economic and monetary opportunity that comes with value creation.

[00:08:00] Michael Hoy: But ultimately, people make these things go. And when you have really great people that really care, they have gas. When my kids were little, I used to laugh and say, Hey, you guys have gas. And they’d say, What do you mean? That means you gotta have give-a-shit. You really gotta care about what you’re doing. You really have to feel good about other folks.

[00:08:40] Michael Hoy: And again, don’t be judgmental—be curious. Assume best intent in everyone. We find that one and one equals three when you bring some really great organizations together with a bunch of people who care a ton, and you treat them really well.

[00:09:10] Michael Hoy: And we go into these deals with the idea that we’re not saying we’re going to get synergy. Because as soon as I say the word synergy, everybody assumes I’m going to cut costs, and that means I’m going to cut heads. In our world, these are growth synergies. How do we come together in a way that everybody’s going to rise? In our opinion, we need more people to do that—not less.

[00:09:50] Michael Hoy: So today, we're around a billion and a half dollars in revenue. If we’re going to be five billion in three years, more than 50% of the people that I’m going to need in five years don’t even work for us yet.

[00:10:10] Michael Hoy: Cutting people doesn’t seem to be the way to go, in my mind. It seems like we really should be building relationships and building trust and helping to develop them.

[00:10:30] Michael Hoy: So, as they come into Great Day, we learn from them, they learn from us, and all boats rise.

[00:10:45] Kison: You mentioned that the PE firm is a minority investor, and the majority is owned by the entrepreneurs. Does that mean you do a lot of rollover equity in these companies you acquire?

[00:11:00] Michael Hoy: We do encourage it. Now, there have been some deals where we’ve not done it, and those were for very specific reasons.

[00:11:15] Michael Hoy: But when we did Universal Windows Direct, the founders there rolled over a significant amount of the purchase price. We acquired Your Home Improvement Company, and they rolled over—I think it was a material amount of the purchase price. But what’s even more important is we put together a preferred equity instrument and we offered it to our employees. So, we always like to brag—we have buy-in from our people.

[00:12:10] Michael Hoy: We literally had employees write checks to buy preferred equity. Meaningful amounts to them. Some of them were upper six figures. That is literal buy-in. When your employees and your people truly believe in what you’re building, in the model, in how it can benefit them, benefit the customer, benefit everyone—again, we say everybody has to win.

[00:12:55] Michael Hoy: We say people-centric—that's what we’re trying to create. That’s the ultimate proof that people really like being part of Great Day.

[00:13:00] Kison: Is there an anticipated return event, like an IPO or something?

[00:13:10] Michael Hoy: We have this belief system that if we’re doing all the right things—growing the business, our margins are growing faster, we’re retaining employees, and the EBITDA is where we need it to be so we can continue to invest in the marketing machine, which really makes these things go—then we’re going to have lots and lots of high-quality choices across a period of time.

[00:13:40] Michael Hoy: Of course, some of our partners have timelines in mind that they want to exit. And we’ve brought in other partners to help supplement for when one wants to get out, another one’s coming in.

[00:14:00] Michael Hoy: But we don’t have some giant exit plan that says we’re going to monetize this on X year. We’re viewing it as opportunity seems to come our way because we love people. We are constantly in the marketplace building relationships with other investors or other strategic opportunities.

[00:14:45] Michael Hoy: And I see us doing more minority recapitalization of the business over time. There can be some sort of monetization, but for us to continue to run the business and own it as the entrepreneurs and be the majority, we think that’s the right model today.

Investing In People

[00:15:20] Michael Hoy: And for us to continue to do that, there’s not going to be some major recapitalization of the business. We’re going to continue to invest in it. And everybody seems to be on board with that idea.

[00:15:50] Kison: You could continue doing that—do another minority recap, then bring in some secondary to take out some folks that want to potentially have an exit?

[00:16:05] Michael Hoy: So, the last deal we did was with LeafGuard and Englert, and we did those at the same time—Englert is the manufacturing arm of LeafGuard, and they also do building material distribution sales to contractors and supply houses. We did a recapitalization and brought in some new investors that are minority to help us get that deal done.

[00:16:45] Michael Hoy: Folks like Rock Ventures, which is Dan Gilbert’s family office. They actually made a small minority investment—again, very meaningful, big dollars. But now we have some real experts on the marketing side that understand the mortgage industry and the origination of mortgages.

[00:17:20] Michael Hoy: That can help us with direct-to-consumer marketing to the same type of customer.

[00:17:35] Michael Hoy: The strategic relationships that are being built—again, because we’ve created a good reputation and we treat people well—you don’t realize how important that is until an opportunity like Rock Ventures comes your way.

[00:18:00] Kison: Yeah, it’s a lot where you're finding the business, the opportunity, then you need to put the capital together. How are you developing these relationships?

[00:18:25] Kison: I mean, does this all fall back on you? Do you have a board you're leaning on? Because I feel like it’s so much for one person to do.

[00:18:40] Michael Hoy: I call myself first among peers. I don’t call myself the CEO. I’ve always felt like we’re all working together. We’re all trying to accomplish the same thing. And in my 10-year period, I’ve never felt like I ever had to make a decision on my own or in a bubble, without getting really good alignment from the team and the business or any of our partners.

[00:19:30] Michael Hoy: So, the folks at Littlejohn & Company, who are one of our investors, they have tremendous relationships with institutional investors, family offices, sovereign wealth funds. My partner, Ed Weinfurter, who’s our Executive Chairman, he and I are both relationship builders.

[00:20:10] Michael Hoy: We’ve reached out on LinkedIn to people we’ve never met before, just to get a conversation started.And you’d be amazed where some of those relationships end up—ones that you never would have thought could have happened.

[00:20:40] Michael Hoy: And then, I’ve been really connected in our industry forever and ever and ever. I’ve been doing this my whole life.

[00:21:05] Michael Hoy: So, those relationships that I’ve established over years—we try to leverage those, not in a way that we're trying to get anything from anyone, but in a way that...

[00:21:25] Michael Hoy: If there’s an opportunity for them to grow with us or for us to grow with them, someone always knows somebody that needs something or wants an opportunity—whether it’s new employees, whether it’s an investment opportunity, whether it’s M&A.

[00:21:50] Michael Hoy: I’m always amazed that the circle of people you put around you, how many opportunities they bring to you, and you don’t even have to ask for them.

[00:22:10] Michael Hoy: If they like you and they trust you, and it’s a mutual relationship, everybody feels it’s worth having.Opportunities come that you would have never thought could come.

[00:22:45] Kison: You're making a strong point there. You have to build the reputation, but also the relationships through this broader ecosystem.You mentioned the investors help you find other investors.

[00:23:15] Kison: I love how you're not shy about reaching out to people cold. And then through your industry contacts, which I think is going to come up more in this interview. We haven't even touched our outline yet, but we will talk more about the people side when it comes to executing deals.

Growth Synergies in Good Deals

[00:24:00] Kison: One of the things you mentioned earlier was growth synergies. Can you talk to me about that in terms of how it relates to your strategy? It sounds like you’re not just buying companies that look like good deals.

[00:24:15] Michael Hoy:  So, when our initial objective—when it was first formed—we had two brands. We had the Patio Enclosures brand, which a lot of people knew of nationally. We had the Stanek Windows brand.

[00:24:45] Michael Hoy: The Patio Enclosures brand, Sunrooms, is really arguably one of the hardest fulfillment types of projects you can do. There’s a lot of permitting, electrical work, and lots of subs.

[00:25:15] Michael Hoy: And we wanted to process that to a point where it could be replicated really easily.

[00:25:30] Michael Hoy: It could create a great experience for someone, and we figured if we could scale that business, what could you layer on top of it over time that were much easier types of installations and fulfillments?

[00:25:50] Michael Hoy: Such as windows or gutters or whatever it may be. So, that was the original premise of building out the national platform on the Patio Enclosures name, if you will.

[00:26:15] Michael Hoy: There is not one home improvement company in America that we know of that has scale like we do—that does multiple products and specialties.

[00:26:35] Michael Hoy: If you’re a homeowner and you replace your windows because you have to get it done, it’s not necessarily something you want to do, but you have to do it.

[00:26:50] Michael Hoy: And if you do it and have a really great experience, you’re going to tell everybody about that experience. You’re probably going to do other things to your home as well.

[00:27:20] Michael Hoy: You’re eventually going to do your gutters, or you’re going to do your bath, or maybe you’re going to do your roof. so, our objective changed from just building this national platform to building a national platform that’s the most referable.

[00:27:50] Michael Hoy: So not only refer outside of your network, but for you to be a repeat customer.And we could create a customer for life.

[00:28:20] Michael Hoy: So, we’ve got nine big brands today around the country that people know. Some are more regional, some are national in scale.

[00:28:50] Michael Hoy: But why shouldn’t a customer have a great experience with Patio Enclosures and then be introduced to the other brands that are under the Great Day family?

[00:29:10] Michael Hoy: Whether it be LeafGuard, Champion, Universal, or The Bath Authority. People want to deal with someone they can trust.

[00:29:40] Michael Hoy: And if we’ve done a great job for them, every one of these businesses should be able to grow organically because of the reputation of the other businesses. We keep calling that the holy grail.

[00:30:15] Michael Hoy: If we can create that—which nobody else has created—it should give us a competitive advantage to continue to satisfy homeowners across the nation in a way that no one else has done.

[00:30:30] Kison: That’s interesting. The synergy you’re betting on is a strong referral platform. Not a complicated integration. It’s not about bringing these things together under one roof or centralizing.

[00:31:15] Michael Hoy: There is some centralization that goes on. We do want consistency in our financial reporting.

[00:31:45] Michael Hoy: So, there is a certain degree of bringing that into a central system—not necessarily taking all the people and picking them up and moving them to our corporate office.

[00:32:05] Michael Hoy: But doing it in a way where we get consistency in data and practice—that’s really important to us.

[00:32:25] Kison: IT, HR, Finance—that’s like every private equity firm’s reach.

[00:32:40] Michael Hoy: We are bringing more and more of that into the back office into a shared services environment. Since day one, we do that.

[00:33:10] Michael Hoy: However, we don’t want to lose that entrepreneurial spirit.

[00:33:25] Michael Hoy: And all these businesses come with different systems, different philosophies, different processes. So, we have realized some opportunity in saying:

[00:33:55] Michael Hoy: Look, we’ve got some businesses that are really alike. They should probably be on one platform in terms of their CRM. And we’ve got everybody aligned with that, and we’re in the process of doing that in five of our brands right now.

[00:34:25] Michael Hoy: We all agree that having eight call center systems makes no sense at all. So, how do you bring your call center, your communication technologies, and your tech stack together there?

[00:34:55] Michael Hoy: To benefit everybody internally, but also so that your customer benefits from it. So they can have a great experience with everyone in the same manner.

[00:35:25] Michael Hoy: Think about this—any time you’ve done a home improvement project, no matter who you decided to purchase from, your expectation was a great experience every time.

Leadership in Integration

[00:45:30] Kison: But we want to understand how the leadership team drives the agenda. What do they execute? How do they execute it? One of the big barriers, and there's one question I ask a lot—or it's really the second, it's the follow-up—what is one thing that we would be crazy to change if we walked in the door?

[00:45:50] Michael Hoy: And they always have a very consistent answer. And then we'll ask the next question: what would be the one thing that we would be crazy not to change the day we walk in the door?

[00:46:05] Michael Hoy: And it's funny, everybody wants change. But they don't want it to them. They want it for everybody else.

[00:46:15] Michael Hoy: So we really come in early on with the idea that in the first hundred days, we're going to do nothing but seek to understand. We're not going to change a thing unless something's broken and it's a crisis or something's been identified as really needing to be addressed early on.

[00:46:35] Michael Hoy: Our objective is to do nothing in the first hundred days and really get to learn the people, the business, the process, the practice.

[00:46:45] Kison: Post-acquisition, you don't do anything for a hundred days?

[00:46:50] Michael Hoy: There are some things that we will start to do the very first day and even prior to close. We will start working on harmonizing the data. So we have a dashboard of all the metrics of our business. We think that's what winning looks like. That's what high performance looks like.

[00:47:10] Michael Hoy: We will go into their metrics with them and say, okay, explain to us what a lead is. We're all trying to get leads. Define what you count as a lead. Every business we've ever acquired has a different definition.

[00:47:25] Michael Hoy: Although subtle and sometimes nuanced, the way they count things, the way they measure things, what close rate looks like, differs by company.

[00:47:35] Michael Hoy: So we want to make sure that when we're talking to a new partner that we're bringing into our world, that we're all looking at the same scorecard.

[00:47:45] Michael Hoy: And we all know that it means the exact same thing. Everybody's going to know what winning looks like really early on. So if you don't harmonize terminology and harmonize the data, it's almost like we're speaking Spanish and they're speaking Chinese.

[00:48:05] Michael Hoy: We have to get early on really good communication.

[00:48:10] Kison: On the same metric.

[00:48:15] Michael Hoy: We do start to—again, part of harmonizing data is the financials. So what's their financial structure look like? All the GL accounts. We don't change it right away, but we do start to map it in a way that we can understand their financials in the way that we would typically view them. Business process changes, practices, change in strategy, marketing tactics—all we want to do is learn why it is they do what they do.

[00:48:45] Michael Hoy: We're buying them for a reason because they've been successful.We see there's opportunity to help them improve and they may help improve us in areas where we're weak based on what their criteria is and what their strengths were.

[00:49:00] Michael Hoy: But I don't want to break them. There's a culture, there's a spirit there.

[00:49:05] Kison: Michael, what stage are we talking about? Are we pre-LOI? Are we signed LOI?

[00:49:10] Michael Hoy: We're signed. We're signed.

[00:49:15] Kison: So we're signed LOI, and what we're really trying to do initially is just keep clicking into the business. You got enough interest to sign with them. And then you really want to dig deeper and seek to understand. Figure out the how, the why. Understand what the historical results were from what they've done.

[00:49:40] Kison: And then how they execute things.I love the two questions. What’s the one thing that’d be crazy to change? What’s the one thing that’s crazy not to change?

[00:50:00] Kison: I find that really helpful. We just get people to think about one thing instead of trying to make a laundry list, but you tend to get the answer versus getting a long list and then trying to have to figure out what the one thing was.

[00:50:15] Kison: That makes a lot of sense.It sounds like that’s sort of a great start for just understanding the people and culture components.

[00:50:30] Kison: How do you start thinking in terms of what it’s going to—other components, I guess, drive success?

[00:50:40] Michael Hoy: Well, for us, it's all growth synergy. So we typically start where the business starts, which is with the marketing.

[00:50:50] Michael Hoy: So we want to understand what the marketing tactics are, why they’ve been chosen. What’s been the strategy? Is it database, or is it more in somebody’s mind—that’s just how we’ve always done it? What metrics are available to help us prove out if the strategy is right or not?

[00:51:20] Michael Hoy: Do you have data to help with that? And if your reporting isn’t great, that’s an area we’re going to write down as where we could bring a lot of opportunity and help to fix that or make it better than it is today.And we’re going to spend a lot of time on marketing in the beginning.

[00:51:40] Michael Hoy: We tend to be more aggressive and assertive with our marketing approach in terms of the amount we’re willing to spend and invest than most of the companies that we acquire. That’s a new concept for them. So when we tell them, look, we want you to double your spend in this area, they look at us like we’ve got ten heads.

[00:52:05] Michael Hoy: They need to understand what they're doing, what we’re doing, and why we’re doing it, and what the results are so we can prove that the methodology makes sense.

[00:52:10] Kison: Another question we asked very early on, and this is more in diligence, is how many locations or what was their growth plan that they had planned for the coming year or the next three to five years?

[00:52:20] Michael Hoy: And usually there's some sort of organic plan to open new locations, add a new product. And we'll ask the question, if you're going to open up two new locations next year, what would you need to open up ten?

[00:52:40] Michael Hoy: It immediately changes their mind from, "We're going to open two," to, "Oh my God, they're going to ask us to open up ten new businesses next year. Oh  And we do that deliberately. So they get used to the mindset of, we want to grow. We want to be aggressive. We want to be on the leading edge.

[00:53:00] Michael Hoy: So instead of thinking about limiting your method or limiting your head to "We can only do this," what if you had unlimited resources? What could you do if you were given those resources? And it gets people out of, "Well, I just want to grow 10%," or, "I just want to grow 20%."

[00:53:25] Michael Hoy: When we go into our planning for ourselves or any business, we don't say, "What's your goal for next year?" And they go, "We're going to grow 20%." So they take their year-end number, times 1.2, and that's what they're going to do. We say, "What's possible? If the investments were made, the resources were provided, what could you do?"

[00:53:55] Michael Hoy: Sometimes they'll come back with a plan that doubles the business, and we'll go, "Okay, timeout. That's a little too aggressive, but you could grow 50%." And they're like, "Oh yeah, obviously." So we don't put plans together that limit us.

[00:54:15] Michael Hoy: We like to put plans together that are really aggressive, and then we say, "What would the execution barriers be to us doing that?" And then we build those into the plans.

[00:54:30] Michael Hoy: So we are always going to grow more than we thought was possible. We're at least going to  So we have a saying in the business: If you don't plan for it, you won't get it.

[00:54:50] Kison: When you buy the business, you're first really trying to unify the financials and understand that you can measure them with the same metrics and get them in the same language. And then it seems the focus is between this referral network and the marketing playbook, which is very growth, revenue synergy-oriented.

[00:55:10] Kison: And then it sounds like part of the alignment is with the leadership culture and getting them thinking bigger.

[00:55:20] Kison: So with that, can you walk me through an example? What's been a big win where you've taken this approach?

Great Day Strategy in Action

[00:55:30] Michael Hoy: There's been a lot of examples. I'm going to use Champion Window and Doors. So we acquired them at the end of 2021. They're a national company. They've been around for 70 years.

[00:55:50] Michael Hoy: A lot of people know them. They have a manufacturing plant in Cincinnati, Ohio. So a lot of our brands make their own product, but we had some that did not.

[00:56:00] Michael Hoy: And we went to them and said, "What if you could make all the products in your factory for all the brands?" They were like, "God, it would take three or four years, and this would be the capital expenditure, and this would be..." We said, "What if you could do it in 12 months?"

[00:56:25] Michael Hoy: And they came back with a plan to do it in 12 to 18 months. And we funded it, and they did it.

[00:56:35] Kison: I'm reading on your leadership style here.

[00:56:40] Michael Hoy: But it was—why 18 months? We're like, "Look, if the resources were there, and they were well-identified, and we knew what we needed, capital's not the issue."

[00:56:55] Michael Hoy: It's typically people and process and systems. So what people would we need to invest in to make this go?

[00:57:05] Michael Hoy: What systems are not in place today or need to be expanded upon to help support the growth initiative?

[00:57:15] Michael Hoy: And then what process would need to be considered, changed, adapted, applied, that’s never been applied for us to make this go?And from that comes a plan, and usually, it's got dollars applied to it.

[00:57:30] Michael Hoy: And then we look at what the return would be on that and go, "Yay or nay."

[00:57:40] Michael Hoy: We try to keep it as simple as possible.