CONVERSATION SERIES: Behind the Merger

In 1962, Jim Fitzgibbon and Bob Burkhardt founded a local supply business – Lakeshore Equipment and Supply Co. – selling primarily turf maintenance equipment to lawn and landscape contractors near its Cleveland, Ohio, headquarters.
 
Forty five years later, that internationally known company – LESCO – reached more than $570 million in sales through its 325 plus service centers and 120 stores-on-wheels.
 
Throughout 2006, LESCO headlined the news as it transitioned from its dual focus as both a distributor and manufacturer and struggled with profitability and keeping shareholders happy. Amid management changes and persistent sales rumors, LESCO continued to open new locations and build and strengthen relationships with landscape contractors who relied on LESCO not only for product purchases but technical expertise.
 
Earlier this year, John Deere purchased LESCO and merged it with its subsidiary, John Deere Landscapes. The acquisition was the conclusion of months of preparation and homework by John Deere management to not only increase the volume of consumable products sold by John Deere Landscapes, but to complement John Deere’s Golf & Turf One Source business, which focuses on bringing solutions to golf course superintendents.
 
At press time, the two companies were working toward integration, but were not yet fused into one organization.
 
Long-time John Deere employee, David Werning, president of John Deere Landscapes and senior vice president of the John Deere Commercial & Consumer Equipment Worldwide, was at the center of the acquisition. He spent considerable time in the field interviewing both employees and customers in a sincere effort to ensure expert customer service during the transition and into the future.
 
In an exclusive interview with Lawn & Landscape magazine, Werning discusses the acquisition and future plans for the company.

LL: How does a larger organization (John Deere Landscapes) meet the needs of customers better than a smaller one (LESCO)?
DW: Business takes place on the local level. Therefore, we believe that customer service can only be provided at the local level. Corporately, things can be centralized for efficiency, but customer service isn’t one of them. Whether it’s a small one-store operator or a company with 650 locations, the customer’s experience is defined by the service provided locally.

We’re a larger company that allows us to do some things that smaller businesses can’t do. Subsequently, our store managers can keep their eye on the ball and take care of the customer. Local stores are authorized to make decisions based on the unique needs of their customers.

The professional landscape contractor has a significant amount of interaction with his distributor. In many cases, it’s the most important and significant relationship they have. Manufacturers can’t do that.

LL:  How have LESCO employees responded to the merger?
DW: The reception that we’ve received from all field employees – both John Deere Landscapes and LESCO – has been refreshing and far exceeded my expectations. It’s what you hope to see – cooperation taking place at the local level. For example, if a LESCO store has to make delivery of three to four pallets of product for a customer and can’t make it for some reason, he can call a John Deere Landscapes guy and ask for help.

LL:  Everyone wants to know how many service locations will close as a result of the merger. Please set the record straight.
DW: There’s no initiative that says we’re going to close stores. It’s not in any part of our planning. Once the acquisition was announced, we visited John Deere Landscapes and LESCO customers in 10 major metro service areas for their input. We asked them to help build a business model that would work. Much of this business is about the people. It would be a mistake to close branches and lose their expertise. We plan on increasing sales and stores, so why lose people?

We have cases where branches are located across the street from each other. As leases expire, we’ll look at the long-term viability of each location. As long as we can provide the same level of service we will consider consolidating stores, but we will maintain the people from each store who have the product line expertise and customer relationships.

Over the next four to five years, we have a robust schedule of opening new stores. We see a tremendous opportunity to expand in areas where we currently don’t have a significant presence. John Deere Landscapes now  has about 300 stores, LESCO has 350 and 110 stores-on-wheels. Our plan is to grow north of 20 to 30 stores a year. We’re underrepresented in the West, so there’s a growth opportunity for us. If we didn’t close any stores it wouldn’t disappoint me.

LL:  What is the total job loss at LESCO?
DW: In the best of situations, a merger calls for change. I don’t have a specific number of employees who will be eliminated. We keep focusing on how we’ll run the company moving forward, and the number of people the business will demand. I don’t mean to be evasive. Our driving belief from day one is to rightsize the company moving forward. The changes we’ve already made at the Cleveland, Ohio office were about rightsizing.
LL: What’s changed at the local level?
DW: It’s a big company. We still need to peel the onion back and see what’s different. There’s different reporting and operating procedures, but the reality is that much hasn’t changed.
It’s still a familiar person behind the counter. Where LESCO has been and where it’s returning to is similar to the way John Deere Landscapes operates. You can’t provide customer service from afar. The only person who is able to make those decisions relative to customer service is the guy standing behind the counter. He is trained and educated. At the end of the day, it’s his job to make the decisions necessary to ensure the customer is provided with the service needed.

LL: What will happen to the
LESCO name?
DW: We have two strong names in LESCO and John Deere Landscapes. It would be ridiculous to get rid of the LESCO brand name. From a consistency standpoint, we’ll convert the storefronts over time from LESCO to John Deere Landscapes. But we have no intentions of removing the LESCO brand from the products.
 
LL: What will happen with the LESCO Stores-on-Wheels?
DW: The primary graphics on the trucks will stay the same, but the John Deere Landscapes name will be added. We have no physical truck changes on the horizon. Products carried on the trucks will be determined by customer requirements.

LL: How much product crossover  will appear at former LESCO and John Deere Landscapes branches?
DW: When we open a new store in a new area there will be extensive cross-over of products. However, in markets with a density of stores the crossover will be minimal.

If customers who regularly go into a LESCO store need maintenance or repair parts for an irrigation system, we’ll carry those. But we won’t carry a full line of irrigation products. It’s all about the convenience of the customers and it will evolve over time. The key is to maintain the expertise at the store and not to dilute the focus on any customer.

LL: What relationship will the John Deere Landscapes/LESCO branches have with John Deere equipment dealers?
DW:The first phase is operating John Deere Landscapes and LESCO as one company. We need to get systems and processes squared away. LESCO mowers will continue to be sold in the same manner as they are currently sold, but long-term we will certainly look for opportunities and ways to help our Deere dealer partners.
 
LL: Tell me about the history of John Deere and the evolution of John Deere Landscapes.
DW: John Deere is an agricultural company, which is both good and bad because of the cyclical nature of the industry. John Deere has worked to diversify itself and really focused in on brand definition in the green industry. John Deere looked at both the manufacturing and distribution sides of the business as well as the professional landscape contractor. In 2000, we started talking to folks which culminated in the acquisition of McGinnis Farms. That was followed by Century Rain Aid in 2001. Those two companies became our platform for John Deere Landscapes. Four years later, based on John Deere’s commitment to the green industry and the strong performance of John Deere Landscapes, we acquired United Green Mark. At its core, John Deere is an engineering and manufacturing company. John Deere Landscapes starts where John Deere ends. As far as systems and processes go, the two companies don’t overlap that much.
 John Deere Landscapes’ management began with myself and one other employee. The rest came from the acquisitions based on their individual industry expertise. We relied heavily on the existing management teams. The vast majority of the senior management is still around today and now includes some LESCO managers.
 
LL: How similar are the customer bases of John Deere Landscapes and LESCO?
DW: Our John Deere Landscapes customers have primarily come from the installation side of the business i.e., irrigation, hardscapes and nursery. LESCO customers are more maintainers of the landscape i.e., lawn care, mowing and fertilizing.

The merger of John Deere Landscapes and LESCO is one of both expertise and customers. We think we can provide service to both audiences particularly as contractors diversify their service offerings. We can simplify the distribution model and reduce the number of vendors they need to work with.
 
LL: How has distribution changed and evolved since you’ve worked with John Deere Landscapes?
DW: Certainly, there’s been consolidation. I think a lot of it is because of the need for scale and scope, and the need to provide services customers are requesting.

As business has evolved, the customer segments we serve in the professional landscape industry look at distribution for more than product and product expertise. They look for non-product ways to assist them in their businesses educating them on business processes or things that make them more efficient or cost effective. It’s accelerated in the last five years and will continue to accelerate.

We talk to our customers every day asking them for ideas and suggestions besides the basics. Delivery capabilities, fair and reasonable pricing and knowledgeable people behind the counter are key. It’s where a large part of distribution is going.

LL: What do you anticipate from the service industries – lawn care, landscape and golf – that you serve over the next few years?
DW: We have opportunities to look at the markets – individually and combined – to develop a business that can best serve each market, grow our stores and identify new customers.

John Deere saw LESCO as the leader on the consumable side of the business. By combining consumables with equipment i.e., LESCO stores and stores-on-wheels working in tandem with John Deere dealers, we will provide an integrated business approach to the superintendent and the contractor.

LL: Describe your management style?
DW: I’m a believer in empowerment. I’ve never enjoyed being micromanaged. I like to be told what the objectives are and be given the freedom to operate within those objectives. It’s no different than how our customers want to be serviced.

LL: Who are your mentors?
DW: I’m very fortunate to have learned from everybody I’ve worked for. I’ve learned a lot from inspiration and a lot from perspiration. You are an accumulation of people you’ve interacted with, and the ones I’ve enjoyed most are the ones who liked to learn and liked to listen. Attitude is the biggest driver. If you are a believer in people with a positive approach, you’ll generally get more out of them.