It could happen. Right. A lasting Mideast peace could materialize. The Cubs could win the World Series. And rivals in the highly competitive spa and pool industry could not only agree to a merger but thrive in its aftermath, even in a daunting economy.
The 1999 joining of two Seattle-area businesses — Carlson Pool & Spa and Aqua Quip — is proof that anything's possible. But there's a reason this marriage is so unique in the industry: It couldn't have succeeded without a virtually ideal confluence of events. Like complementary business needs and personalities. Diverse talents and experience. Shared work ethics, goals, values. An unusually devoted management team and staff.
Last but not least, the foundation of this extraordinary merger was built on personal strengths found in increasingly short supply: people who are secure enough about themselves and their abilities to respect the talents of a competitor. Erik Carlson, now Aqua Quip senior vice president of operations, started in the pool business at age 10 and learned this early. So did Aqua Quip president Brian Quint, who also grew up in the business. And both their partners in life and business mergers — wives Kathleen and Nancy, respectively — share these attributes.
Those are some unlikely combinations. So it's not advisable to take a plunge of this magnitude without checking how deep the water is. Because even if you have all of these things working for you, there will be moments when you wonder whether you'll ever come up again.
"A merger is hard," says Kathleen Carlson, senior vice president of sales and marketing at Aqua Quip. "It is a process you have to be committed to. You have to know that it is going to be worth the work you have put in, and you have to trust and communicate all the time."
GROWING THE FAMILY BUSINESSES
It's hard enough to accomplish that in the evolution of a family business, let alone the joining of two of them. That takes dedication — a word that may be inadequate when describing Erik Carlson.
He started Carlson Specialties in 1965, at age 10. He sold pool chemicals, collected the money, paid the bills. When his high school opened a pool, he won the bid for the chemicals and continued with it for 10 years. While in college he started doing repairs on pools where he was selling chemicals, learning only by experience.
During that time he met Brian Quint, whose parents, Dick and Esther Quint, ran a successful pool supply business called Aqua Quip. "Erik was a customer buying products from the company," says Brian, who was cleaning pools at that time and working in his parents' stores. "We always felt we were just in the same boat."
After college came Smart Merger No. 1, when Erik and Kathleen married. Within a year, in 1978, Kathleen quit her job to help run the business, which first operated out of their home before moving to a separate shop. "In those years we expanded into cleaning pools on top of the service work we did for residential, semipublic and commercial," says Kathleen who studied aquatic administration in college. In 1986, the Carlsons purchased an existing retail store while continuing to run their service department from their shop. Carlson Pool & Spa was born. Two years later, they bought a new location and combined retail and service under one roof. By 1998, there were two Carlson Pool & Spa stores and another store, Sundance Spas by Carlson's.
The Carlsons had "made it" through a combination of grit, smarts and mutual support, a long way from those humble beginnings. Brian Quint also lived that story line.
Quint's parents started Aqua Quip in 1959, out of their family lumber store. Their small corner of the store eventually took over the whole store and warehouse. After years of being one of the few wholesalers in the area — with Carlson Specialties one of its customers — Aqua Quip's emphasis shifted to retail when other wholesalers appeared.
After Brian finished college, his parents wanted him to get a job in another industry so he would have more diverse experience. He spent a short time in banking; his wife, Nancy, was also in that business. Before long, though, both were with Aqua Quip to stay. Brian joined the company full-time in 1979, gradually moving up to president in 1990 before taking over the business when his father died in 1995.
That year, Brian Quint and Erik Carlson's stars were aligned again. Carlson accepted the nomination to become secretary-treasurer for the National Spa & Pool Institute, leaving his regional seat vacant. Quint filled it. Meanwhile, Carlson Pool & Spa had carved a niche in service, construction and maintenance. Aqua Quip was an ever-expanding retail leader. Along with the intertwined histories of Erik and Brian, the companies would constantly be reminded of one another's growing presence in the area, and would compete periodically at home shows.
"It's funny, but I never was threatened by them, and vice versa," Quint says. "There were people in my company who thought that maybe I was more docile than I should have been about the relationship. But I believe in this industry and that we're all in this together."
The companies' respect for one another was such that they had discussed the possibility of merging in the early 1990s. "We were both growth-oriented companies, and we would have to grow into each other's area," Kathleen Carlson says. "There was some initial conversation that did not progress very far. In those years we were always competitive, carrying some of the same product. There were rivalries, and problems popped up. But since we were on such friendly terms, we always worked it out.
"We would work hard for each deal but never bad-mouthed the other dealership. In fact, we trusted each other enough that Erik and I had it written that if anything happened to us, Brian was to come in and take over our company and do what was best for our kids."
A PARTY OF TWO
By this time, the Carlsons and Quints were anything but the Hatfields and McCoys. Erik recalls, "Our spa store was really in the backyard of the Aqua Quip stores and was doing very well. We were doing more and more deliveries into what was their market and then putting more and more service trucks in there behind them. We were partners in that venture with a separate, third party, and for several years had learned how to work with partners and learned the culture of 'win win.'" But the Carlsons couldn't match Aqua Quip's massive scope and resources in the retail field.
All of this came to a head in 1998, when the Quints and Carlsons were at a party for an industry associate. Quint recalls: "One of us said, 'Why are we going down the same path, separately. Can you imagine how great we could be if we fought these battles together?'"
Kathleen Carlson remembers, "Some of the initial ideas we had talked about were the expertise Carlson Pool & Spa had in service, construction and maintenance. Aqua Quip's forte was retail and how to handle multiple stores, which we thought Carlson's was not as good at. We decided to see where there were synergies."
There were even more than they had realized. "This was a no-brainer," Erik says. "My NSPI experience (he ultimately became president) and contacts throughout the industry showed me the way to work together.
In our case we saw economies of scale, too." They envisioned advertising dollars going further, product line volumes increasing, service dispatching being zoned. In other words, no more occasions of an Aqua Quip truck driving south while a Carlson truck drove north.
"We looked at the people involved and whether we could fill different positions," Kathleen says. "Erik could take what we would call operations; Brian would handle administration; I would take sales and marketing. We felt there was a great core of people under us that could support a merger."
But there'd be no corporate nuptials without a thorough, open and honest courtship. "This was one of the most important processes we went through," Kathleen says. "Do we think alike. When it gets tough, will we be able to relate and do things in a similar manner. A merger is like a marriage. You need to be compatible when it gets tough — and it will — or it will blow up."
The talks revealed enough similarities to plunge ahead. They received professional help for the valuation and merger process. Major decisions were made: The Quints would be the majority owners because they were bigger and had more assets. But for the process to succeed, there had to be daily teamwork.
"We developed what we called the G-5," Kathleen says. Consisting of the two couples and an agreed-on fifth member, the group would make the majority of the decisions. The team also agreed on how to divorce within two years if needed — but that after a certain time limit, there could be no backing out.
More agonizing reappraisal loomed in the form of a business valuation. The Quints and Carlsons hired a merger and acquisition specialist, Tom Elzey, to determine how the valuation and ownership structure would line up.
"This got emotional because that's when you're fighting for your company's worth," Quint says. "At the same time, you have to be realistic about what the business is really worth. All of us had to agree on the valuation model, then plug in the numbers and figure it out.
"It took a couple months. For a while I wondered if we were ever going to get there. Kathleen was an intense negotiator, and I was pretty arrogant about what I wanted. Erik's role is primarily to mediate us through issues."
"Kath and Brian probably did 95 percent of the legwork, bookwork and due diligence to pull this off," Erik says. And the hard work still wasn't done.
MAKING THE MIX WORK
Even after the merger in 1999, there were challenges, adjustments and unsettling surprises. "Mixing cultures was difficult," Brian says. "I tend to be collaborative with my management team. Our company had been twice the size of theirs, so I needed to be that way. On their side it was maybe more of a democratic environment. Also, I was a believer in open-book management. The Carlsons tended to be more close to the hip about finances. There was also a big difference in pay scales.
"We weren't smart enough to see all that coming. And only in the last two years have we hit stride totally. We had massive growth in 2000, but contracted or fell back in 2001 and had to downsize. We were in survival mode. In 2002 we were finally able to step back, and now we're a well-managed business."
Says Kathleen: "We were overly optimistic with what we could accomplish in sales. A merger causes stress, so you shouldn't look for growth right off." Timing — the economy had peaked — was a factor in this as well. The new team also started with too big of a management team, which has since been trimmed to a more workable number.
The more efficient Aqua Quip is now the best of two worlds. "The biggest change is how we manage ourselves now," Kathleen says. "We have grown up to a business that manages by processes. We live and breathe our budgets every month, all month long. We have developed great team process in how we handle challenges.
"It has been an evolution from two entrepreneurial companies to a professional business that has held on tightly to its family values, how it sees its customers and employees. Without those people we would not have a company, and we spend time making sure we are doing the right things in their eyes."
"Our management team and blended staff is very strong," Erik says. "We could not have done this without them. And there were a number of people around the country who gave us support, insight and acted as sounding boards."
Says Brian: "Best of all, we are poised well for the long run. We now have a stronger overall foundation, a broader base for success for long after we're gone. We're better equipped for the future, and that future looks very good."
