Looking for the Synergy

Gerry Raker

Oh, for the good old days when the horticultural industry was growing year after year. There was room for everybody. If you were lucky enough to be in the right place at the right time and worked hard, all you had to do was manage your success. Business management pretty much meant counting up what you had in your hand at the end of the spring season, making a loose plan to facilitate increasing production the next year and then taking some time off before starting over again. The future was always as bright as the next morning’s rising sun.

Now, if you’ve had the good fortune to survive the last decade, the morning’s rising sun only makes you wonder what kind of challenge the new day will bring. While overall industry growth remains static, horticulture has also been forced to absorb the pummeling of an economic blitzkrieg of gigantic proportions. The setup started with increasing demand from the growth of super stores, a little mix of novelty provided by companies propagating annuals from cuttings and the general public’s feeling of financial well-being courtesy of some creative bankers.

Then the housing bubble burst and the Great Recession launched the industry into chaos. Early on, a few companies here and there went bankrupt and some began to be absorbed by others. Then, when the economy failed to rebound quickly, the scramble for market share and the inevitable price concessions chipped away at margins and profitability until it incubated a full-fledged consolidation.

No link of the supply chain was spared. It didn’t matter what was produced: seed, cuttings, plugs, liners, finished annuals, cut flowers or nursery, pots, fertilizer or greenhouses. It didn’t matter how it was distributed and sold, wholesale or retail. Lights blinked off. Doors closed. “For Sale” signs went up. Some by the owner’s choice and others at the direction of their lender, the irony of which is some lending was cut off because of the new federal restrictions put on banks to keep their business lending practices in line.

We thought that forecasting would help us plan better and make sure that we had the cash flow to weather the storm. For all of our effort, in our case, there was so much change in supply and distribution from year to year that the weatherman had a better chance of forecasting the monthly weather for the year than we did of predicating financial outcomes for the same periods. That the future is uncertain is certain, but when your historical data trends are destroyed because your major suppliers and customers disappear into the fog of mergers and acquisitions, it can be a real craps shoot.

But even though the forecasting process couldn’t bring certainty to uncertain times, it did help us understand what was going on so we could prepare for the consequences. If the sales forecast came up short, we could quickly evaluate the impact of that and at least adjust the costs that we could control. Somehow it seems that the shortfalls are always a little bit greater than the windfalls and that the merged companies are always a little bit further away from us—a little more transaction oriented and less relationship focused.

I’m amused at how the M&A (mergers and acquisitions) spin-doctors have hijacked the word “synergy” for their press releases. To me, synergy is about cooperation and working together to be more than you were separately. It’s the fuel that powers relationships and teamwork. In the dialect of M&A, it seems that synergy only means that the value of two companies will be more when they’re combined than when they were separate. Even though they promise more and better to their customers, the culture of the acquired company gradually disappears and all of the energy gets poured into combining their operations, while customers of the merged company wait to see the benefit.

Anyhow, since we don’t have the luxury of time to wait and see how it turns out, we continue to adapt to a changed landscape and new business environments, even though much of it seems beyond our control. It’s a journey, an unrehearsed metamorphic journey. In the end, we still control our disposition and no matter what’s forced upon us, we’ll be who we always were. GT

Gerry Raker is the business team leader and owner of C. Raker and Sons, Litchfield, Michigan.