Relaunching a company is not an easy task. It comes with a lot of struggle and burden to whoever gets appointed to lead the charge. John Foley proved himself up for the challenge when he found himself thrust into leadership in the newly formed Verdant Specialty Solutions. Verdant is a specialty chemical company that got formed by the acquisition of a private equity firm, OpenGate Capital from Solvay S.A. Victoria Meyer brings John in to the show to talk about the acquisition and what it’s like to relaunch a business in the chemical industry. Learn a thing or two about change leadership as John talks about the burdens and the strategies he used to launch Verdant.
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Putting Together The Perfect Team For Relaunching A Company With John Foley
I am delighted to speak with the man of the hour, John Foley, CEO of Verdant Specialty Solutions. Verdant is a specialty chemical company that got formed through the acquisition of a carve-out business from Solvay. John is an accomplished leader with years of experience in specialty and commodity chemicals. We’re going to have a great conversation about what he’s doing with Verdant and other things. John, welcome to the show.
Thank you, Victoria. It’s a pleasure to be here.
I am delighted to have you here with us. You helped OpenGate Capital acquire that amphoteric surfactants business of Solvay. You’re now heading up the newly formed company, Verdant Specialty Solutions. Can you tell us how that came about?
I’d love to. I was faced with a career change or a position change. My former private equity role ended. I had been all-in in that business and activity to get it to the finish line. Immediately afterward, I paused and took stock of what I want to do next. I knew I wanted to lead another middle-market specialty chemical company. I took two main actions. One was to talk to all my executive recruiter friends in the industry about what opportunities might be developing. I ran that track but I also had a strong focus on finding the private equity partner and opportunity. On that track, some of my investment banker friends introduced me to quite a number of private equity firms. I must have spoken to 20 or 25 different firms looking for the fit or the way I like to lead and manage and interact for the business strategy where they were interested in it.
In the end, I worked with a couple of different firms. By Q3, I was working exclusively with OpenGate Capital on the West Coast where I found that they had a good mix of my style, interaction and business vision. They also had a strong focus on corporate carve-outs, which is a unique way to buy a business. It can be complicated to carve out assets from a major company, stand them up and operate them as an independent business. They had done over 30 corporate carve-outs. We immediately looked around at what was available. We worked on a couple of different deals before concluding the Solvay amphoteric surfactants business. It took a little while to close it but that’s what’s brought me here now.
You worked with Solvay for a long time. Did you have experience with this business previously?
As we went through the deal, I spent 26 years with Solvay and its predecessor company. I still consider Solvay to be my primary work family with so many friends and colleagues. I did have exposure. This business was part of Solvay Note Care of which I worked for approximately ten years. When the acquisition was made, Solvay bought this business in 2009 from an entrepreneur, Bill McIntyre. I wasn’t directly involved at the time. Eventually, I was general manager of North America and had oversight over the business. I was familiar with it for sure.
Amphoteric is not a new business or market. It’s been around for a while. Solvay business existed on its own as it grew. Solvay took over for a decade or more and now here we are again in a somewhat independent mode. How do you expect to bring success to this business as a standalone?
The amphoteric surfactants, you describe them as not new. Not many chemistries are new anymore. A lot of them have been around for a while. We have an interesting technology with strong market growth in part driven by COVID. Global growth of this particular class of surfactants has been strong. The opportunity for us to bring more success to this business is to understand how it developed as a business. Bill McIntyre founded the business. As many entrepreneurs do, they brought a lot of energy, a lot of growth, development, strong customer focus and grew a successful business that’s made an impact in the market. That attracted Solvay to acquire the business.
Relaunching a business is like making a transplant. You unplug a business and start it up again.
What Solvay brought over the last decade of ownership is a strong commitment to upgrading the safety, compliance, processes and team. I left Solvay in 2015, which had been the last time I’d been at our University park plant, for example. When this business came up for sale, my message to the OpenGate team is, “I have to go look at the assets before I conclude.” I was deeply impressed by what Solvay has done in the five years since I left. Culturally, asset-wise and productivity, they made a huge contribution to the point wherein 2020 this business with a stable fixed cost was able to increase production, double digits and take advantage of the increased demand. They’ve done a good job.
Where the business is now and the opportunity is probably a little bit too much of a big company to focus on process, simplification and in all those functional excellence areas. They’ve lost some of the entrepreneurial drive, energy and customer focus in my estimation. What we’re going to do with this business is maintain this strong focus on safety, compliance and supply reliability but we’re going to bring back that DNA that is still embedded in the business, that entrepreneurial mix.
I was on the phone with a key customer in the personal care business and a couple of team members who were part of McIntyre’s stay through Solvay. They’re delighted or excited for the opportunity to do it. That will do it. The second thing I would add is we won’t stop here with this amphoteric surfactant business. We consider this a platform, a great set of assets to run with and build the team around but we’re fully intent on adding on technologies, additional market and segment exposure. We’re on the right track. Even if we’re limping on the road, we’re on the right road towards success.
The whole aspect of carve-outs and private equity holds a bit of mystique to a lot of people. You’ve got experience in this. Taking on a carved-out business is a unique challenge. How do you approach this in terms of thinking about what are your keys to success? What do you do first? What do you consider the most critical success factors as you, in some ways, relaunch this business with its new ownership and new structure?
Maybe a couple of comments. The first on successfully carving out the business because it is a daunting task, almost like a transplant. We’re unplugging the business from its former parents and starting it up on its own. First, it’s making sure there’s a good team coming across, in this case, we received a lot of great team members. The plans are coming over to the operation side and the right level of commercial talent. Supporting that and it’s critical are the transition services agreements from Solvay.
We have approximately 30 agreements that allow us to continue to access support from Solvay while we complete our transition. We want to do that as quickly as we can because, frankly, it’s expensive and we’re not on our own until we finish that. The other part is that we have brought in from the OpenGate Capital is what I call the Ecosystem of Consultants and experts. We have a dedicated IT consultant who will help us select and implement our ERP system. Jedi Knight of Global HR gets our programs in finance.
We’re getting that great operation and support from OpenGate and their consultants to stand up the company but that gets you to where you’re operating. You can continue and run. How are we going to create the vision going forward is a different answer. For me, it’s the same basic playbook that I’ve been running for years of general management in businesses and it always starts with the team. We’re inheriting a team with a culture that’s intact. We’re recruiting new people and particularly for a business like this establishing that teamwork and a team-centered system is critical.
The next thing we’re going to go about is complexity reduction. I like to make things simple and some of the large global organizations in our industry are quite complex in how they run businesses and make decisions. It gets into an optimization globally but is difficult and slow. We’ll simplify things and a strong focus on profitability. I also find many of the major companies that I’ve been associated with or observed have a strong volume orientation. I’ve often said that, “You never get fired in the chemical business if you keep your plant full and blame your competitor for your profitability level.” We’re going to add team, reduce complexity, focus on where we add value and get paid for it. That seems to also unleash or liberate resources for growth.
It segues into one of my next questions, which is this whole aspect of success is going to come through your people, execution and forming a new culture to a large extent. What’s interesting is because to a large degree, you’ve got people that came from McIntyre, which had its own culture. You came into Solvay, which has its own unique culture. Now, you’re going to be Verdant. What do you want Verdant’s culture to be? How do you help form that?
We’re talking about that using symbols. In my initial town hall, we used several symbols like T. Team is at the center of it. All companies talk about teams but this one is one integrated team navigating the key priorities, safety, compliance, reliability but also generating EBITDA and cash, generating value. That part of how we work has to be seamless. It can’t be an industrial team focused on how low they can make fixed-cost, a commercial team on, “Let’s focus on variable margin.” We need one team to understand all elements of a business bringing balance to the business and making decisions as a unit. That is a key for me to establish particularly with the leadership team but we’ll drive it all the way down to the plant floor to start making decisions like that.
It’s been fascinating for me, with people I’ve known for a long time but as we unleash this, the comments they make. When I’m talking about value or value pricing with the commercial team, they’ll say, “Yes but if we lose that business we have to reduce costs.” The manufacturing is saying, “If we focus on profitable customers, we may lose focus on the less profitable customers.” One of them told me that and I said, “That’s what we’re going to do.”
As long as you’re working as one unit and you have aligned objectives, you’re doing it. We’ll do that. We use the image of orca whales. They hunt in packs. We need to be hunters. We need to be a little bit of Marie Kondo, clean, focused, efficient and the Idea relay. We use a lot of images to bring that to life and share with the team that philosophy. There are a lot of discussions and spending time together to get working as one unit, one pack but that’s what I’m excited about.
I have found certainly in working with different organizations that when you unleash these ideas, many times people are like, “I’ve been waiting to be able to make a change. I’ve seen this as an issue for a long time and I couldn’t do anything about it. This is great that we can take action to focus on a different area, etc.” You figure out who’s eager to make that change and identify those opportunities. This is not your first rodeo. You ran a PE-backed business before. What would you say are the lessons you learned in that experience? How are you applying them to Verdant?
It’s not my first rodeo but I still learn every day. I love that part of it. In leaving the global multinational where I spent most of my career, even within those units, I was typically running smaller businesses with the same playbook. It wasn’t such a leap but leaving that mothership where you have all the relationships, all the resources and going into a private equity situation. Some of the key things weren’t new. I came to deeply appreciate how profoundly challenging it is to move culture and how many things you can do at one time and the pace of change that you can drive. For me, what was important in forming the strategy on this initial acquisition, I was much drawn to the idea of a carve-out in our space.
Generally, if an asset of business has been owned by one of our global leading companies that they have invested in that business, move along the culture and the standards on safety, compliance, mechanical reliability and process safety management, the whole suite. That’s what’s happened in this business. Solvay invested its energy for over a decade to take an entrepreneurial business and bring it up to global standards. That gives me great comfort as a starting point to then graft on top of that the entrepreneurial aspects that maybe you can’t do everything well at the same time.
That focus under the ownership was safety, compliance and supply reliability came at a bit of a loss of focus with the customers and the growth. We’re going to bring that back and that is one lesson that I’m reapplying as a starting point. Once we have that culture moving then we can take on maybe more entrepreneurial businesses or things that need to be upgraded or improved once you have that critical mass.
You mentioned regaining some of your customer focus. How have your customers received the news of you taking over this business and taking a new step forward?
Finding the perfect team is critical in relaunching a business.
It’s still early in the process of gathering the feedback. One of the concerns that I saw early from customers wanting to ensure supply reliability and uninterrupted supply transition because they know it’s an issue. I’d say both our suppliers and customers are following that. It’s trust but verify with where it comes from. The fact that a number of our executives are well-known in these circles helps but it’s still a new company.
Overall, the reaction made me happy after we signed the deal on December 20, 2020 and announced it on January 5, 2021. I heard directly from some of my industry contacts the congratulations and all those pieces. Even on some LinkedIn working groups and surfactant industry pieces where people were saying along the lines of, “We’ll be watching to see if this new team can restore the glory of what was once McIntyre Chemical.” What struck me and I probably didn’t appreciate it fully at the time is the presence that McIntyre Chemical had in those markets because they’re visible and have a strong customer focus and people want that back. That’s a wonderful opportunity for us.
It’s a great legacy to go back to.
You can’t waste it and we have to act quickly to restore some of the pieces that may have dulled around the edges. I’m encouraged.
There’s a lot of private equity interest everywhere but certainly chemicals and specialty chemicals. What makes chemicals and specialties a good target for PE? What do you see that is happening in that space? You’ve been exploring this quite a lot before you landed on this deal. What’s making it attractive?
I’ve worked in private equity for a few years now. I was deeply impressed to learn the scale of the private equity industry globally. The sheer number of firms and vast sums of money that need to be put to work was eye-opening for me. I didn’t think it should have been but it was. There is a strong interest in the chemical space. People have had some good experiences with some of the deals and feel there are some returns there.
Also, the industry is undergoing great change. Maybe COVID accelerated this but the global leaders seem to be reflecting on their long-term strategies. What are the trends, sustainability, new materials to build our new sustainable world? As they focus on those targets and they look back at their portfolio, what doesn’t sit well or where they want to exit and raise money to fund what they see as their innovation-driven future leaves a lot of businesses available.
For a global industry where the capital is concentrated in global leaders, if they’re exiting these assets, there need to be other companies and private owners that pop up. There’s this pool of money and interest. Where private equity can align with operators, people who know the space, can look at the assets and see how to put them together in an efficient way to make money, there’s strong support for it. I don’t know if it’s a particularly strong focus on chemicals for the global private equity industry but they have a lot of money and there’s an opportunity here that needs to be filled.
We’ll see where this all goes. You touched on sustainability as one of the trends that certainly is impacting the chemical industry. Verdant has chosen a name that invokes in many ways green and lush. Where do you see that going for you? How are sustainability and green chemistry impacting your business? Is that something you see as part of your future?
Sustainability is an important part. The name also represents for me a fresh start for this business and where it goes. No one can ignore the macro trends for consumers, the products they want and what’s being promoted by our value chain partners. We’re committed on that path as symbolized by our choice of name as Verdant and see it may be similar to safety and compliance. It’s not a destination. It’s a journey. There’s a lot of work to do to continue to push our products and our business down the road to a more sustainable future.
For me, it is also holistic. It isn’t the final products that we sell but how we’re making sure that we have a sustainable business that can support reinvestment in our people, assets and communities. We do that by making products that people want as part of their portfolio long-term. We have a lot of work to do there. It’s a good start with amphoteric surfactants. In my view, some of them are on a natural side with some of the raw materials and where it goes but we’ll be working along those lines.
John, you’ve been open about an interest in future acquisitions to bolster Verdant’s business. What’s next for you?
I’m not here to make any announcements but I can share a couple of things, which have been interesting. As we’ve worked on this deal and once we got it signed on December 20, 2020, it was becoming increasingly clear to me. I was starting to sense that my private equity partners weren’t happy with me on the amount of time I was spending on looking for new acquisitions. What we did early on is the criteria and what we were looking for. Probably the regions. We were thinking about North America, first and Europe, second. I’d love to get to Asia but we need to make sure it’s the right deal and we have the team to support an Asian business to make it a global business.
The second area in technology is we’ll be looking for new and different technologies to add to our portfolio to make it a more complete offer. Also, increasing our exposure to formulations and solutions in different market segments because we have a heavy home personal care focus here. We set those priorities where we were screening companies. We received some inbound interest as a result of making the first deal. We’re explaining our strategy and what fits. People start to see what might fit for people who are thinking about selling businesses both corporate carve-outs and privately owned businesses, either PE-owned or entrepreneurial owners.
We’re evaluating 3 or 4 at this time. Deals are hard to do. You have to have a willing buyer or a seller that agreed to terms but I hope that we can close another deal or two. It’s moving along and it is an important part. What I told the team, for the initial priorities is safety, compliance, supply reliability. We’re going to focus on customers, value and we need to triple the size of the business. If it takes three years, I will have disappointed a lot of people including myself.
Tripling in three years is quite a good ambition but it should be doable. It’s a piece of cake. John, this has been so great. I’ve enjoyed talking with you. I am looking forward to your future success with Verdant and all good things.
Thank you, Victoria.
Thanks for joining the show. We will speak to you soon.
About John Foley
John Foley is the CEO of Verdant Specialty Solutions, a global specialty chemical company that supports human well-being through the power of science and nature. An accomplished leader, John has a 30-year record of success in both the specialty and commodity chemicals industries.
John joined the Verdant management team upon the company’s formation in May 2021. Previously, he was the CEO of ORG Chemical Holdings, a business that he transformed from 2015 to 2020. His career includes 25 years with the global chemicals firm Solvay and its predecessor companies, where he held regional and global leadership positions. John was vice president of divisions that offered solutions for the home and personal care, agrochemical, coatings, oil and gas, and industrial markets. He has also served on several boards including the Board of Directors for Solvay North America, ORG, and the Society of Chemical Manufacturers Association (SOCMA).
An agricultural economist by training, John earned his bachelor’s degree in agriculture economics from the University of Nebraska in 1984. He attended Harvard University’s General Manager Program in 2001.
John was born and raised on a farm in Nebraska, where he lost his right arm at age six. This formative experience taught him the value of determination, diversity, and human potential. John is a voracious reader, marathon runner, dog lover, father of two adult children and a foster parent with his wife Krista. John lives in Houston, Texas.