Peter J. Holton: A Life in the Trades at All Levels

Craig Castelli (00:04):

Welcome to The Close M&A Podcast with Caber Hill Advisors. I’m your host, Craig Castelli, and today my guest is my good friend and business partner, Peter Holton, managing director at Caber Hill, who oversees everything we do in the facility services sector. Peter has a unique background coming from a family business where he worked at such a young age. He may have been violating child labor laws, but it [00:00:30] really taught him a lot along the way, and we’re going to hear some of that story. So Peter, family businesses are always an interesting dynamic. Anybody who works with enough family businesses comes away with stories normally about the family themselves. So I guess just to kick things off, do all family businesses have some level of dysfunction in their dynamic?

Peter J. Holton (00:52):

They all do, right? I mean, it’s unique from a family business if there isn’t dysfunction, and it’s [00:01:00] really hard to separate church from state, meaning when you are grinding away each day and then you have a family event coming up, those are the best is some people just can’t cut off the work. It’s like to show The Bear, I dunno if you’ve ever seen that show on Hulu. Oh yeah. A lot of family members in that show and they’re always yelling and all that stuff, but they do love each other. I don’t know if we got to the level of my family yelling at each other like that, but yeah, there’s some tension, maybe [00:01:30] Thanksgiving or birthday party for one of the kids or something like that. So yeah, there’s definitely some dynamics of dysfunction.

Craig Castelli (01:38):

Yeah. Yeah, absolutely. I think we see it with all of ’em. It has to add a whole other level of complexity to your job. How do you navigate that?

Peter J. Holton (01:51):

That’s a really good question, Craig. The way I navigate it is, first thing I do is I take a deep breath. I smile because [00:02:00] memories from flooding back to working in the family company and my personal opinion is the biggest situation you do is understand why are they getting angry? What is the fear? It’s the fear that they have in each other, whereas they should be leaning on each other, and those are the companies that can really start taking off is when they start leaning on each other instead of just the inner workings of the fighting per se, [00:02:30] taking a step back and really thinking about, okay, what are we trying to accomplish? And is everyone on the equal playing field as far as president, vice president, all that good stuff. At the end of the day, titles are for customers, and so as a family business, they’re a cog in a wheel and it’s got to make sure that they run just like any other business.

Craig Castelli (02:53):

Yeah, I think that’s an interesting point that you make. Titles are for customers because your title walking around the shop [00:03:00] might be very different than your title sitting around the dinner table.

Peter J. Holton (03:03):

Of course, of course.

Craig Castelli (03:07):

So I mean, I don’t want to oversimplify it, but oh yeah, go ahead.

Peter J. Holton (03:10):

No, I was just going to say it’s funny because I specifically remember in high school, so I worked for my family’s company in high school and college all through the summers. Yes, before college. So let’s not get the,

Craig Castelli (03:23):

And tell everybody just for a second what their family company is.

Peter J. Holton (03:26):

Yeah, great. So my family’s company is Dublin Contractors. It’s [00:03:30] a family run painting, drywall, plastering type company. It’s all commercial and industrial in the great city of Milwaukee. And it’s my dad, it’s my uncle Jerry, it’s my cousin Jerry, my brother Jim. And we do get along. Yeah, there’s bickering, but we all do get along. But it’s funny because my oldest brother, he, he’s been working there since high school, so he went to college and now he’s running things now [00:04:00] at Dublin. But I specifically remember growing up just looking at my brothers at the dinner table because I have three other brothers, my mom and my dad, everyone just exhausted. And I would sit down and before I sit down, the food would be on my plate and it would be gone because my brothers are so darn and hungry from working for my dad. It was crazy. So those are always fun memories. So now if you see me, I eat pretty fast and it’s a habit of mine. I’m sure you’ve saw it with our team. [00:04:30] It’s just something that happens.

Craig Castelli (04:33):

It’s become a running joke around the office. You get a prize if you can actually beat Peter in how fast you eat a meal.

Peter J. Holton (04:40):

It is a habit. I can’t break it.

Craig Castelli (04:43):

But I mean, in all seriousness, I think at least my opinion in partnerships, whether they’re families or just business partners in general, communication is so key. And so with some of the challenges you face with family businesses, ultimately, how much of it’s [00:05:00] communication and how much of it is really anything else?

Peter J. Holton (05:05):

The number one thing is communication, but it’s also expectation. The expectation of each other. It is like a nonverbal saying, you got to pick up your own slack. You got to make sure that you’re doing what is imprinted on our chest, which is our family company. And so those two things. One is verbal, which in our family run company, [00:05:30] verbal communication is hard. It’s really hard to do that, especially if you have an older sibling that is listening to a younger sibling higher in the title or the hierarchy of the company. That’s really hard. And you got to separate that aside. But the expectation, and what I mean by that is are you putting in the same amount of effort and work as the other family members? And only you can look yourself in the mirror and do that. [00:06:00] And sometimes I have to, in some cases, when I’m working with family businesses, I don’t come out and say that, but I do meet with ’em in person or get on a phone call and we talk about where is the angst here? Where is this coming from? Well, and you kind of peel back the onion. And once you do that, then they start understanding why is Peter asking that? Well, because I’ve been there, done that. And so that’s where people trust me, they trust Caber Hill is because of that in my experience. [00:06:30] And quite honestly, I love working with family companies. It’s crazy, don’t get me wrong, but I know how to do it and I’ve been doing it for years and it’s been a lot of fun.

Craig Castelli (06:40):

So what’s your favorite family business story? It doesn’t have to be about your family. It could be, but any family business story.

Peter J. Holton (06:47):

Oh man. So paint thinner. For those of you that don’t know, if you inhale the fumes, it makes you really giggly, it makes you laugh. Okay. So there was a storm, I’m [00:07:00] probably a sophomore, going to be a sophomore in college, and my dad wakes me up at three o’clock in the morning and some alarm went off in their warehouse and he goes, Peter, we got to go to the yard. That was what we called it, or go to the shop. Sorry, that yard was a different area. I’m like, what? I didn’t know what was going on. So I’m like, why are we going? He’s like, the alarm went off. And so my brother, Jim, he showed up as well, and my dad myself. [00:07:30] And we had two 500 gallon drums of paint thinner that leaked everywhere throughout the entire floor. And the offices, it came in and there was a flood too.

(07:44):

It was raining so hard. So we mixed with the water. So we’re getting everything out, removing anything. And then over time I’m like, why is my dad giggling so much? Why is my brother Jim giggling so much? Why am I laughing so much is because, and that was a story that we still talk about around the family. It was hilarious, [00:08:00] but looking back on it, it was crazy. And three o’clock in the morning we’re there, and then the best part was we’re all done. It’s like 6 30, 7 o’clock in the morning. My dad’s like, all right, well get to work. I was like, kidding me, fun’s over boys. Oh yeah. So that was one of my fondest memories.

Craig Castelli (08:20):

Oh, that’s amazing. So this whole experience really set you on a course to where you are today, right? You are now, I mean, I will say this, if you don’t want to say [00:08:30] it about yourself, I think you’re one of the foremost advisors to facility services businesses in the entire country. It doesn’t matter if it’s janitorial, painting, roofing, paving, HVAC, the list goes on. You’re the expert when it comes to valuation and M&A. Just talk a bit about this, about how the past experiences shaped this and what you’re doing out there in the market today.

Peter J. Holton (08:55):

No, I appreciate you saying that, Craig, because I do take pride in it, and it’s something that I wear [00:09:00] with a badge of honor. And the reason that I’m very successful in the facility service blue collar space is because I can go into any office and I can talk white collar and I can talk blue collar because with growing up in a family company, doing the manual labor, working your 50-, 60-hour weeks in high school and college, I could have gotten an internship, but I couldn’t. We had to help the family business. And I look back on it and go, there’s [00:09:30] not a lot of investment bankers that have my background, and that’s what makes me stand out. And so when I can talk to the owners and I can relate to what they’re going through, and as far as family, as far as the physical work that you’re doing, that’s what makes, makes me and Caber Hill stand out. And that’s what makes it really exciting.

Craig Castelli (09:51):

And the reality is the majority of the business owners in these sectors have that exact same background without [00:10:00] naming names, we both know a gentleman pretty well who’s running a business that’s pushing a billion dollars top line, who built his own business from scratch was cleaning offices on his own in the early days. And that’s the story of most of these business owners, regardless of the size that they get to. And I think you really have a unique way of connecting with them when you share that background.

Peter J. Holton (10:28):

And that’s a great point. And they’re story [00:10:30] after story of those people that came from nothing, went into blue collar space and made something in theirselves. And I think that that relation, that making it relate is the key. That’s the component. Because at the end of the day, what we do is very emotional, and you can look at all the X’s and no’s, you can look at all the financial information, and that’s the easy part in my opinion. It’s the connecting that, Hey, do you trust me? Do you know [00:11:00] what I do for a living and how I can help you? And this is what I do. And that’s the best thing is, okay, let my hair down a little bit and let’s figure this out together. And that’s where the beauty of it is. And that’s the approach that I take.

Craig Castelli (11:16):

Yeah, well, we say this all the time, but for most business owners, their business is their baby. And I think that’s even more true when they were 18 or 22 when they started it, not 30 or [00:11:30] 40, like so many others,

Peter J. Holton (11:31):

Bingo, it is spot on, and it’s the only thing that they know how to do. I keep asking my father, I’m like, what drove you to your success? He’s like, I didn’t have any other choice. And you got to put food on the table. And a lot of these blue collar owners, they have the same mentality. I got to put food on my table and the drive, the passion and the energy, you got to match it. And that’s pretty exciting when you can.

Craig Castelli (12:00):

[00:12:00] Yeah, yeah, absolutely. So across all these different facility services sectors that you cover, what’s really hot right now?

Peter J. Holton (12:10):

Great question. So I kind of look at things as a baseball game, and if you’re going to look at the two hottest sectors that I’m seeing right now, roofing industry is probably in the bottom of the third inning. It is still very hot. It’s got a long runway until we get to that bottom of the ninth inning per se. [00:12:30] So roofing is very hot. The other sector, which I thought would slow down, but it hasn’t, is janitorial. If you were to ask me last year, I would’ve said probably top of the eighth, but now I’m going to say it’s the bottom of the sixth. It’s kind of moved back because there’s so much more activity out there. And buyers are coming out of the woodworks more than I’ve ever seen. And so those two sectors, HVAC is still hot. I would say they’re probably bottom of the eighth where that’s going. [00:13:00] And then landscaping probably bottom of the seventh going into the eighth inning. Those are where I’m seeing all those trends in those verticals.

Craig Castelli (13:09):

Yeah, janitorial is interesting because it’s just so tried and true. You’ve got recurring revenue. It’s a simple enough business to understand, but it’s a big enough sector that there’s a lot of different ways to play on it, a lot of different end markets. And you’re right, I agree. I thought it was something [00:13:30] that would start to slow down by now, and it really has. It’s like it has a second wind.

Peter J. Holton (13:36):

It does. And it’s incredible. The owners that you talk to, they’re not stopping as far as acquisitions and as far as business valuations that we’re doing for ’em and getting companies ready to sell it is extremely hot in that sector.

Craig Castelli (13:53):

Yeah, yeah, absolutely. Alright, so let your hair down with us for a second here, Peter.

Peter J. Holton (13:58):

Okay.

Craig Castelli (13:58):

What are you working on right now that you’re most [00:14:00] excited about? So

Peter J. Holton (14:04):

I’m working with a family company and it is a lot of fun working with this family company because you have a father and you have a son and they’re running the company. And sometimes I have to take myself off a camera because I’m laughing a little bit, and you got to have fun at what you do. And we’re working hard, don’t get me wrong, but it is fun sometimes where [00:14:30] you hear the bickering and you’re just like, okay, guys, let’s table that for a second. And so that’s probably the one that I’m working on right now that is the most exciting. There’s another one that’s coming up that I’m excited to work with. I’ve known this owner, gosh, for 10 years, and he’s looking at doing something because of the future that’s coming up for him and his family. And so moving on to a [00:15:00] different direction. So I’m anxious to talk to this owner, really excited to roll up my sleeves and help him. And because 10 years is a long time to know someone in our space, and you just build a connection. And that’s the best part is you build this connection on their first call. You meet with ’em a couple of times a year just to see how things are going. And so that other owner really excited about and see where that goes.

Craig Castelli (15:27):

Let’s unpack the first one a little bit without [00:15:30] giving too much away here, but I happen to know these two guys, the father and the son not as well as you, but I’ve had the pleasure of hanging out with them on a number of occasions. And it’s an interesting scenario where father is going to finally realize a well-deserved exit from the business and path to retirement. Son’s going to really fully take over operations, hopefully with the backing of a strong PE firm to partner with him. But as you [00:16:00] go through this process, we get into management meetings specifically. We’re going to have to really give both of them a lot of coaching so that the son can say his piece and really shine here. How are you going to work with them to manage that dynamic?

Peter J. Holton (16:16):

Yeah,

Craig Castelli (16:18):

I didn’t prep Peter for this question, just so everybody’s aware of it. This is real off the cuff conversation right now

Peter J. Holton (16:25):

Is a great question. And I’ve already started doing that and I’ve talked to [00:16:30] the son off to the side, I’ve talked to the father off to the side, and you have to continue to do that implanted in their mind, implanted in their brain that look, yeah, you ran this company for 35 plus 40 years and your son’s been in there and he’s been helping. He’s been grinding. We got to put him on a pedestal. And it could be hard for a father to say, okay, yeah, you want to see your kid succeed, [00:17:00] but when you’re running that business and you’ve built it from scratch, it’s hard to see that. You got to put your son above you in that conversation. And when you can realize that for the betterment of the family, it is, I’m getting goosebumps right now. That’s the beauty of it. And that’s where you can see. Okay. Yeah, it makes sense. And so yeah, we’re going to have coaching, I’m sorry. Yeah, we’re going to have coaching more and more, and as we get closer to management meetings, [00:17:30] we will run him through that and we’ll run him through that again and again.

Craig Castelli (17:34):

Yeah, lots of pressure because you’re right, it’s for the betterment of the family. It’s for the betterment of the company. There’s just the natural hierarchy, and children always have this natural deference to their parents, and the parents who founded the business are used to being the spokesperson, and it’s not going to be just automatic that they can flip that switch, but with enough reps in practice, they can, and [00:18:00] we will get ’em there.

Peter J. Holton (18:01):

Of course.

Craig Castelli (18:03):

All right. Last question here before we wrap up. Let’s hear a piece of advice from you that our listeners might not hear every day somewhere else.

Peter J. Holton (18:15):

Piece of advice, I guess I’m going to tell a story if you don’t mind, and then I’ll lead into the advice. It was one of my first transactions and I was working for a buyer and [00:18:30] we did the deal, and then the owner, the seller who sold to our client, the buyer, he passed away within five days. It was really sad and look back on that. And that owner didn’t have his trust. His will and estate. Didn’t have his financial planning set up, and so now his family has been stuck running and trying to figure out with the state and [00:19:00] going over all these legal costs where I have the same concern with my own brothers that run their company. And I have concern with a lot of business owners that just because you think you’re young right now and you have plenty of time to do that, my best advice is get your house in order. You don’t know what’s going to happen with your family, with you. So get your trust willing and estate set up. Get a financial planner to help you because you don’t want the state dealing with [00:19:30] what you left if you didn’t have it set up.

Craig Castelli (19:34):

That’s great advice. I mean, and doubly so in a state like Illinois where probate’s a nightmare, but even in just about any state, it’s an easy problem to avoid. Now, I’m the son of an estate planning attorney, so I didn’t really have a choice. As soon as kid number one was on the way, he was all over me to get this figured out. It doesn’t take a lot of time. It doesn’t cost a lot of money. Yes, you have to have some uncomfortable conversations. Conversations [00:20:00] with your spouse and others in the family that everybody should be happy, but nobody wants to have. Right. But God forbid the worst case scenario rises. You cause a lot more pain for everybody who remains behind if you haven’t tackled this than if you do.

Peter J. Holton (20:20):

Without a doubt. You don’t want the state or your family scrambling trying to figure out the pieces that you left behind where you could have spent money and [00:20:30] time upfront to do that, to help your family in your situation here.

Craig Castelli (20:34):

Right, right. Couldn’t agree more. Well, Peter, this has been a lot of fun. Thanks for hopping on here and thanks all you for watching us on The Close.

Peter J. Holton (20:42):

Thanks guys.