By Hope Belli Tinney, Washington SBDC
RICHLAND, Wash. – What happens when your small company is acquired by a big company, but then it turns out that size matters and small is better?
Polestar Applied Technology, a Richland-based nuclear power consulting and technical services company, found itself in that scenario after it was acquired by a multinational corporation in 2007. By 2013, the division was threatened with closure.
Instead of accepting the inevitable, three management employees, with the help of two advisors with the Washington Small Business Development Center (SBDC), took on the challenge of plotting a profitable course back to their small business roots.
Changing course wasn’t easy, but the course they were on was a downward spiral.
Transferring assets, finding capital
“Integration of a small, entrepreneurial company of 80 people into a large multinational of 30,000 is a tough task,” said Kathy Miller, managing director at what is now Polestar Technical Services. “Although a number of initiatives were tried, Polestar never really became part of the larger organization.”
“Polestar had always competed for work as a small business,” said Patty Bailey, project operations director. “There was no realization how much of an impact there would be when we were no longer a small business.”
Bill Bailey, director of business development, said that by 2013 the Richland-based division was no longer part of the company’s growth plans. So Miller and the Baileys created a new plan.
“The parent company was not opposed to divesting the business,” Bill Bailey said. “But for the transition back to a small business, we needed to create a new corporation and figure out how to transfer people, contracts, property and government security clearances to the new entity with no disruption in service. We also had to work with the parent company’s schedule, and we needed capital to finance our startup.”
Negotiating with a major corporation
Experts in lifecycle management of nuclear facilities, neither Miller nor the Baileys had experience setting up a new corporation, negotiating with a multinational in a divestiture plan or securing a major loan.
That’s when they called the Washington SBDC and started meeting with Bruce Davis, the SBDC advisor in the Tri-Cities.
The Washington SBDC is a network of more than two dozen business advisors and two international trade specialists who meet with small business owners and entrepreneurs to help them start, grow or transition businesses. SBDC advising is one-to-one, confidential and provided at no cost to the client.
The Washington SBDC (http://wsbdc.org/) is hosted by Washington State University and receives financial support from the U.S. Small Business Administration and other institutions of higher education and economic development. The SBDC office in Kennewick, Wash., receives additional support from Columbia Basin College and the Tri-City Development Council.
When Davis found out what Polestar was trying to accomplish, he called in Michael Franz, the SBDC advisor in Seattle who has extensive experience with corporate level situations. Every Friday for more than 10 months, Davis met with the Baileys and Miller while Franz joined most meetings via teleconference.
The path back to small business profitability was complicated and included assessment of business feasibility, development of a financial model, negotiation of transition details, finding legal counsel for the transition, business licensing and formation steps, employee transitions and benefit plan setup, detailed financial planning for the new entity, investigation of financing alternatives and bank interactions, transition of multi-state operations, a marketing strategy and plan and DOE facility clearances.
Systematic discipline yields results
“It was tricky,” Davis said, because the Richland group had to keep handling the day-to-day responsibilities of their existing business while also creating a new corporation.
Is it a little like changing cars while driving down the interstate at 70 miles an hour? It was worse than that, Davis said: “The lane the Richland folks were in was heading toward a bridge that had collapsed.” At its peak Polestar had employed more than 80 people, but by 2013 it was down to 26 – all senior-level professionals.
“We had 26 people who were counting on us to get it done,” Miller said.
She and the Baileys credit Davis and Franz with providing assistance on multiple fronts, but one of the biggest benefits of meeting with the SBDC was that it kept them focused and moving forward.
“The discipline was important,” Bill Bailey said. “Being held accountable was important.” Patty Bailey said the group would come up with a list of action items every week and then systematically work through them.
Employee loyalty rewarding
Along with expert technical experience, Franz and Davis also provided outside objectivity and encouragement.
“The first time we met with Bruce, he said, ‘This is do-able,’” Bill Bailey said. “That gave us some comfort that we weren’t heading off in a direction that would lead to a dead end. We had a fighting chance to survive.
Miller agreed: “Having someone on the outside saying, ‘Yes, you got this,’ was huge.”
When the divestiture became official, Miller said, all of the Richland-based employees chose to accept positions with the new Polestar. A number of employees working off-site chose to stay with the company as well, and a few employees who had left have returned.
The new Polestar Technical Services recently passed its two-year anniversary in Richland and the future looks bright: “We have over 30 employees now,” Miller said, “and we will do just under $5 million in revenue this year. We have some pretty big goals going forward.”
For more about Polestar Technical Services, go to http://www.polestartechnicalservices.com/.
Kathy Miller, Polestar Technical Services, firstname.lastname@example.org
Patty Bailey, Polestar Technical Services, email@example.com
Bill Bailey, Polestar Technical Services, firstname.lastname@example.org
Bruce Davis, Washington SBDC, email@example.com
Michael Franz, Washington SBDC, firstname.lastname@example.org