Kito Crosby CEO interview: How we combined two businesses

Earlier this year, The Crosby Group and Kito Corporation announced the completion of the deal that saw the US and Japanese lifting businesses become a combined entity under the name Kito Crosby.

Speaking after the completion of the deal, the new organisation’s CEO, Robert Desel, who before had been CEO of The Crosby Group, said: “I am thrilled to announce we have completed the business combination of The Crosby Group and Kito Corporation to form Kito Crosby, a global provider of comprehensive lifting solutions.

“Together, our highly complementary product portfolios and mutual commitments to safety, reliability and innovation will create exceptional value for our customers and other stakeholders. I am honoured to be leading this organisation and its 4,000 team members around the world to bring together two amazing businesses with rich traditions and histories.”

Yoshio Kito, Kito Crosby’s chairman, who previously had been president and CEO at Kito, added: “This combination represents significant value creation for our customers, employees, shareholders and communities. We are excited to continue growing as a combined business and to develop incremental opportunities for our existing and new customers across the world with expanded product offerings and solutions, while maintaining the same support and commitment they have come to expect.”

Desel says that aside from some organisational alignments, the months since the formation of Kito Crosby have been spent engaging in listening and learning.

“Both leadership teams are spending time – before we make any changes big or otherwise – really learning each other's business,” he explains.

“That’s very, very important because Crosby does some things well, and Kito does many things well, but we come from different traditions: a lifting hardware (hooks and chains etc.) tradition and a hoist and crane tradition, and also from different origins. It’s important that we take time – the deal closed on 1 February, so we’re barely six months in at this point [at the time of the interview] – to listen to the customer, visit the teams.

“I like to spend as much time as I can at what I call the sharp end of the stick, which is either where we make products or where products gets used and consumed, which is at our distributors and our end users. “Even before the combination with Kito I tried to spend as much time as possible at our manufacturing sites, with our channel customers or our end users.

Kito obviously has… some sites in places [where Crosby has] not had a presence in, and that's taken me on the road even more than normal.

“I spend most of my time now, when I’ve been in Asia, at the sites that I've never been to before, listening to the team, listening to the customers and learning the market, and we will continue to do that, and we will make small and incremental changes when needed.

“Because of the complementary nature of the products and the geographies, we have the luxury of going and listening to the customer and doing what's best, which is like truly a luxury in this environment where there are a lot of [mergers and acquisitions] that are predicated on immediate savings. We don’t need to do that because we have two really healthy, strong businesses with very rich traditions that need to be respected and understood.”

Training

Desel says the combined business will produce benefits for both distributors and end users. As he mentions above, the two halves produce complementary products – most of the items that Crosby manufactures and sells, Kito does not and vice versa – but they share common distribution channels in many markets.

 “We both go to market through distributors – mostly independent distributors, which we both place a very, very high value on closest to the point of use of the product,” says Desel.

“And we have very common end users… that would use both Crosby and Kito products (or Harrington products, as the Kito brand is known in the US). With that in mind, we ar e able to bring more scale and efficiency to the channel – they now only have to deal with one company. That’s more efficient for them, that brings value to the channel, a better partner – it’s easier to do business.”

He adds that for the end user base, with Kito Crosby now being a larger company that means it can invest more in training and in product development and create more integrated, comprehensive solutions because through these investments the firm will touch a broader range of customers.

Picking up on the theme of investment in training, Desel says that Crosby has “a rich tradition of training”.

“We've always trained very aggressively,” he states. “At the end of last year we were at half a million people that we had trained – those are the ‘craft workers’ that put their hands on our products as well as safety engineering and lifting specialists. In the US, we’ve doubled our distributor demo day training over the prior year and that’s possible now because of the additional scale we have with Kito, because now we can invest more because it’s touching a broader array of customers and products. Anything that we’re spending on, anything we’re investing in, we’re now leveraging it over a bigger base, so we can justify bigger investments.”

Kito, too, is involved in end user training, although Desel points out that it has historically carried out more training in the distributor arena. Once again, it’s an area where the experiences of both businesses are complementary and will enable them to learn from each other.

“We believe that Crosby can learn from Kito and Harrington’s distributor training tradition and start to do more of that, and that Kito and Harrington can start to use Crosby’s end-user capabilities to train,” he says. He str esses, too, that the training is all about the safety of the enduser – safe lifting practices, inspection, how to rig a hoist – and that it’s not about the Crosby product.

Expansion

There are clear areas of potential expansion for both sides of the new company, with Desel identifying Europe and Asia-Pacific as the regions with the greatest potential. He says that the US is a big market for both Crosby and Harrington. However, unsurprisingly, Kito is much more prominent than Crosby in Asia, having operations in Korea, Indonesia, Taiwan and Thailand, for example; hence, Crosby will be in a position to leverage those sites and serve those markets better, whereas in Europe, where because Crosby has a bigger presence than Kito, the situation is played out in reverse.

As the business grows, there is the potential for employees to reap the rewards in the long run. Crosby’s existing employee ownership programme was extended to Kito’s staff from 1 February, when Kito Crosby was formed.

This means that all 4,000 staff have “a stake in the long-term value creation of the business”. As Desel explains, what this equates to in practice is that if and when the business is sold by the parent company, the private equity firm KKR, “a portion of those proceeds get pushed back to all 4,000 team members”.

“Every single person in the business will get a financial reward as the value of the business increases,” he says, adding that he believes Kito Crosby to be unique in the lifting and hoisting industry for having such a programme.

As for future acquisitions, Desel says that the company is always looking for businesses that would thrive under its ownership. However, he also points out that with Kito being a company of equal size to Crosby before they merged, his hands are full.

“We’ve got a lot of work to do and, as I said, we are taking our time. So while we have no immediate plans to do anything else, we think we’re a very good steward.

“If you look at [The Crosby Group businesses previously acquired] like Straightpoint, BlokCam and Gunnebo Industries, they’ve really thrived with the benefits of scale and being able to take these businesses global very quickly.

“There are probably other opportunities in the future, but in the near term we’re laser-focused on making sure that Kito [and] Crosby learn each other’s business and we are being very thoughtful about how we do the integration.”

Private equity

Kito Crosby is owned by Kohlberg Kravis Roberts (KKR), a US private equity fund. With OCH sister publication Hoist Magazine having reported on a few private equity firms moving into the lifting space in the past 12 months, we put it to CEO Robert Desel that this was an emerging trend.

Desel, however, rejects the idea that there’s been any change in private equity interest in this segment on the manufacturing side.

“For the manufacturing world, Crosby has been owned by private equity for decades. Even before it was owned by KKR, it was owned by private equity,” he says.

“Kito was a public company, owned by private equity, went back to a public company and is now part of Crosby, which is owned by private equity. So I think it’s always been around.”

As to why private equity might be attracted to lifting, Desel says: “I don't want to speak for other firms, but for me it’s a business you can feel good about because you’re making an impact every single day in almost every sector of the economy. Whether it’s wind power or manufacturing or logistics or space travel or defence, or oil and gas, or infrastructure – we touch everything in one way or another. It’s quite a stable industry.”

Having excluded the notion of private equity taking an increased interest in lifting manufacturers, Desel says that he is noticing more new investment on the distributor side: “What we are seeing is this consolidation of distributors, particularly in the US but in Europe as well, where private equity is starting to buy distributors and stitch them together.”

But, he adds, “I don't know what’s driving that. I wish I could tell you.”