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Bryson Stephens

The Key to EBSCO’s Success

EBSCO leaders work to grow the company organically. CFO Eric Essary (left) and Board Chairman Bryson Stephens (right) encourage business unit leaders to be, in Stephens’ words, “seekers and hunters” — conversant with their marketplaces, aware of their competition and “on the lookout for potential acquisition targets.” Photo by Art Meripol

In an age when some of the most iconic American companies are no longer around, EBSCO Industries Inc., at age 75, is proving it has staying power.

EBSCO Industries’ founder, Elton Stephens, started out selling magazine subscriptions to pay for college during the Depression. After realizing he had a knack for sales, he soon organized a sales team. Then in 1944, he incorporated the business, and over the next several years, EBSCO grew, becoming one of the largest subscription services in the world, serving schools and universities, libraries and the military.

Today, the family-owned company is a model of endurance and business fundamentals. It is one of the largest privately held companies in Alabama and is no.166 on Forbes Magazine’s listing of America’s top 200 private companies for 2018. It is a conglomerate of diverse businesses operating as one company — a juggling act requiring steady performance. The performance comes from more than 5,000 employees worldwide, including 1,600 in Alabama, producing $2.8 billion in revenues.

EBSCO has experienced much organic growth but also growth through acquiring middle-level companies from industries ranging from research databases and promotional products to fishing and hunting supplies.

“We like to see, above anything else, organic growth,” says Stephens’ grandson and EBSCO Chairman of the Board Bryson Stephens. “We like to see internal, entrepreneurial initiatives within our businesses, where we are expanding our product lines or our geographic markets.”

One of the earliest examples of EBSCO’s organic growth is the birth of Vulcan Industries, which today makes store fixtures and custom retail signs, Stephens says.

In 1946, Elton Stephens and wife, Alys, launched Metal Fabricators and Finishes — which later became Vulcan Industries — to make and sell their own magazine display stands.

CEO David Walker

EBSCO Industries acquired numerous companies over the years since then, such as the National Publications Co. in 1967 and furniture maker H. Wilson Co. in 1977. But in 2001 it launched its own private equity arm, EBSCO Capital, and hired David Walker — EBSCO Industries’ current chief executive officer — as manager.

“The addition of the mergers and acquisitions’ role and team gave our businesses the resource needed to complement their organic growth with acquisition growth,” says Walker. “I was very fortunate to be the first quarterback of the EBSCO Capital team, which provided me an opportunity to work across our portfolio of businesses to develop and execute acquisition strategies.”

Walker says EBSCO Capital also developed a network of relationships with investment bankers, business brokers, lawyers, accountants and other professional service providers in the “deal community” to generate the deal flow needed to make investments in new platform businesses.

Currently, EBSCO Capital has $300 million in equity capital and several investment “platforms” for which it acquires companies. The platforms include EBSCO Information Services, which provides research databases, e-journals and e-books to libraries, universities, medical institutions and corporations.

Another platform, EBSCO Health, sells medical journals, e-books and databases to clinicians, while platform PRADCO Outdoor Brands has companies that manufacture fishing lures and several types of hunting supplies. Earlier this year, PRADCO acquired Whitetail Institute, a Pintlala firm credited for creating the food plot industry.

“We really want our business unit leaders to be seekers and hunters,” says Stephens. “We want them to know their marketplaces, and we want them to be active and communicating and engaging with the markets in which they sell, including their competitors. And we want them to be on the lookout for potential acquisition targets.”

This spring, another platform, called Luxor, which produces workspace solutions, closed a deal to purchase KwikBoost, a company that makes mobile device charging stations and other products. Meanwhile, the platform Imagen includes companies that make promotional products; while the All Current platform resells electrical components.

EBSCO acquired the S.S. Nesbitt insurance agency in 2001. But in February, EBSCO renamed the risk consulting and insurance division the Valent Group.

“As it relates to new platform acquisitions,” says Walker, “we look for businesses that fit well with our natural ownership advantage, which we define as including our long-term investment philosophy and our desire to make significant follow-on investments in the businesses that we acquire.”

“One of the benefits of being a moderately diversified conglomerate is that we own a portfolio of assets, and those assets serve different roles within the portfolio in terms of their cash contribution and investment and growth potential,” Walker says.

Eric Essary, EBSCO Industries’ chief financial officer, added that “Typically, when we’re buying a business for one of our existing companies, we’re looking for a solid track record and reputation, and we’re looking for a good, solid strategic fit with what our existing business is doing.”

“On the new platform front,” says Essary, “we’re looking for companies that are of a certain size. Typically, from a revenue standpoint, we want those companies to have anywhere from $10 million in revenue to a couple hundred million in revenue.”

EBSCO Capital not only favors companies that offer products or services that are likely to be around for several decades, they also consider the strength of a company’s existing management team.

“We look for a management team that’s humble, driven and growth-oriented in their approach,” says Essary, “and wants to come with their business into our family of companies, a management team that has integrity, a long track record of success in whatever business they’re in, and third, we’re looking for a management team that has a good cultural fit with EBSCO and an appreciation for our permanent, capital approach.”

As a result, Essary says that even when EBSCO Capital owns more than 50 percent of a business, it strives to resist micro managing the company or its management teams.

EBSCO Capital, in fact, markets itself as the alternative to private equity, Essary says.

“We view ourselves as permanent capital,” says Essary, “meaning that when we buy a company, we plan on owning that company for the long term. Whereas a private equity firm is very different. For them to generate returns for their stakeholders, they have to sell a company within a three- to five-year period.

“Because of that,” says Essary, “we have aggressive but rational, long-term growth and returns expectations. We don’t get too upset about economic cycles or short-term investments that have long-term payoffs.”

This year, EBSCO announced plans to expand its portfolio again with a new platform called BiSo Collective, a company based in downtown Birmingham. Under the leadership of former Daxko CEO Dave Gray, BiSo Collective will acquire B2B, Software-as-a-Service (SaaS) companies and help grow and scale those businesses.

“We wanted to be in the SaaS space,” says Stephens. “We feel like it has good growth characteristics. It’s a great example of an area where we’ve developed a conviction around an investment theme, SaaS, and partnered with a great leader, Dave Gray.”

Meanwhile, EBSCO continues on its quest to find new companies to acquire.

“We’re looking for companies that are solving problems that have existed in the past and will exist in the future,” says Walker, “because we feel like these are durable businesses in durable markets serving durable customers.”

Gail Allyn Short and Art Meripol are freelance contributors to Business Alabama. Both are based in Birmingham.

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