Expo Holdings Inc. (EXPH)

[Santa Barbara Broker]

No venomen. There was no direct and substantiated announcement of an acquisition of Builders Choice in that PR:

"...we are pleased to welcome their team to ours...".

"...Acquiring this team...".

"...The company views acquisitions as an opportunity to...secure experienced, high quality, associates...".

"...The company will only report acquisitions after they occur, and will offer no updates regarding acquisition candidates."

At no place in the PR was there a direct statement that EXPH has acquired Builder's Choice as a company and as a corporate entity. It tap-danced around the subject like most doublespeak PRs leaving the reader to largely interpret whatever they wanted from it. It may interest you to know that on the Builders Choice website, they mention that they have "less than 50 employees". I am guessing that if the total number of employees was 22 they might have written "less than 25 employees". Is it your position that Builders Choice was planning to just lay off the remaining employees and dissolve what was left of the corporation? Or is it your position they have yet to complete the corporate part of the acquisition and are waiting to "report (that) acquisition after (it) occurs"? It seems that if the latter is true, it would be pretty foolish to report taking on half Builders Choice's employees ahead of announcing the entire corporate takeover at one time if "post-reporting" only is EXPH policy, no?

This looks like a move to vastly increase the EXPH payroll with the hopes of making up enough sales in Builders Choice former patrons to pay for them. Let's hope the patron's loyalty to Builders Choice sales department personnel is firm. Because normally a company in a position to have half their employees abandon ship (especially the sales staff) is not a really sound financial one. And that would have probably been known by their patrons as well....who may have already sought out new suppliers which, if true, would have added to Builders Choice's problems to begin with and perhaps prompted this move.

I read this with some amusement as well ..."combine with a competitor and revenues rise". Did you know that most M&As in this country, upwards of 70% do NOT produce a higher revenue stream by sales alone in the long run? In fact upwards of 70% are abject failures to their shareholders. The problem most often is integrating the different cultures...a situation which is magnified greatly when one company or both have experienced financial problems. Here is an older (Feb 2007) article but a sound one:

http://www.thefreelibrary.com/Why+mergers+and+acquisitions+can+often+fail.-a0160421821

Initially the bottom line is improved by layoffs of redundant personnel and the shuttering or sale of various and sundry redundant warehousing facilities and non-profitable business and the like. What EXPH has done is the exact opposite which leaves their only hope of an improved bottom line through increased sales and their greatest problem merging of the two cultures that will be responsible for doing so. Not knowing the exact payroll/commissions of the employees they just acquired but assuming that it is probably in the $1.2M range plus another $1.2M for perks, travel and logistical support of the sales force, that’s a LOT of new net cabinet sale dollars. To be overly optimistic about this latest move is bound to produce disappointment short term at the very least. All IMHO.

SBB