Tom Gores: The Platinum Effect

Tom Gores is best known as the new owner of Palace Sports and Entertainment and the Detroit Pistons, but his investments in Michigan don’t stop there.
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“Visionary” is perhaps the best word to describe Tom Gores, the 48-year-old Michigan-raised son who launched his private investment firm, Platinum Equity, in 1995. With a portfolio of more than 130 companies, which represented $30 billion in aggregate revenue at the time of the acquisition, much of Gores’ time is devoted to either managing his current assets or researching potential investments.

Platinum Equity started out in the technology sector and gradually moved into distribution, manufacturing, logistics, and publishing. It added entertainment to that list with its $325-million purchase in June 2011 of Palace Sports and Entertainment, which owns the Detroit Pistons and The Palace of Auburn Hills, the team’s home base since 1988.

Both Gores and Platinum Equity are based in Beverly Hills, Calif., but long before he amassed a personal fortune estimated to be in the range of $2.5 billion (Forbes 2012), Gores was just another kid growing up near Flint. A star baseball, football, and basketball player in high school, he went on to earn a bachelor’s degree in construction management at Michigan State University in 1986.

Gores is a devoted Pistons fan who says he was so anxious about the team’s 2012 opener and all the hoopla surrounding the new look at The Palace that he hadn’t gotten a lot of sleep after flying in from Los Angeles the night before.

DB: How do you manage 130 companies? Your daily schedule must be non-stop.

TG: I have a saying, “Count on it, but don’t plan on it.”

DB: So what was keeping you up all night before the Pistons’ home opener?

TG: It was really about how opening night would go, how our players would respond, and how our fans would respond. But the point was this: Being the Pistons (owner) and being back in Michigan is consuming me. And I can’t help but really want this (franchise) to be successful.

DB: So it’s safe to say that among all the assets under the Platinum umbrella, Palace Sports and Entertainment is one that truly is near and dear to your heart?


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TG: It is. Because it directly impacts people and the fans. And the other thing about this asset is you can really affect a community, in a different way than a regular business. The sports business is a very powerful way to communicate with and impact people. So it’s a vehicle to do very good things for people and for business in Michigan. I didn’t know what to expect in buying the Pistons, and didn’t know whether I’d be a removed owner. The questions were asked, even at the original press conference. But it’s really hard for me to be a totally removed owner when it involves people, like this kind of asset does.

The thing I know about myself is whatever I get involved in, I just want to do it the best way possible. Probably the first time I really learned that about myself is when I started coaching kids. My kids are older, so I haven’t coached in the last two years, but what I realized is when I take on a job, it consumes me — even coaching 12-and-under girls and 10-and-under boys in soccer and basketball. I just want to do the best job possible. So I had different lineups, plans for how each kid could do better, how we could improve each kid — certain philosophies. I probably coached 15 to 20 teams. I did it all. So I really get consumed with it in a way that I want to do it right, and make sure that we add value and are impactful.

 

DB: The Platinum philosophy has always been to give the managers of your assets time to turn them around and grow them. But do you have that luxury with the Pistons, who are under daily scrutiny from their fans and the media?

TG: I think there is more pressure and I think it requires hard discipline to just keep doing the right thing to build the franchise and the team properly. We know that problems don’t get solved easily, whether in business or in life, and you’ve got to work at it. So for us, it’s to make sure we keep our discipline and build the business in a way that’s healthy and isn’t just for one day, to keep somebody happy. But there is more pressure here to succeed fast, to win fast. We just have to maintain our discipline. We’ve been very successful in pretty much every business we’ve taken over, and we just have to stay the course in building a very successful business here.

DB: How has Platinum’s mandate changed from 1995, when you first founded it, to now? Is its portfolio more varied than you foresaw or planned?

TG: For sure. The industries have changed and some of the business approach has changed. But really, the philosophy is the same: We want to get involved in situations where we can make a difference. In the Pistons case and The Palace, it’s no different. We’re very operationally focused. There hasn’t been a change in focus or philosophy; just different industries. Steel companies, auto parts distributors — really, we look at the end user in every company that we buy. Is that an end user that will be around forever?

In the old days we looked at the customer and said, “OK, do we provide a product for the customer that they might not be able to get anywhere else, that’s unique, that’s differentiated? Do we provide that kind of product?” Because when you do, then it’s up to you to execute it as a businessperson and give the customer what they want — whether it’s Ryerson Steel or a technology company that we own. You know, the Pistons fans are our customers, and they love a great basketball team. And on our end, we have to provide for our customers. It’s very basic for us: We always look at who the end user is. If you’re replaceable, then for us we’d have a hard time investing. But if it’s really a unique, more captive, proprietary product that we can offer, then it’s up to us to execute and keep the customer happy. And if you keep the customer happy, they will stay with you.

DB: You frequently refer to a “Michigan ethic” that your company and approach to business seems to embody. Could we sum it up as very blue collar, with a manic focus on execution?

TG: When you grow up in Michigan, it’s cold and stormy and you’re just working away. Mostly it’s a lot about appreciation and gratitude — including growing up in Michigan with the very basic values. And the people in Michigan, and how human they are, how real they are, is something I’m really grateful for. So I think it has affected the Platinum philosophy. It is very much block and tackle.

I was telling my nephew the other day: “I’ve been at this a long time, but don’t be confused that it’s just about going in and impressing someone with your personality or getting them to like you. That’s a part of it, sure. But a very big part of business is systems and process, execution, that kind of blue-collar mentality. Business and process are so important.” If you meet our folks, you’ll see that they’re very basic in their approach, and don’t try and be too fancy. I put so much value on execution, hard work, and being in the details to understand how to be successful in life, not just business. It’s definitely influenced me as a kid and as a businessman, and it’s very much a part of Platinum because, at the end of the day, you have to be in the details of what you do. You have to be able to execute; you can’t just talk about it. And we really respect that approach.

 

DB: Platinum currently has 12 portfolio companies in Michigan, with more than 3,200 employees. Do they have anything in common?

TG: All these businesses, the way we’ve looked at the economy in Michigan, they really revolve around providing unique services. They’re in a very unique position to provide their products. With Four Winns (a manufacturer of luxurious sport boats and cruisers), we saved the plant in Cadillac. We worked with (then) Gov. (Jennifer) Granholm in terms of saving jobs. It’s a great little company. For us, it’s a small company. But for Michigan, it’s a real important company to stay alive. We made good changes with the product, and that’s a very small example of keeping jobs in Michigan.

Acument Global Technologies Inc. is a fastener company (in Holly) that we’ve owned since August 2006. It’s not a huge company. It has several hundred million in revenue (and 750 employees). We had to make a lot of adjustments when the economy fell apart in 2009 or so, and it really did a very nice job in surviving. And I think without our leadership, it would have had major problems and potentially (would have) gone out of business. I think half of its business on the fastener side was (dependent on) auto, and for a good six months there was nothing coming in from auto. So we figured out how to survive and scale the business, and we’re very proud of the fact that we adjusted to what was going on.

Our biggest entity in Michigan is the merger between Diversified Machine and SMW International. These are two large manufacturers of steering and chassis products for cars. That was very strategic. We bought (DMI in Wixom in December 2011, which today has 535 employees), and then bought the other (SMW in Troy in January 2012, with 826 employees) and we started integrating them. They are very important in their space and obviously a big part of the auto industry. They’re very large, right in the core of Detroit’s wheelhouse from a manufacturing and distribution standpoint. They’re two companies we’re bringing together and building for the future.

DB: So when you think about future investments in Michigan, is there a particular area or sector you’ll be focusing on?

TG: I’m a big believer in core competency. In Michigan, we know how to manufacture. We have an engineering talent that compares almost to no one. We have great universities and a very skilled work force. We have to put that to work. A lot of folks talk to me about how much new stuff there is in Michigan, and I think that’s fine, but we have a core competency that, compared to the rest of the country, we should really leverage. I mean, there’s a tremendous engineering base, and great universities where you have great people coming out of there. There’s a work force, both white collar and blue collar, that is hard-working and has the right values. So I really think that’s where we should be leveraging ourselves in Michigan. You know, the new things will come, but those are going to take time. And people have to eat, they have to put food on the table, they have to educate their kids, they have to do the very basic things necessary to move forward in their lives, and we should be continuing to leverage our core competency and grow at the same time. But we should really leverage what we do uniquely.

DB: So moving forward, can Platinum have an even greater impact in Michigan and, if so, how do you do it?

TG: Jobs and kids. It’s providing people jobs; we’re doing that and helping the economy. And that will help folks educate their kids and move that forward. Those are the two big things. And we have a unique asset in the Pistons, where I think we can really reach people. My plan is to leverage that the most we can and transfer our knowledge on business, to help people with small businesses improve their businesses. At some point we’d like to have an organization that does that. There are so many small businesses in Michigan we’d love to be able to impact, and we have the expertise. So we haven’t even begun to really implement the plans to affect an impact on people. In my own mind, I have big plans for it. And if we bring our resources together with our expertise and caring, I think it’s a very powerful formula.

 

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