Episode #13 - Welcoming Madrid to the Catalyst Acoustics Group Family

Adam Hritzak

All right, so first thing today, let's kick things off by having Bob Ellis from Madrid join us now. Bob, why don't you tell us a little bit about yourself to get things going today?

Bob Ellis

Well, I'm from Western Pennsylvania. The company, Madrid, was based in Southern California... moved to Southern California. I graduated from Penn State. I was a CPA in California for five or six years. I purchased Madrid in 1988. They were a client of mine. They were financially in straights, so I purchased them and, at that time, it made skateboards and boogie boards.

Within about six months, we got rid of the boogie boards, we did skateboards for a year and a half and then we got into curved plywood furniture parts because skateboards are made the same way with curved plywood. So, we did furniture parts. To this day, we still do them, but we really stopped doing curved parts probably in the early 2000s when furniture went offshore, residential furniture went offshore.

Then, we happened into construction products - we were making curve reflectors and didn't know what they were used for, and finally figured that out. And then we just started developing products over a 15-year period. Then when Catalyst purchased us, we had a full line of products.

Adam Hritzak

I'm curious to talk a little bit more about the products and just an education for the audience. I would like to hear more about what some of the top products Madrid has to offer, what those are, and why you believe they've been able to be such a great solution in the market.

Bob Ellis

Well, our main product, one of the main ones is Grille's, but we've just started offering a bunch of other products, Continuous Linear with different attachment mechanisms. It's really opened up more markets for Madrid over the last year. And it continually gives, is giving us more opportunities to grow the business with the C-clips that hang from the grid, the Continuous Linear clips, the torsion springs that we're developing right now. And all those products are just adding to the ability to sell more wood products in the acoustical world.

Adam Hritzak

And what factors do you think have been really critical to help Madrid with your sustained success over several decades?

Bob Ellis

I think customer service has probably been the key. We respond to client needs, whatever the issue is. A lot of times they just have lead times that other people can't meet and we're able to meet them with what they want. And that has really served us very, very well over the years.

Adam Hritzak

All right, great. I think it's a good point here to switch gears a bit and focus on the acquisition. So let's bring in Joe Lupone. Joe is the CEO of Catalyst Acoustics Group. Joe, thanks for joining us today.

Joe Lupone

Yeah, thanks for having me.

Adam Hritzak

So, Joe, I'm going to start with you here as we talk a little bit more about this new relationship that we have. And as the CEO of Catalyst, you're obviously a tremendous resource to kind of fill everybody in on the acquisition. Starting there, what was it that made Madrid attractive to Catalyst?

Joe Lupone

Yeah, before I go into Madrid, I would take a step back and as we look at the marketplace and what is going on with interiors in general, there's just a tremendous amount of energy that's brought to an environment when there's wood aspects to that interior, where there's glass and marble or stone and steel, and then introducing wood.

It just brings a freshness and almost a component of nature. I think it's a long-term play and it's something that really makes a difference. And there's a demand for that and there's not a ton of people doing it well. And so, what really, when I looked at, you know, what was happening with Bob's business, he was doing it well. He wasn't doing it all over the country, but there were pockets where he was really doing it well. The reps were satisfied with it, and they loved selling this product. And the people he was serving, the end customers, they were creating beautiful environments with Madrid products.

And so, we wanted to be a part of that. We wanted to be in the space, but we wanted to be a part of Bob's business because of what him and over the years, his partner had created. So that was sort of the beginning of it for us. know, the other Catalyst brands and products include some wood products.

They also include other interior products like fabric wrap panels and felt and various other deflectors, diffusers, et cetera. And so, we thought that when we looked at the complimentary products and some that were in some ways going head to head with Bob's products, that this was a really nice fit.

And as we spent time and got to know Bob, we thought, wow, it would really be cool as well to have this guy be a part of our business going forward. So, he's extremely knowledgeable. He's got a passion for what he does. That's how those are the initial discussions. And together we made a number of meetings and dinners, and we figured out a way to pull together and make it work. And I'm really glad that we did.

Adam Hritzak

That's great. And Bob, I'm curious to hear about this from your angle. What was interesting to you about being acquired by Catalyst? Talk a bit about the process from your side throughout this.

Bob Ellis

Well, I think one of the things - I was looking to sell the business, number one, but because of my age and with nobody to take it over at that point. And I like the fact that Catalyst wanted to come in and not change anything. They wanted to keep the rep structure. They want to keep the management team. And other people had looked at it, but they were going to tear it apart.

And, when you've been doing something for so long, you don't want it torn apart. So that's ego, but not to say that's the way that you should be looking at it, but that's the way a business owner sometimes looks at it. It's not the best way. And so, it made it an easy decision for me.

Joe was easy to work with. We were able to be candid with each other and it worked out.

Joe Lupone

I would make one more comment about the reps. So philosophically, from a Catalyst perspective, we have what we call the partnership promise. So, as we acquire businesses, it's a group of people that come to work with each other and have passion about something. They deliver solutions to the market. The people they work with, it's not just the employees of the company, but it's their business partners, primarily, you the suppliers and reps.

You know, we take a look at the reps and we start with the reps, the people that have been with the company in the first place. Those are the ones that we want to demonstrate, right out of the chute, some loyalty to.

So, we make what's called the partnership promise and, Jennifer Chagnon, our Chief Marketing Officer, she spearheads a marketing team that has a bunch of tools and resources for channels to market.

So here we are, Catalyst, we acquire Madrid. Madrid has a number of reps. So, the first thing we want to do is go to the reps with open arms and say, listen, we're glad that you're part of the Catalyst family now and you are going to be continuing to sell Madrid and rep Madrid in the marketplace.

And then we share with them a smorgasbord of things that we do to help reps be successful. And it might be that we're going to do a mirroring website and help them make sure that Madrid is on their website upfront and current to the best possible way it could be. It might be that there's an outreach program that a rep can do, but they don't have the sophisticated tools to go ahead and do that. Things like marketing automation, HubSpot, various things like that.

So, with our marketing, one of the things on the smorgasbord might be our ability to help a rep do that sort of thing. So, he can focus on selling. Somebody who does this a whole lot comes in, takes their database, sets it all up, puts outreach, and then they reap the benefit of the leads that come up with it. I go on and on about a number of things, co-branded digital literature, rendering, support for trade shows, those kinds of things to help the rep.

The first place we want to do that is with the existing reps, the relationships that Bob and his team have already built with reps. So, we start off that way. Then where it makes sense, we would say to some of those reps, if you don't have some of the complimentary products that the other Catalyst brands offer - so in this case, if you had wood, but you don't have fabric rep panels - hey, listen, we have a fabric rep panel offering.

if you could sell the wood and also sell the fabric wrap panel, that may give you more windows of opportunities. That might give you a way to expand what you currently sell into other areas and help you drive your business forward. With the mindset of who is the rep, what do they want to achieve as a business, and how do we collectively help them be more successful? So those are the kinds of things when we saw Bob's business.

And we saw these reps, we knew of them. We saw that some of them were very successful and we saw it as a great opportunity to work with them for a mutual benefit. And that's what we call, again, what we call the partnership promise. And I'll just say one more thing. And that is that we knew from the other employees at Madrid, some of the very skilled people on the commercial end and on the manufacturing end.

We knew that we had channels to market for the other portfolio, the companies in the portfolio. We knew that Madrid could be a product group that could be brought to them in certain geographies as well. So, there was a great opportunity both ways on the channel side of things.

Adam Hritzak

And Joe, I can certainly second that. I've had the pleasure of getting to know these Madrid reps over the last couple of months and having some of those initial conversations with them. It's tremendous teams all throughout the country, very dedicated. And, you know, we're excited to work with them more closely. I know they're pretty excited about the opportunities that are available to them through this, these partner agreements that we have. So, I think it's going to be a tremendous relationship from that standpoint. I'm glad to hear you bring that up too.

Bob, question for you. Obviously the acquisition was just made official in May of '24. So, things are still kind of early to this date, but curious to hear, what are some of the early things that you've seen, initial successes, some early wins since the acquisition has taken place and even brought into the CAG family?

Bob Ellis

Well, you know, we are developing new products that we didn't have the time for. We were just trying to manage it with the personnel we have. CAG brings all these additional resources to the table to say, hey, could you look at this engineering-wise? What do you guys think marketing-wise?

You don't have to be on an island by yourself trying to figure this all out. So that was one of them. That's a positive thing. And then financially, we were just given an opportunity to quote a job. We didn't end up getting it, but we were in the running, and it was, you know, it was a very large job in the millions of dollars. And without the financial backing of CAG, Madrid wouldn't have been able to do something like that.

And having the personnel to put it all together. So, it just it'll help Madrid in the future to grow quicker and have more presence in more markets. So that's what's going to be a big change for the Madrid brand.

Adam Hritzak

Yeah, absolutely. Question open to both of you. I'm really curious to hear this from both your points of view, but what are some of the long-term goals and plans that you see with Madrid and obviously now having that backing and those extensive resources with the Catalyst family?

Bob Ellis

Well, from my perspective, I just think now Madrid was growing and it continues to grow. I just think the pace of growth can be extremely quicker just because of the resources, whether it be marketing, whether it be financial, the engineering, whatever those things that Catalyst has that Madrid didn't have the opportunity to utilize now, will assist with its growth over the next two, three years in a large way.

Joe Lupone

Yeah, I would say that Madrid had an excellent brand, great products, a tight, close knit team. And they picked pockets of the country where they decided to do well. So, where they had the time and where they wanted to excel, they went and executed. And so I believe that together with Bob and the rest of the team, we'll be able to expand that to the whole country. And so that, think long-term, that's one of the objectives.

We also believe that the business was under-invested in capital equipment and the ability to really improve the manufacturing capabilities, and that's not unusual. Bob would have to foot the bill and take the risk for all of that being owned by the business, being owned by one individual. And so, it's understandable that in the second half of his career, he might not want to make those larger investments, you know, Catalyst is willing to make that investment and to put the resources in and have a state-of-the-art manufacturing facility and invest in some automation and do the kinds of things that will really help us take the business to the next level.

And so that's a second goal is making the acoustical wood and Madrid is sort of a combination of the aesthetic side of things as well as the acoustical side of things from a wood products perspective. We anticipate having one of the finest, most state-of-the-art production facilities in all of America so that we can grow the business.

People can rely on the on-time delivery, they can rely on the quality, and that there will be product development activities that will bring new wood-based products for years to come. It'll be a very exciting place to be a rep in selling the product.

And from a user standpoint, people will really be satisfied with the production capabilities of the company.

Lastly, I would say that we want to make our Wood Center of Excellence in Madrid. We want to make it the best place to work. So, we want to have employees that are passionate, they're having fun, they're taking care of customers. We firmly believe that that's part of the secret sauce and what helps the Catalyst brands grow. Bob's brought that, if you spent time with Bob, you can understand he's very particular and detailed about things, but he does things in a pleasant way, great value-based person, competitive, and those are all the little nuggets that we saw in there. So long-term, we want to make sure that while we bring to the equation what Catalyst wants to bring, we want to make sure that we bring the stuff that was special to Madrid. We want to keep that going as well. So, we'll be able to have a little bit of a sense of what's going on.

So that's sort of the three goals I'd outlined for long-term goals.

Adam Hritzak

That's excellent. Thank you. I appreciate the insight from both of you throughout this and I think you satisfied the questions I had on my list. Just offer up to the floor here - any final parting thoughts or additional comments you think would be valuable to share with our audience?

Bob Ellis

I just think it's a great opportunity for Catalyst to be one of the top suppliers of wood products down the road. I think Madrid and their other acquisitions in wood, they have the ability to, the potential to be one of the top players in that market.

And that's fantastic.

Joe Lupone

Yeah, I feel the same way. There's a great growth potential and it takes money to make money. So, we'll continue to invest in the business and we'll listen to the key constituents, our reps, our end customers, guys that have been at this for years like Bob and some of the other people that are in this space within the Catalyst business.

And so, I think there's just a, there's a great opportunity and I'm excited about it. We've done this sort of thing in the metal space before where we've made some acquisitions. We've created a Center of Excellence where we really became world-class at how we manufacture, how we serve customers. And I feel like this is the kind of thing that we could do in the acoustical wood space as well.

Adam Hritzak

Excellent. Well, that's great. Thank you for that. I think we can call the episode here. So again, thank you both for taking the time today to talk with me and share your thoughts about all the details with Madrid joining the Catalyst family. I think it's a very exciting time for all of us and really appreciate your thoughts today.

Joe Lupone

Great. Yeah, thanks, Adam. Good talking to you too, Bob. Have a great day.

Bob Ellis

Thanks Adam. Good talking to you Joe. Take it easy. Thanks. Yeah, you too. Bye.