Big Interview: The best of both worlds

The merger of Esselte Holdings and ACCO Brands' legacy EMEA operations proves that privately-held and publicly-listed businesses can successfully be combined.


ACCO Brands’ 2017 move to acquire Esselte Holdings led to the creation of a new $600 million business unit formally known as ACCO Brands EMEA. 

Responsibility for the division was handed to the experienced former Esselte management team led by Cezary Monko. Over the years, under private equity ownership, they had transformed Esselte into a lean, efficient, entrepreneurial and – importantly – profitable business. The challenge would be to combine this culture with the publicly-held ACCO, whose own European operations had been struggling to make money and were heavily focused on the UK market. 

A year after the transaction, the ‘heavy lifting’ of the merger has mostly been completed, and results point to a new impetus for ACCO in Europe. OPI’s Andy Braithwaite met up with Monko at Paperworld in Frankfurt at the end of January for an update on the integration process and to learn more about his plans for the development of the company. 

OPI: Perhaps we can start with a quick resumé of your career to date. 

Cezary Monko: It’s been almost 26 years now since I started as a sales manager in the newly-established Esselte in Poland. It was 1 April – April Fool’s Day – that I started; I still think it was symbolic! 

And then it was Esselte all the way. The past 15 years were of special importance to me – I first became European President of Sales, then President of Europe, and then CEO. Last year we sold the company to ACCO Brands and I became President of ACCO Brands EMEA. 

OPI: How did the merger come about? 

CM: ACCO and Esselte had been looking at each other for at least 20 years, trying to buy out one another. For various reasons, this did not happen earlier, but when ACCO made the move, we were also ready to go. 

We were owned by JW Childs which had acquired us 15 years before. That, of course, is about three times longer than the expected time for private equity investors, so it was high time for them to sell us. At the same time, they were looking for the right partner and the only really good fit – I’d say the perfect fit – was ACCO. 

For us [the Esselte executive management team], it was clear that there was only one industry buyer that we would like to sell to and JW Childs came to the same conclusion on their own. It was the right fit both timing- and business-wise. 

OPI: I guess in terms of trade buyers, the number of potential candidates was quite limited. 

CM: It was indeed. We had several conversations with potential financial buyers and some of them were interested, but we preferred an alliance with ACCO. 

In the end, the dialogue was quite prolonged. We first started talking in 2015, so it took almost two years to reach a conclusion. And as always in negotiations like this, there were some ups and downs. It’s quite a difficult combination: Esselte is a complex organisation in Europe and ACCO, being a market leader, is complex too, so we needed to find the right combination and formula. 

OPI: When you say ‘complex’, is that because that’s normal when you’re a large organisation or were there specific peculiarities? 

CM: Both companies were built historically on acquisitions, so there was a huge number of subsidiaries, legal entities and layers involved. From a legal standpoint, where the complexity lied was in building the structure for the new organisation from hundreds of entities in Europe, some of which were dormant but still needed to be taken into account when you’re creating a new company. 

OPI: So how did you merge these two entities in Europe and what is the situation now? 

CM: Obviously, we knew ACCO from the market and we knew that there were a lot of synergies and a lot of characteristics which were complementary. But we didn’t know any details and they didn’t know too much about us either, other than an overall perception of being a good fit. As you know, legacy ACCO was strong in the UK and we were less so, while in continental Europe that’s where we play a bigger role and they were less developed. 

The first thing we looked at was the overlap in the EMEA business segment: offices, distribution centres, functions, etc. We identified areas that we wanted to eliminate while keeping in mind, of course, our desired market position and the economic benefits of these actions. 

Then we looked at company culture and the merger of a private equity-owned business and a public company. 15 years of private equity leaves a strong mark on an organisation. 

OPI: Can you give some examples? 

CM: Sure. At Esselte we went through a long and intense journey of implementing lean management, and I can confirm that we are a pretty lean organisation in Europe. Several processes were simplified which we define as ‘elimination of waste’. There was a lot of bureaucratic ‘fatigue’ that we tried to get rid of from the perspective of planning management, manufacturing, logistics, office processes, internal reporting, and so on. 

Clearly, we didn’t have much external reporting being a private company. As such, we came from a pretty straightforward, efficient, dynamic and quick decision-taking environment and fused with a public, US-based, Sarbanes-Oxley-compliant and risk-conscious organisation. That was a difference we had to deal with. 

The challenge really was how to combine the two into one which would not be the same; not the old Esselte or ACCO, but the new ACCO Brands EMEA. 

The way I approach it is to preserve as much of the lean thinking and the lean way of working as possible, but still become compliant and meet all the requirements of the stock exchange and public reporting. It’s been a challenge. 

OPI: What has the integration involved in terms of reducing the number of facilities from X to Y? 

CM: We have eliminated nine country offices where we had overlap and three warehouses. We also significantly restructured the legacy ACCO UK organisation and merged it with Esselte UK – that was the most complex integration. 

OPI: Let’s focus on that for a minute. As you’ve mentioned, ACCO was very strong in the UK, less so in Europe. 

CM: Yes, so legacy ACCO in the UK took the lead and they now manage the new entity which is built on the ACCO UK organisation based in Aylesbury. We preserved part of the legacy Esselte organisation and merged it into ACCO, and we also moved our Esselte branch into the ACCO warehouse near Birmingham. It’s now all run as one organisation in the UK, which is ACCO Brands UK. 

The same pattern applies to every other country, but in reverse. We used Esselte as the base and merged people, branches and the business of legacy ACCO in those markets into Esselte in much the same way. 

I think both organisations consist of really great people. There are certain strategic decisions ACCO made previously that affected their ability to act in the market. They basically withdrew from several mainland Europe markets and treated them as export markets which just didn’t give them enough strength. Therefore, we should really benefit from the Esselte presence there. 

OPI: What is the actual status of the integration process today? 

CM: I would say we are about half way through, although the front end is pretty much done. By that I mean the sales and marketing, cost-related synergies are either already achieved or announced. We also know the future footprint and the location of most of the functions and the personnel; much of that has been announced. 

Work in progress is the integration of the company culture and back-end functions, including supply chain, finance and IT. From 1 January 2018, we have been operating as one customer-facing company, but the ultimate objective out of all of that is, of course, to grow sales. I will not claim that the integration is complete until we see that using and leveraging the sales organisations from both sides and the brands coming from both legacies have resulted in solid growth. 

Hopefully, I’ll be able to say in a year from now that all integration, including commercial gains in the market, has been achieved. 

OPI: Let’s look at the market in general. What are your thoughts? 

CM: When we were beginning to merge with ACCO a year ago, I considered that as a big change in itself and I thought it was good that [the market in general] was stable. But of course, it wasn’t – we’ve probably never seen such a level of change in the market in one year. As you can imagine, I’m speaking about ownership changes with our major international customers. 

I see both positives and negatives associated with these developments. We are a global business headquartered in the US; we’re not an American business in Europe. On the one hand, it’s positive for us to work directly with European and local businesses with less of a dependency on the US. 

However, the transition from listed companies to private equity-owned – and we have a lot of experience with that as Esselte used to be a listed company in Sweden before private equity bought us – is risky and sometimes causes a lack of stability. There’s a lot of people change, a lot of strategy change, a lot of short-term activities, reactions and changes. And the priority, in particular in a private equity-led organisation, is about deriving as much cash as possible from the business. 

That means our ability to sell is affected by all the changes in the market. Inventories are a problem because under new private ownership they [major accounts] don’t want to have a lot of inventory, and actually rightly so. I think lower inventories mean a healthier business in the long run. We’re a lean-philosophy type of company; we don’t like big inventories, so for us responding to demand from customers to load up their inventories at year end just to achieve higher rebates was not healthy. But of course, what could we do about that? We went with the flow and supported it, but it always affected us negatively in the first period of the following year. It’s not a good stable business model. 

I assume that all the steps they are taking today are going to make them healthier as a business in the longer term. That’s to be proven, of course, but today we are suffering from a lack of continuity in management teams; people have to learn the industry, the products and so on. Strategies change and there is little stability. For us it’s extremely important that we have this dominant local presence where we have some parity between big international players and strong local players. 

In a mechanical way, I think 2017 was a year of adjustment for these international customers in terms of inventory levels, product ranges, breadth of portfolio, the number of brands and vendors. Everything has been challenged and is under scrutiny. 

From our perspective, we’re in a better position with our brands and market presence, but like every vendor, I believe we are subject to pressure this year. 

OPI: Are you where you want to be in terms of products and brand portfolio? Or have you got a new brand strategy? 

CM: The brand strategy for Europe has been established and it includes all the legacy Esselte and ACCO brands: Rexel, Nobo, Kensington, Derwent, GBC, Esselte, Leitz and Rapid. These brands will stay and they cover all our current product portfolios. 

Over time, we are aiming for a two-brand strategy which means that we would like to position Leitz at a premium level. That’s something we already do in stapling and punching, for instance, with Rapid and Leitz. So that’s the strategy – we now have to populate it with ideas and products. 

OPI: What about the product categories themselves? Most of them are not growing. 

CM: No, but for us this is a flat market. It’s not declining, nor is there growth potential, but we have to remember that by combining Esselte and ACCO we’ve got new sales opportunities. We suddenly have several new brands and a wide array of products that we’ve never sold before. We are talking about hundreds of products multiplied by, say, 25 European markets. That’s a huge job for us this year – to fully explore the sales potential we have versus the product potential. 

OPI: But in order for you to grow you’re having to obviously take share from others. 

CM: Yes. In the short run we will take share by simply including those brands into our sales proposition in markets where we were weaker. 

OPI: How aggressive are you going to be in terms of winning that share? 

CM: To be honest, I’d like to say that it will be more sustainable. We’ve seen that kind of thing many times where some people believe they can come in and buy the market. That’s difficult because a competitor can then do the same to you. We would prefer to do it in a more sustainable way, by investing in products and in brands, and showing where the value-add is in the long term. 

That said, we do see big opportunities and we may need to be a bit more aggressive. Why not? But that’s not the core strategy for us. We’ve been here for a hundred years and we’re here to stay. We want to develop, invest and convince key players that we are in essence a one-stop shop, and they don’t have to go elsewhere. 

OPI: From a personal perspective, what are your goals for the next few years? 

CM: First of all, for this year I’m very excited to be honest. I hope I can contribute and create, together with the management team, a new formula and a new ACCO EMEA – neither the same as Esselte nor ACCO. 

My ambition is to merge the cultures and create something that will keep the best of both worlds. That is not just a slogan: I believe in a lean way of working and behaving. I know that there are responsibilities on the public side that need to be observed, but I don’t want to lose any of the energy and the attractiveness that this team developed for the market over the past several years. It’s quite an interesting model. We were sold to ACCO, but luckily we were given the chance to drive the new company going forward. It’s very rewarding and a sign of confidence which we do appreciate.