More than 140 years ago, Charles Bonney founded Bonney Forge, a forging and finishing company for hardware used in horse-drawn carriages. Since then, the company has evolved into a leading international manufacturer of industrial forged steel valves, cast steel valves, forged steel fittings, unions and branch connections – in large part thanks to John Leone, who purchased Bonney Forge from a U.S. conglomerate in 1984. Under his leadership as the CEO and chairman, the company has grown from about $18 million to nearly $300 million in sales. At the same time, it evolved into a family business. Today, John Leone’s children and their spouses all work alongside their father, with one daughter, Sue Leone, the executive vice president of WFI Operations in the company’s Houston office, set to take the reins. We recently sat down with the father-daughter duo to discuss how Bonney Forge evolved into a family business, what it is like to work with family members and how the company has approached succession planning.

BBH: John, tell us about your personal and professional background? What road led you to eventually purchase Bonney Forge in 1984?

John Leone: I graduated from Pennsylvania State University as a petroleum and natural gas engineer. Upon graduation, I joined Gulf Oil in Venezuela. The company had only U.S. engineers, and there was a lot of turnover among the young engineers because, as the families grew and children became school age, they would come back to the U.S. As a consequence, there were many opportunities for individuals to move up the ranks quickly, so it was exciting.

I returned to the U.S. and joined Taylor Forge, a family-owned company that manufactured piping systems, and held several roles in application engineering  and sales over the years. Taylor Forge was eventually acquired by Gulf and Western, a major conglomerate, and integrated with other forging and manufacturing companies. This new business was called Bonney Forge after one of the companies, and it was a piping business with engineered and made-to-order products for the energy industry. There, I progressed from overseeing operations in Europe to eventually running the entire business.

Gulf and Western ultimately decided to sell Bonney Forge, but no one was interested in buying it. I was the last man standing, and I wanted to purchase the business. However, I didn’t have the money. With the help of an investment bank, I bought the company with debt through a leveraged buyout and owned one-third of it, with the rest owned by various managers and the bank. I put in about $33,000 – which I had to borrow – and it turned out to be a good investment.

After about three or four years, we started to become profitable, and our investment bank wanted to liquidate. I was not in that mindset, though. I had control of the company and was investing in the business for the long term. I wasn’t paying dividends. Even though I didn’t realize it was going to be a family business at the time, that’s a significant difference between running a family company vs. running a public company. With a public company, there are investors that expect you to do something every three months. I was looking to do something every three years.

BBH: What was your biggest challenge along the way?

JL: Those first years were all challenging, but a particular event was when we moved our plant to a new town – Mount Union, Pennsylvania. The manufacturing of our product requires skills and training, so it is difficult to move into a new area and expect to draw from the available workforce. I can’t recall ever thinking it was going to be mission impossible, though. In fact, we had reason to be looking to the future. We moved into a spec building that was 25,000 square feet, and today, it is 300,000 square feet.

BBH: Was there a certain point at which you decided you wanted it to be a family business? Sue, at what point did you get involved and decide this was going to be the career path for you?

JL: There was no grand master plan – we evolved into a family business naturally. My son, who passed away a few years ago, did join right when I acquired the company, and he was instrumental in growing the business.

In terms of ownership, the banks and other owners liquidated about seven years after the acquisition, so we are a 100% family-owned business. I have three daughters, and they essentially own the company as far as the shares are concerned because they have transitioned to them over the years through a grantor retained annuity trust, or GRAT. However, there’s still one voting share, and that remains with me.

Sue Leone: When I started out in undergrad, my dad wasn’t at the point in his career where it was a family business, so I had no intention of working for the company until much later. I studied nursing and practiced as a nurse for 14 years before I took a turn toward the corporate world.

After my brother joined Bonney Forge, I saw how much he enjoyed working for our dad. Over time, I decided I wanted to work in the business too, so I went to graduate school for my MBA. After graduating, I still wanted to find my own success first, so I took a job at a healthcare consulting firm. All the while, my dad kept encouraging me to join the company. He finally just said, “When you’re ready, let me know.” I was traveling 100% of the time, and one day, when I was packing to go to the airport yet again, I realized I was ready. Fast-forward, and I just celebrated my 20-year anniversary at the business.

JL: People have approached us about buying the company, but it has never been an alternative to me or the family. If we were to sell the company and then invest that money in other assets, how many assets are we going to find that are going to generate the numbers we’re generating? It’s a preferred investment. Even more, it provides jobs for people in the family, and they enjoy what they’re doing – and our customers like the way it’s run as a family business.

SL: It would be a different Bonney Forge if it was not family owned because a public company would drain the cash and not invest in the business the way we have, which is what has been critical to our success.

JL: We also have 800-plus people who would be working at a different company. We treat our employees like family. I go back to our headquarters every month to present to the workforce about what is happening in the company, and I interact with our employees to learn about what is going on with them and their families.

BBH: Has all of your growth been organic?

JL: We have acquired companies over time. We acquired a competitor in 2002 that manufactures complementary products to the ones we were manufacturing. In 2013, we acquired an Italian valve business. The company was our licensee, and because we had a licensee agreement, it put us in a preferred position. It was a very important acquisition to us and complemented our Chinese operation. We had a minority ownership in the company, so the merger was friendly and smooth. The day following the closing, it was business as usual.

BBH: Talk about the company’s mission. How and when was this developed?

JL: Our mission focuses on being an industry leader, cost-effective and good corporate citizens. We not only have a mission, but we have a creed. They were developed and written during the first three or four months after the acquisition, and there has not been one word changed since. It is very prominent in every office, and new employees and customers are introduced to the mission and creed.

SL: This document was developed long before I joined the company, but I have always referenced back to the creed and the mission, even before my time at Bonney Forge. It really is a guiding force no matter your situation.

BBH: Tell us about the dynamics of working at a family company, particularly as it relates to communication.

SL: We’ve always been a close-knit family and communicators. Communication is essential to the business, and that is something my father has developed. He is a great communicator and expects all employees to be the same.

My dad taught me that we’re a team, and there are times when we need to call a huddle. With technology today, people just want to send a text or an email and think the problem is solved, but sometimes you need to see people and have real-time, back-and-forth communication. You have to use the technology that makes this world so wonderful, but you also still need face-to-face dialogue.

JL: Communication is important to us. I would echo what Sue said in that we’ve always been close as a family – and I think we’re even closer because the family company requires us to constantly communicate.

BBH: Sue, your sisters are also involved in the business. How did you navigate going from just being siblings to being both co-workers and siblings?

SL: It’s been almost seamless because there’s a respect that we have for each other as family members and now work colleagues. Not to say that we’re not a family who has some differences of opinion, but we resolve them and come to a cohesive resolution of issues. There was never any competitiveness, and my dad would not tolerate that if it did happen.

It’s the way you’re brought up. I have good parents, and we all work together very well. I have to mention that my mom, who passed away four years ago, was a key factor in my dad’s success and turning this into a family business. They were a team. She was so flexible and moved all over the world for him, even when she had young children.

JL: It would never have happened unless she had the attitude that she had. She was supportive of me from the very beginning, and I could not have done it without her.

BBH: What has been your approach to corporate governance? Do you have a board of directors?

JL: We have a board, and it is made up of me and my daughters. At least at this stage, we have not had any issues that have made us feel that we need outside input. Now, if we had a larger cross-section of owners where there were different interests, I could see where that might be necessary.

Do we need help sometimes? Of course. We use our corporate lawyers and auditors in those situations. We’ll call them in, and they’ll consult with us and help us.

BBH: How have you approached succession planning?

JL: Sue is my heir apparent, and she has all the bookwork and experience that she is going to need. While she is in charge of running our Houston operation, I have also made sure to expose her to other areas of the business over time. For example, she was part of the M&A team when we acquired the Italian company and has been involved in negotiations with foreign governments. The organization and our customers are aware of the plan and have embraced it.

SL: I will add, though, that my dad is not planning on retiring. He’s been very vocal about saying, “They’re going to take me out horizontally.” Just like him, I have no plans to retire. I love what I do and enjoy going to work.

BBH: Have you had conversations with the next generation about potentially joining the business?

SL: We’re just at the cusp of the next generation – they’re in their early 20s. They know this company is here, but they’re not ready yet. Just like me, they want to have their own success first. The seeds have been planted, though, and we’re busy fertilizing them. Our plan is to stay private because it’s much more fun and also very rewarding – to meld together our personal and business beliefs.

BBH: Do you have a favorite story from over the years about working with family?

SL: At one point, I was working in sales and marketing, and my dad called to tell me he wanted to put me in charge of manufacturing operations at our facility in Houston, which meant I would have people reporting to me.  I told him I didn’t want to do that, and he asked me if I was turning down a promotion. I said yes, and all he said was, “Not accepted.” Needless to say, I took the job!

JL: I have a story about my son. We have many sophisticated international customers visit us at our plant in Mount Union, and arranging hotel facilities and dinners was a challenge because there were limited options. So, we acquired a set of properties, and one was a barn that my son decided he was going to convert. Although it was over the conversion budget, it was worth it. Today, that barn is a beautiful lodge where visitors can stay, and it’s his legacy.

BBH: John and Sue, thank you for your time and insights.

We the Family: The Benefits of Creating a Family Constitution

Interview conducted by Jake Turner, and article written by Kaitlin Barbour.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Compliance Notes:
This publication is provided by Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) to recipients, who are classified as Professional Clients or Eligible Counterparties if in the European Economic Area (“EEA”), solely for informational purposes. This does not constitute legal, tax or investment advice and is not intended as an offer to sell or a solicitation to buy securities or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code or for promotion, marketing or recommendation to third parties. This information has been obtained from sources believed to be reliable that are available upon request. This material does not comprise an offer of services. Any opinions expressed are subject to change without notice. Unauthorized use or distribution without the prior written permission of BBH is prohibited. This publication is approved for distribution in member states of the EEA by Brown Brothers Harriman Investor Services Limited, authorized and regulated by the Financial Conduct Authority (FCA). BBH is a service mark of Brown Brothers Harriman & Co., registered in the United States and other countries.
© Brown Brothers Harriman & Co. 2018. All rights reserved. 2018.
PB-02265-2018-05-21