During former Chairman Tom Sullivan's more than 55 years in various roles at RPM, the Medina County-based holding company has acquired dozens of companies and consistently outperformed the S&P 500.
MEDINA, Ohio - Thomas C. Sullivan was a 34-year-old father of six when his father, Frank Sullivan, founder and chairman of Republic Powdered Metals died unexpectedly of what the family believes was a massive heart attack.
Suddenly in charge of an $11 million family coatings business that made five products, with everyone from his mother to his employees looking to him for leadership, Sullivan made some tough decisions in 1971, including selling off massive amounts of the family's shares to generate cash.
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Thomas C. Sullivan is retiring after 55-plus years at RPM Inc. "I shared a goal with [then-President] Jim Karman that if we didn't hit $50 million within the next five years, I would look to sell off the company," Sullivan said earlier this week. By 1976, five years later, RPM's revenues were $47 million, which Sullivan said was close enough.
"By 1979, we were at $100 million, which is probably the largest figure in my life, because I knew we were going to make it," he said. By the time he handed over the CEO role to his eldest son in 2002, RPM was a $2 billion company with a growing international reputation as a destination for entrepreneurs.
RPM now ranks as the world's sixth-largest coatings company, whose subsidiaries manufacture and market high-performance coatings, sealants and specialty chemicals, from Rust-Oleum to industrial adhesives to nail polish.
When RPM International Inc. shareholders gather for their annual meeting Thursday, to celebrate the company's record $4.8 billion in sales in fiscal 2016, they will also applaud retiring Chairman Emeritus Tom Sullivan, 79, son of the company's founder and father of the chairman and chief executive, both named Frank C. Sullivan.
In his more than 55 years in various roles, RPM has acquired dozens of companies and consistently outperformed the S&P 500.
RPM is one of only a handful of publicly traded companies, less than half of 1 percent, to increase its dividend for 42 straight years, an estimated payout of about $1.9 billion. Investors expect it to announce its 43rd straight increase Thursday.
"If you invested $1,000 in the S&P 500 in 1972, when my Dad became CEO, by 2016, you'd have $81,100," Frank Sullivan said. "If you'd invested the same amount in RPM, and reinvested all the dividends, today you'd have $510,190. He outperformed the S&P 500 and returned six-and-a-half times as much in the same time frame. It's one of the greatest value creations by a manufacturer."
When Frank once suggested to his father that that 1972 offering wasn't such a good trade for the Sullivan family, because those shares would be worth millions today, Tom Sullivan replied: "When your grandfather died in 1971, ... I was scared to death that I was going to put my mother in the poor house if I failed to grow what my father started. In fact, the 1972 stock offering put $6 million in a bank account for my mother.
Moreover, "it was that trade that gave me the courage to take the risks that allowed RPM to grow to the $2 billion global business it is today," he added.
Starting young
Tom Sullivan was still a child when his elder brother, named Frank after their father, abruptly announced he was being called to the Catholic priesthood. His four sisters each went off to college and got married, "so that left me," Sullivan said. "I was it."
His father, determined that his youngest child and only other son would not abandon the family business, started taking then-12-year-old Tom on sales trips to Pittsburgh and New York. "I started working at the company plant when I was 16," he said.
After graduating from Culver Military Academy, he went on to Miami University of Ohio and earned his bachelor's degree in business.
On a trip to Dallas between junior and senior year of college, he called a childhood friend named Sandy to say he was in town but leaving for Tulsa the next day. "When that door opened, I said: 'Wow.' She was voted one of the University of Texas' 10 most beautiful, and she was every bit that, inside and out," Sullivan said, adding: "I never made it to Tulsa." They got married soon afterward.
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Tom and Sandy Sullivan of Bay Village had six children ages 10 and under when Tom suddenly inherited leadership of his father's company, RPM.Sullivan joined the U.S. Navy as a communications officer, serving on a destroyer in the western Pacific, when he became a father. "I didn't see Frank until he was 4 months old." After the Navy, he joined RPM full-time in 1961 as a divisional sales manager.
His father gave him a briefcase and sent him out on sales calls to woo potential clients. "I had just turned 21, but I looked like I was about 16. The other guys would look at me and just shake their heads," Tom Sullivan said.
Lesson learned
One of his first major mistakes was after acquiring the Reardon Co. in 1966, RPM's first acquisition, Sullivan fired most of its employees. Frank Sullivan was furious, and told his son to hire everyone back. Nearly everyone came back, at twice the salary and one-half of the productivity.
Now when RPM acquires well-run companies, it keeps the current management team in place, encouraging the owners to keep operating the business as a part of RPM. "We're the only company that could buy your business on Friday, and on Monday, you could come in to work and still run your company," CEO Frank Sullivan said.
"The real reason for the success of RPM was the fact that when my father died, I surrounded myself with older men who were just-retired CEOs of publicly traded companies" who weren't afraid to criticize him, Tom Sullivan said.
Decades before it was considered sound business practice, Sullivan filled RPM's board seats primarily with outside directors. "When Karman and I worked here, we had two independent auditors. Today we have more than 30."
"Once we hit $1.35 billion in 1997, we had a huge party," and invited the Cleveland Orchestra to perform. When one disgruntled shareholder stood up and asked Sullivan: "What did this ego trip of yours cost you?" he replied: "It cost me $125,000. And it was worth every penny." That concert generated stories in The Plain Dealer and The New York Times; RPM still opens its shareholders meetings with musical performances.
He took his father's advice to "Hire the best people you can find. Create an atmosphere to keep them. Then, let them do their jobs," and created his own mantra for acquisitions: "Buy the best companies you can find. Support them with resources. Then, let them grow."
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RPM Chairman and CEO Frank C. Sullivan at the 2012 shareholders meeting in Strongsville. When he was still working in the company's plant, "Frank came into my office one day and said, 'I haven't had a raise in four years.' I said, 'Are you here to earn money, or are you here to learn a job? You'd better change your attitude, because I expect you to work harder than anybody in that plant and learn from it.' Frank didn't get the raise."
Frank Sullivan agreed. "My Dad built this, and I'm just the beneficiary of it. I inherited a collection of great products and a culture that is very successful, and I work very hard to keep it going. My goal is 100 percent not screwing up what my Dad built."
RPM shared this video with shareholders on Oct. 6:
Includes research from Plain Dealer Reporter Jo Ellen Corrigan.