Not one to mince words, KPS Capital's Michael Psaros offers a ...

44-49_Feature.qxd 4/6/09 5:44 PM Page 45Deal LookbackSelectAcquisitions7/08 - Napco Marketing Corp. (Napco); awholesale merchandiser and marketer of floral-orientedproducts4/08 - DesignPac Gifts LLC; a designer anddistributor of gourmet gift baskets5/06 - Fannie May Confections Brands; amanufacturer and multi-channel retailer andwholesaler of premium chocolate10/05 - Wind & Weather; a direct-marketerof weather-themed instruments and gift items3/05 - Cheryl & Co.; a manufacturer and directmarketer of premium cookies and bakedgift items11/04 - The Winetasting Network; a distributorand direct-to-consumer marketer ofwine5/02 - Certain assets of The Popcorn Factory6/01 - The Children’s Group, Inc.; educationalchildren’s toys and games11/99 - GreatFood.com4/98 - The Plow & Hearth; a direct marketerof home decor and garden merchandiseyears, bought The Winetasting Network, cookies makerCheryl & Co. and gift maker Wind & Weather,among others.Of course, after the right price is negotiated, the offerto come into the “1-800” family has its perks. Mostof the acquired companies have stayed on with thesame management and have been able to leverage thecompany’s 30 million (and growing) customer base.And despite the weak M&A market, McCann suggeststhat the company could be an active buyer. “Thisis a much more challenging time and there are assetsout there that could be interesting,” he says. “Any businessesthat rely on credit are going to have issues. Wehave a long balance sheet and are moving ahead.”But like most consumers out there, McCann willbe particular when it comes to dealmaking. “Multiplesare contracting and we are looking around, butwe won’t pay what we were paying a year ago,” he says.Beyond acquisitions, the company continues tofocus on organic growth initiatives as well. It recentlylaunched a mobile platform that is available to Blackberryand AT&T users. Still, McCann’s greatest fearis that the company will get behind the curve. “I remainanxious. I feel like I am not going fast enough and I worryabout the next thing,” he admits.With that said, compared to others in the retailuniverse, 1-800-Flowers.com is in significantly bettershape. It maintains a low fixed-cost structure, and byexpanding its use of home agents, the company is moreagile than most in the sector. Also, last summer 1-800-Flowers expanded its credit facility to almost $300 million,giving it ample flexibility in the face of the economicdownturn.From the beginning McCann has been ahead ofhis time. From 1-800-Flowers.com’s first internet saleto the telecommuting staff established almost 15 yearsago, he has never shied away from bucking conventionalwisdom. In speaking about the company’s use ofhome agents, for example, McCann cites that it providesa compromise for the company and its employees.“There are peaks and valleys of calls coming in,”he says. “A homemaker can work from 9:30 until 1:30,a very busy time for us, and still be available to herchildren and we don’t have to pay for the whole day.”He adds that the use of home agents allows thecompany to employ more people, covering more hoursout of the day.Perhaps the trickiest part of McCann’s acquisitionstrategy is keeping the company’s family business feel.McCann founded the business and now serves as itsCEO, while his brother holds the position of president.At times, he has employed his children, but onlyon one condition: “Every child has to work here forsome time, but when they graduate college they haveto leave the business for at least five years.”McCann’s daughter, who was a vice president atFederated Department Stores, and his son, now workingwith the Popcorn Factory, have each returned to theroost.Even with more acquisitions on the horizon, Mc-Cann’s goal is maintain the company’s ethos. “It’s importantto me to maintain the family culture as wegrow. And we will continue to act smaller than ourheadcount.”“ We willcontinue to actsmaller thanour headcount.”February 2009 MERGERS & ACQUISITIONS 45