Burgmaster: Entrepreneurial Spirit Sapped by Corporate Decay

A family-built machine tool company acquired by a conglomerate, then taken private in an LBO. A study in arrogance, bureaucracy, and complacency.

The rise and fall of Burgmaster can be told in three parts. The first is entrepreneurial spirit and innovation imbued by a founder; the second is cultural then business decline after acquisition by Houdaille, an industrial conglomerate; finally, a leveraged buyout by KKR that led to Burgmaster’s demise.Charlie Munger’s admonition: avoid the ABCs of business decay—arrogance, bureaucracy, and complacency. Under Houdaille, all three were on display.

In 1945, Fred Burg started what became Burgmaster in his garage. By 1964, he had 240 employees, $7 million in revenue, and $1 million in pre-tax income. In 1965, Houdaille acquired Burgmaster, believing a good manager could manage anything and the way to manage was “by the numbers.”