“Roy, this idea won’t work. But I’m going to back you. I’m going to let you make a mistake, and perhaps you’ll learn from that mistake and get back to just running a textile business.”
It was 1952, and Royal Little’s idea was to buy Burkart Manufacturing, a producer of cushioning materials for the automotive, and eventually, the furniture and bedding industries. He had spent his entire career in textiles and had risen to become principal owner chairman of the board of Textron. His concern was that textiles, like most other industries, are prone to boom-to-bust cycles. Why not use Textron’s non-textile assets”cash, lender and supplier credit, general management expertise, etc.”to acquire and operate suitable companies outside of the textile industry, industries that could be booming while textiles were busting? Why not form an industrial conglomerate?
History would show who was to learn what that day in the Boston banker’s office. Textron today is a $13.4 billion, multi-industry company employing 35,000 people worldwide and making things that “fly, hover, zoom, launch, move people, protect soldiers, power industries and serves customers in industries spanning aerospace and defense, to specialized vehicles, turf care, fuel systems, and tools and test equipment.”
It is stunning how blinkered the bankers had been when Little approached them for funding for his plan. As was his style throughout his business career, he had made meticulous preparations. He strengthened the Textron balance sheet taking the highest tax-loss carryback achievable to maximize cash position and minimize debt. He had brought in an experienced executive to replace him as Textron president so that he could move to the position of chairman and be free to pursue diversification through acquisitions. And he had found the ideal acquisition. The Burkart brothers had managed their company well but were more than ready to retire.
Royal Little’s remarkable combination of vision, energy and meticulous planning ability might never have reached full potential but for his uncle, Arthur D. Little, who rescued him from a one-room school house in rural California and arranged for him to attend a private school in the Boston area and then go on to Harvard. His education was interrupted by World War I when he served with distinction in trench warfare in France. When the war ended, he returned to Harvard and then to a business career.
After working for a Connecticut company in textiles for a few years, in 1923, at age 27, he started his own company, Special Yarns, which was to become Textron. The textile industry in the interwar years was all about selling, and Royal proved to be one of the best. Other salesmen drove between accounts. Royal flew his own light plane, using roads and utility poles as his navigational aids. When World War II began, he took his aviation skills a step further. After attending jump school at age 46, he personally demonstrated the quality and reliability of his rayon parachutes to the Army.
In the two years following the acquisition of Burkart, he engineered two more acquisitions of companies outside of the textile industry. Then, in a remarkable demonstration of his ability to “think outside the box”, in a complex series of negotiations he bought American Woolen, a company much larger than the already expanding Textron and in the textile industry to boot. While not profitable– American Woolens was losing $2 million a month at the time of acquisition”the company had large cash reserves and substantial working capital as well as a $30-million tax-loss carryover, just what Royal Little needed in 1954 to finance more extensive diversification.
Of course, not every acquisition worked out as well as he hoped. One relatively small but dramatic failure was the attempt in 1956 to convert the 18,500 ton former troop ship SS LaGuardia into a luxury cruise ship. Perhaps demonstrating some wisdom in the Boston banker’s advice, the managers entrusted to handle the conversion were not up to the job. The single cruse of the renamed Leilani was an unmitigated disaster with most of the passenger debarking at the first opportunity, and the ship being sold off at a loss.
But most acquisitions did succeed, which was why it came as such a surprise to the business world when Royal Little announced his retirement in 1961. “I’m a great believer in retirement as 65 and getting the hell out,” he said. He remained as a director and chairman of the executive committee until the end of that year, when he resigned from both positions, completely severing his official ties with Textron.
His retiring as a director was especially astonishing in the corporate business community. Had he wished he could have remained on the board until reaching the mandatory retirement age of 72. But he had a true Royal-Little reason for not doing that. “I was strong minded and I knew that if I stayed on as a director I’d be second guessing management,” he said. “I’d be breathing down their necks. But I had complete confidence in their ability to run the company, and I felt they should be free to set their own course without interference from me.”
The 35 years between his leaving Textron and his passing serve as a definition of “active retirement.” He set up Narragansett Capital, an extremely successful small business investment company, established Amtel, a “LittleTextron” with $400 million in sales; and set up a highly successful acquisition consulting firm.
He was equally as active and ingenious in philanthropic pursuits. The trust funds he set up for the Rhode Island School of Design and United Way employed their tax-except status for buying companies, while cutting their trusts in on the profits. One fund set up for the United Way of Southern New England, now worth $17 million, channels $2 million to the charity annually. And somehow in his business retirement years, he took time out from his passions for golf and bridge playing to set up game preserves in Kanya and Tanzania, become a major supporter of Junior Achievement and write articles for Fortune (e.g., “Don’t Let Your Brain Go Down the Drain”). Fortune referred to him as their highest paid byliner.