PSEG continues 'Northeast strategy' with acquisition of the McBride Co.
The New Jersey-based contractor is the latest in a string of acquisitions that are part of PSEG ET’s overall strategy to provide one-stop mechanical and energy services to customers in the Northeast. McBride is also the energy provider’s largest acquisition to date.
“We are trying to create a company in the Northeast that will be a leader in our industry,” said Fred Fastiggi, PSEG ET vice president of development. “We look for substantial companies during our initial acquisition stage. There are only a few large companies, like McBride, that fit that category.”
McBride reported 1998 revenues of more than $81 million. The company had previously partnered with PSEG ET on several New Jersey projects, including the City of Bayonne and Saint Peter’s College.
A good fitFastiggi added that the acquisition of McBride fits his company’s business plan of blending mechanical contracting services with energy services.
“We don’t want to be just a mechanical contractor,” he said. “We can combine mechanicals with our financing background, our ability to supply energy, and post-construction maintenance.
“We don’t want to be just a one-plus-one-equals-two company. We want it to be more substantial.”
That strategy is supported by the company’s previous “substantial” acquisitions:
- Liber Rich/Rich Fire (NJ);
- Struble Air Conditioning (NJ);
- Fluidics, Inc. (PA); and
- Arden Engineering Constructors, Inc. (RI).
The revenues from all acquisitions add up to $300 million.
The purchase of Fluidics had a lot to do with bringing McBride into the fold, according to 80-year-old Joseph McBride, former chairman and ceo, and son of company founder Frank A. McBride.
“The acquisition of Fluidics gave them [PSEG ET] a feel for the business,” he said. “We talked with Fluidics and they said they were happy with PSEG. Fluidics has been able to run their business without a lot of interference.”
McBride said that PSEG ET will take a breather and not announce any major acquisitions the rest of the year. However, there may still be acquisitions of smaller companies.
Experience: A valuable assetNow that McBride is part of PSEG ET, he is using his experience to help the company further strengthen its presence in the market.
“We recommend companies that would be helpful to building our team,” he said.
Fastiggi said that the acquisition patterns will be based on what the company needs in a certain region. Size may not necessarily be a determining factor for acquisition.
“We look at large as well as small companies that will give us good geographic coverage,” he said. “For example, if someone is strong in refrigeration, compressed air, or absorption chilling in a particular area, we are interested in them — but not just for the geographic market. We would like to spread their skill throughout the organization.
“We follow the traditional acquisition role. We’ve identified 90% of the companies that will make sense in those particular regions.”
Emerging trend for mechanicalsBoth agree that the recent acquisitions are part of an overall trend that will continue to grow in mechanical contracting. More and more contractors will see the trend and join forces with energy providers.
“At first, we ran into resistance from mechanical contractors because we were seen as a threat,” Fastiggi said. “Now they are willing to listen to us and talk about acquisition, because of the changing market.”
McBride said that although he may not have envisioned this partnership five years ago, he liked what he saw for the future of his company. His employees showed some initial concern for the future of their benefit and retirement packages, but those concerns have eased and McBride is looking toward growth.
“This [acquisition] will mean increased business for us. This will build our volume up without any major adjustments to how we do business.”
With no fourth-generation succession plan and with a “comfortable” stock-for-stock transaction, McBride is sure of doing the right thing for himself, his employees, and his customers. The company’s top management team will remain in place.
He has also guaranteed himself a little more time for golfing.
“I have a three- to four-year contract in a part-time role” — senior-level sales and marketing.
Meanwhile, Fastiggi is busy implementing PSEG ET’s business philosophy and looking forward to serving more customers through market penetration.
“We may look to acquiring as few as 20 companies or as many as 40 or 50,” he said. “We are not going to tie ourselves to a specific number. Geographic and capability factors will determine the amount of contractors we buy. We expect to finish our acquisitions of mechanicals in the Northeast by 2002. Our focus will continue to be on commercial, industrial, and institutional markets.
“We want to capitalize on the goodwill that these companies have built up.”