Independents Unfazed by Consolidators

September 22, 2000
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In the communities of St. Louis, MO, and Pittsburgh, PA, “consolidation fever” has not spread as rapidly as it originally appeared it would. Like other U.S. metropolitan areas that have seen consolidators move in and acquire companies, tuck in, and solidify, these two cities braced for some lively competition from the new entities in town.

But something happened. Or, to put it more accurately, not much happened. Independent contractors geared up for battle, but few battles broke out. Independents interviewed by The News for the most part haven’t changed the way they do business. These contractors point to an emphasis on customer service — and the loss of the local, personal touch by consolidated contractors — as integral to their success.

Back in September of 1998, The News visited St. Louis to profile Welsch Heating & Cooling, Inc., and Jerry Kelly Heating & Air Conditioning. At the time, both contractors said they were comfortable with their own businesses and had no desire to join up with a consolidator.

Two years later, their attitudes haven’t changed. Each has a successful, thriving business that is a fixture in its community. Neither man thinks consolidation would have done anything to improve on that. (For profiles on independent contractors, see pages 18-22.)



Declaration of Independence

In 1998, Steve Miles, general manager of Jerry Kelly Heating & Air Conditioning, said, “What they [consolidators] wanted to give us for the business and the stock purchases, we could make up in sales without being beholden to a corporate office.”

Today, Miles says pretty much the same thing: “Most contractors are on their own because they don’t like corporate culture — ‘big business.’

“St. Louis is a very conservative community,” he added. “Most relationships, including business relationships, are based on the people you know. The first consolidator in St. Louis already had a reputation, and it wasn’t a good one. This may have tainted the others by association.”

Butch Welsch, owner of Welsch Heating & Cooling, echoed Miles’ opinion. “For whatever reasons, the experience in St. Louis is that locally owned and operated firms are preferred by the public,” he said.

“For example, we have no national grocery chains, nor virtually any national home building companies. Apparently consolidators may have examined this situation and determined that St. Louis may be a market to stay away from.”

In Pittsburgh, the coming of ARS and Service Experts may have caused a few temporary ripples in the local hvacr community, but it had little or no effect on the older, established union contractors.

“Pittsburgh is a strong union town, which may have prevented some consolidators from coming here,” said Q-Dot Inc.’s general manager, Kevin Whalen. “The unions are also growing, and taking the available talent pool from non-union shops.”

But Whalen said it isn’t just the union presence that has kept the consolidators relatively quiet.

“They [consolidators] just haven’t made an impact in Pitts-burgh,” he added. “There is still a big entrepreneurial spirit here, and owners just don’t like the idea of answering to someone else.”

In the case of St. Louis, strong community ties and personal relationships have deadened the blow of consolidation in the region. In Pittsburgh, the union atmosphere and the thin talent pool have kept consolidators from expanding further, according to Whalen.

“They acquired some first-string entrepreneurs and put them into management,” he stated. “But they just don’t have any strong team to back them up.”

As competition between consolidators and independents plays out over the top-100 metropolitan U.S. markets, the issue of consolidation will vary in importance. Not every community reflects the business atmosphere of St. Louis and Pittsburgh, but chances are consolidators (or operating companies, as they now like to be referred to) will gladly blend into the local landscape and forge ahead.

Independents and consolidators alike now seem to be focused on internal growth, rather than what the other guy is doing.

Publication date: 09/25/2000

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