Each group has distinct benefits and features.
FORMER CONSOLIDATORSAlmost 550 contractors are members of the companies that were born out of the consolidation movement in the late 90s. They represent approximately $5.9 billion in 2001 revenues. While all companies are still looking at outside acquisitions to grow, the focus in the past two years has been on internal growth. Once known as aggressive consolidators, these groups now prefer the moniker of operating companies.
ARS, a Memphis, TN-based company, was acquired by ServiceMaster in 1999 and merged with many of the parent company’s Rescue Rooter retailers. It currently has 90 service centers in the top-50 U.S. metropolitan markets. The division reported $600 million in year 2001 sales. Its spin-off company, American Mechanical Services (AMS), reported $245 million in sales for the same period.
Jack Tester, ARS vice president of Residential Service and Repair, said his company is internally focused and less aggressive in its acquisitions. “We will eventually look again at aggressive external growth,” he added.
Tester said that integrating independent contractors under one umbrella has always been a challenge. “This is a complex business,” he said. “There is nothing easy to running this type of business on a day-to-day basis.”
Comfort Systems USA (Houston, TX) recently made some big changes aimed at strengthening its balance sheet and moving toward more focused markets. The company sold 19 businesses, representing $650 million in revenue, to EMCOR Group.
“We really want to focus on hvac and automated controls,” said William Murdy, ceo. “Many of the companies we sold were major mechanical firms. They were not strictly hvac. This year we’ll do about $900 million [87 operating locations] in sales; 80% of that will be in hvac [and controls], up from 60% the previous year.”
Murdy believes in “logical growth.” That could include acquisitions, but he noted that Comfort Systems has “no formal acquisition strategy.
“We see this as a healthy industry and we are going to be one of the players,” he said. “We don’t have to be the biggest, just the best.”
Service Experts (Richardson, TX) accounted for $1 billion in revenues for the Lennox Inter-national Retail Division in 2001. The 200 operating units are expected to generate the same figures in 2002 — a “flat year” according to one Service Experts spokesperson.
Leading Service Experts is new president Dennis Smith, who replaced Jim Mishler in October of last year. Smith was formerly chief operating officer for Simplex Time Recorder.
“Dennis has a very impressive track record of helping companies reach their highest level of potential, and we are confident he will do the same for Service Experts,” said Bob Schjerven, Lennox chief executive officer.
While at Simplex — a $900 million fire alarm and security systems business with 170 company-operated locations — Smith more than doubled the company’s operating margins to 12% in less than four years.
“Dennis is not new to performance challenges or doing what it takes to meet them, and I’m confident his efforts will energize and accelerate performance throughout the Service Experts organization,” said Schjerven.
Encompass Building Services (Houston, TX), formerly known as consolidator GroupMac, classifies its hvac-related businesses slightly differently from other companies. According to Larry Jenkins, vice president of Marketing and Communications, Encompass includes hvac contractors with mechanical contractors who perform other services, including sheet metal.
In 2001, the company’s mechanical contractors had revenues of $1.3 billion, of which approximately 50% was hvac work. Of its 225 U.S. locations, about 80 perform hvac-related services.
“We are trying to work on debt reduction through operational improvements and lowering our level of capital,” said Jenkins. “We had a tough back half of 2001, but we are seeing business improvements now.
“Acquisition is not a key strategy now. We are trying to get everyone integrated into the same system. [But] there are holes to fill and we may acquire a company here or there to fill these holes.”
Blue Dot Services (Sioux Falls, SD) has 80 U.S. locations generating $424 million revenues in 2001. The company is in the process of moving its corporate offices from Sunrise, FL, to Sioux Falls, home of parent company NorthWestern Corp. The organization’s ceo is Daniel Newell.
Blue Dot retreated from an IPO and has remained a private organization, consisting of residential hvacr, plumbing, and duct cleaning companies. The company is also making a push into the commercial markets.
“Trends and focuses in 2002 include maximizing higher-margin services,” said Christen Rennich, Blue Dot communications manager. “[We plan to] implement new information systems and operational processes, then establish common business platforms in all locations; enhance customer-facing activities through lead generation, service development, and delivery.”
EMCOR Group (Norwalk, CT) is a global company specializing in mechanical and electrical construction and facilities services. Frank T. MacInnis, chairman and ceo, said he expects the company to post revenues of $3.9 billion to $4.1 billion in 2002.
EMCOR has approximately 55 companies operating in the U.S., with a recent push into the Midwest and New York markets. Jeffrey M. Levy, president and chief operating officer, talked about the company’s business strategy in 2002. “The acquisition of 19 Comfort Systems units is an example of how we are focusing on the basic strategy of establishing and maintaining ‘local’ mechanical and construction contractors,” Levy said.
“Each of our companies are experts and competitive in their own markets. We are seeing more of a ‘pull’ relationship going on. Some of the larger companies are reducing their internal staffs. Our people have been asked to step in to help [maintain] their facilities.”
CONTRACTOR GROUPSEAI’s (Hebron, KY) 200 independently owned U.S. residential and commercial mechanical contractors represent over $2.5 billion in sales. EAI’s goal for 2002 and beyond is to increase membership by 50 contractors per year.
“In September 2001, EAI asked its membership to … commit to a new standard of excellence,” said Jeff Wilmink, EAI president and ceo. “This program is the implementation of the Seal of Excellence. It is a certification we are requiring all of our members to complete.
“Asking our members to step up to this commitment was a challenge, and…not everyone was capable of this commitment. Consequently, over 40 of our members have been terminated.”
ISL (Brentwood, TN) has over 300 members representing 80% residential and 20% commercial and plumbing contracting companies. Half of its members are independents and half are Service Experts’ contractors.
ISL’s vision is to offer “effective training, operational services, and support to stimulate personal, professional, and financial growth, while embracing core values of honesty, integrity, and respect.”
Bill Efird, president of ISL, said, “ISL continues to provide our members with the solutions necessary to generate double-digit profitability. Our training programs are simply the best in this industry. Look for our continued growth in 2002-03 as our programs are launched in additional locations across the U.S. and Canada.”
AirTime 500 (St. Louis, MO) is a marketing and consulting organization “exclusively” for owners of residential hvac service and replacement businesses. Services include proprietary tools, management expertise, marketing systems, training, buying “clout, freedom of time, and financial independence.”
Its goal has been to create 500 memberships. It has well over 400 as of this writing. The organization was founded by hvacr entrepreneurs Jim Abrams and John Young.
According to Terry Nicholson, AirTime 500 president, “Those who have joined the ranks and followed its curriculum are finding the proprietary tools and systems offered are very effective in attracting new customers to their businesses.”
Contractors 2000 (C-2000, White Bear Lake, MN) is a member-owned organization comprised of approximately 265 independently owned hvac, plumbing, and electrical service contractors in the U.S., Canada, and Australia.
C-2000 describes itself as an organization “dedicated to helping contractors improve their business by helping them implement the very best practices, principles, and programs, and by offering world-class training programs and a network of members helping each other.”
Greg Niemi, president and chief operating officer, added, “We are the lighthouse to help guide the independent service contractor through the tumultuous seas of competition by consolidators, national service companies, utilities, and big box retail stores.”
Aire Serv Heating & Air Conditioning (Waco, TX) is a franchise company with 75 locally owned hvac businesses in the U.S., Canada, Great Britain, and Saudi Arabia. Roger Goertz, Aire Serv president, said his company is on track to achieve double-digit sales growth in 2002. He said that 30 markets have been targeted for expansion in 2002.
“The franchise owner owns the business,” Goertz said. “We teach our franchise owners the Aire Serv business systems and tactics they need to achieve growth and financial success, but we also continually coach owners to follow through with these systems.”
Building Services Institute (Nashua, NH) was created to provide independent commercial hvacr contracting companies with “a vehicle to effectively compete with consolidators, utilities, and equipment manufacturers.”
Since its inception in August 2001, the group has signed up 36 members and is adding six to eight members each month, according to president Wendell Bedell. The membership ranges from multiple-location companies to those in the $2 million to $10 million range who are wishing to expand into commercial business.
“We added [a marketing service] to help our member contractors solve marketing process problems and to meet today’s business challenges,” said Bedell.
Allen’s All-Stars (Miami, FL) describes itself as “America’s High-Quality Nationwide Contractor Service.” The company says it is a “national consortium that provides consumers with 100% satisfaction-guaranteed work done by licensed and insured contractors, and provides contractors with more business by belonging to a powerful national organization.”
The company recently expanded to the Houston market. It currently has offices in Atlanta, GA; Orlando, Tampa, and Miami, FL; and Washington, DC, with plans to be in every major U.S. city within a year. Stan Fulton is the president and founder.
OTHER INDUSTRY GROUPSSome other organizations that serve hvacr contractors are listed below. Membership information and updates are available on their websites.
Due to space limitations, not all groups have been identified. There may be other groups whose voices need to be heard. Contact business management editor John R. Hall at 734-542-6214; 734-542-6215 (fax); email@example.com (e-mail).
Publication date: 04/29/2002