NORWALK, Conn. — That low-rumbling, earth-quivering noise, with its epicenter in this southern Connecticut community, has a familiar sound. The hvac trade has been hearing a similar noise for the past four years but it’s gone by a different name — consolidation.

This New England noise has a different rumble to it. While Wall Street consolidators ring up over $3 billion in annual revenues, this one company boasts a $2.2 billion global business — not bad for a company that went bankrupt a mere five years ago.

The EMCOR Group, Inc., has quietly been moving into markets across the United States and in targeted foreign countries, offering a hybrid of contracting services in each region. These services include design, construction, operation, and maintenance of facilities throughout the world.

While the numbers may support a large corporate presence, the company’s offices are housed on one floor of a Norwalk office building.

“We don’t need to have large corporate overhead — we need to have operations,” said Jeff Levy, president and chief operating officer for EMCOR. “Our resource and investment should go where we make the money.

“Decentralized control is an important part of our business. You have to be close to your customers.”

Making its presence known

“Most of the players in this market know who we are, but very few of them know where we have operations,” added Levy. “We may work with a contractor on the West Coast who knows a half-dozen of our subsidiaries, but he doesn’t know that we also do business in Chicago.”

EMCOR’s presence in a variety of markets is just one of the reasons why the company has enjoyed steady and substantial growth in the past few years. Its acquisition plans have strategically placed the company in some of the best U.S. and foreign markets.

“Between last year and this year we acquired about $700 million in annualized revenues,” Levy said. “But it is not the size [of acquisitions] that makes the difference, because each operation is evaluated on an individual basis. We don’t have to be the biggest on the street.”

But big is what EMCOR is.

The company employs more than 18,000 people worldwide. In 1998, it was ranked 12th on the Fortune Magazine list of the largest engineering/construction companies. In addition, it ranked 6th on Fortune’s “Most Admired Companies” in the engineering/construction classification.

Levy said it is no secret why the company is ranked so high — it’s because of what it can offer to its customers. He said EMCOR prefers to work on projects that involve more-than-average planning and engineering. He likes the fact that customers look to his company because of its skill and experience — and value.

“You don’t make money today by just getting clever,” he said. “You make money because there is value in what you do for your customer.”

EMCOR clients include industrial, commercial, telecommunications, energy, health care, and sports and entertainment firms.

One of its companies, the J.C. Higgins Corp., Stoughton, Mass., recently provided mechanical services for EMC Corp., a supplier of intelligent enterprise storage systems. A fast-track construction method for the 680,000-sq-ft facility required the installation of 9,000 tons of refrigeration from centrifugal chillers, 160 air-handling units, and more than 3,500 ft of 30- and 24-in. pipe requiring 85,000 in. of welding.

The project was completed under a 10-month accelerated schedule.

Another EMCOR company, Hansen Mechanical Contractors, Inc., Las Vegas, was responsible for installing the mechanical systems in the New York New York Hotel/Casino. The project involved 2,800 rooms and more than 700,000 sq ft of public space, casinos, restaurants, and shops. This fast-track project was completed in 24 months.

Although these high-profile jobs keep EMCOR in the headlines, it is the smaller jobs that are the backbone of the company.

“One-third of our project work is under $250,000,” Levy said, “and 60% is under $5 million. The balance between small jobs involving service and modification and large projects makes this business successful.

“Our small projects keep us close to customers on a daily basis. Maintaining the skills of our workforce and keeping them current with new technology gives us the resources to undertake large design-build projects.”

Acquisition vis-a-vis consolidation

Levy believes that a common trend among contractors today is to “follow their customer” into a market where the customer needs modification or retrofit work, or where they may have new facility construction plans.

He said EMCOR wants to be where its customers are, and sees that as a reason for the company’s expansion.

“We feel good about our company but we also need to expand into good markets,” he said. “We need to be able to cover geography pretty well.

“Our criteria for making acquisitions is, does the market make sense? The market must be fundamentally balanced.”

Levy cited Columbus, Ohio as an example. The community has a solid core of businesses with some high-profile companies headquartered there (Banc One, The Limited, Nationwide Insurance, etc.) and Ohio State University.

“We looked at the Midwest and said, ‘Columbus makes sense for us.’ We found an electrical contractor [Dynalectric, formerly Romanoff] that was well connected to businesses in the area, and we made the acquisition last summer.”

EMCOR looks at the breadth of the market, too. Columbus has a good mix of educational, financial, and light industrial markets, as well as solid growth in the suburbs.

Next, EMCOR looks at the people working for the contractors in the area.

The People factor

“Do the people fit the way we do business? I’m obsessed with the proper fit,” said Levy.

“Management talent is very important to us. It is important for leaders of these companies to be involved in the community and in the industry.”

Levy likes to set up meetings with management and ceo’s of prospective acquisitions. He and his management team have to feel comfortable with the people or they would rather not complete the deal.

“We want a lot of open dialogue between management and the field. We stay away from the old autocratic model, where one person runs the entire show.”

EMCOR is looking to expand its service business. Levy estimates that 20% of his company’s business is purely post-construction service.

“We are looking to provide more facilities services in order to maintain close contact to customers and to stabilize the business,” he said. “Most of our companies are in service, but we want companies that dominate the service business in their markets.

“If you can bring your customers more capabilities, you are doing them a good turn. We have found that we can expand the scope of our capabilities by adding more service work.”

Expanding services

The contractor’s recent acquisitions in California and Massachusetts are further examples of the company’s expansion into maintenance engineering-consulting and energy consulting. Companies are looking for these services to improve their existing facilities.

“There is a trend away from new construction,” Levy explained. “People are focusing more on maintaining and reusing their existing properties — called asset management.”

The philosophy behind the company’s acquisition program differs from some of the objectives of consolidation. Whereas Wall Street consolidators look to grow their market shares through acquisition and tuck-ins, EMCOR looks for new avenues to serve existing customers and make an immediate impact in targeted markets.

“We want to expand our delivery network,” Levy said. “Our acquisition plan is deliberate. We would like to have electrical and mechanical capabilities in the same market. To that we want to add our service capability.”

In the overall scheme, the company is looking to provide complete services to its customers. One of its companies, Poole and Kent, is a leader in wastewater treatment facility services. By tapping into its expertise, EMCOR can offer similar services to other markets.

Performance contracting

This concept of bundling services forms a foundation block for the company. In order to support its bundled services, EMCOR is relying on performance contracting, taking total responsibility for the services provided.

Its approach to performance contracting is a reflection of the trends in today’s business.

“The issue of responsibility and ownership of services you provide is a major trend,” Levy said. “People want you to be responsible. And we can deal with it on a single service or fully integrated service basis.”

How does EMCOR compare to the consolidators?

“We went through the consolidation process already,” Levy said. “Now we are seeing consolidators paying a lot of money for these businesses. They can’t let them alone to do their own thing.

“They will look for value from integration. This is not a forgiving market. Paying a lot for a company puts a lot of pressure on future performance.

“You have to create an interactive business model and structure. I’m not sure how you integrate all these different companies into one. In a couple of years, when the stock deals are vested, former owners may want to take their sale proceeds and leave.”

Utilities: friends rather than foes

Levy stated that many utilities have gone after the local residential service market and have not yet focused on the national residential side. He said their strategies seem to vary, with some focusing on customer service.

This has drawn a great deal of interest from EMCOR.

“We are very much part of the utilities’ programs where they seek to expand customer services,” he said. “We have provided consulting services for companies like PG&E, Enron, and Duke Power. We are also constructing a central power plant in Las Vegas for Unicom Thermal.”

Levy sees the energy business as having a very long gestation period with a slow development process. He sees some utilities getting out of customer service and focusing on being energy providers.

Levy acknowledged that cross-subsidization, using ratepayer monies to support an unregulated business, is a legitimate concern and cited an example. He said his company has been doing traffic signal maintenance for New York City since 1962. The contract is bid every two years. Usually a portion of the work goes to an EMCOR company.

At one prebid meeting to discuss the contract, some Con Edison employees were spotted in the audience.

“When contractors complained about unfair competition, Con Ed said it was at the meeting to gather data,” he said. “They were curious. Most utilities are finding out now how they can participate in the service business.”

Nonetheless, “We don’t see utilities as a direct competitive threat,” Levy said. “They have a greater potential to be our partner or customer.”

What about the small shops?

Levy strongly believes that there will always be room for the smaller local contractors. Although EMCOR looks to be the dominant force in many markets, there are some regions that would not be a good fit for the company, and would not benefit by its presence.

“There are some companies that are serving their markets so well that I can bring nothing to them,” he said. “These companies are very successful and have a customer following. Why should I want to change them?

“There are so many needs in our business that small contractors serve. There is a natural market there that I can’t compete with. Some of the small, local companies don’t have the overhead that I have. They don’t need CAD and estimation systems or computers. They have one or two buildings they maintain, make a living, and everybody is happy. I can’t and won’t compete with that.”

Some of the smaller companies are dependent on one or two customers to maintain their businesses. But Levy is not interested in a market that relies on one core business.

“I don’t want to go into a market just because it is beginning to grow,” he concluded. “That kind of market may end up in the tank. We want a market that is fundamentally sound, with many sectors in which we participate.”

If that is a recipe for success, then EMCOR can sell a lot of cookbooks.