Skip navigation

YTK countdown: the time to hesitate is through

If there's anything to the what's-in-a-name business, Continental Electrical Construction Co. may have seen it coming when they opened shop in Chicago back in 1912.More likely, though, Continental's fate would have been the same by any other name. It was the big contractor's profits, contacts, technical expertise, and consistent successes in the Chicago area that appealed to the giant national electrical

If there's anything to the what's-in-a-name business, Continental Electrical Construction Co. may have seen it coming when they opened shop in Chicago back in 1912.

More likely, though, Continental's fate would have been the same by any other name. It was the big contractor's profits, contacts, technical expertise, and consistent successes in the Chicago area that appealed to the giant national electrical contracting firm that swallowed them whole.

The leviathan in question is called Group Maintenance America Corp. (GroupMAC), a two-year-old nationwide sole-source provider of mechanical and electrical system installation business that has gobbled up electrical contractors in more than 55 cities in 26 states.

In October GroupMAC purchased Continental, along with Gentzler Electrical Contractors Inc., Dallas; and Stephen C. Pomeroy Inc., Deerfield Beach, Fla.; for a total of $100 million. In early November GroupMAC (NYSE:MAK) paid another $100 million for Trinity Electrical, Grand Prairie, Texas, a transaction expected to bring their annualized revenue rate to more than $1 billion (CEE News, December, page 1).

GroupMAC isn't the only big billion-dollar company buying independent contractors on the block, but the two other new billion-dollar consolidators concern themselves only with buying electrical firms. They are called Building One Services Corp., Washington, D.C.; and Integrated Electrical Services Inc. (IES), Houston. Building One and IES now rank second and third on ENR magazine's top 50 electrical contracting firms. EMCOR Group, Inc., Norwalk, Conn., is still No. 1.

The Building One story

Building One was founded November 1997 by Jonathan J. Ledecky, chairman and CEO. Its electrical division, Building One Electrical, Lenexa, Kan., formed early in 1998. William P. Love Jr., former president of SKC Electric of Lenexa, was named president of Building One Electrical. Building One Services Corp. (Nasdaq: BOSS), headquartered in Washington, D.C., also provides mechanical and janitorial services to facility owners and managers, including commercial, industrial, retail, and industrial customers.

The consolidator bought five more contractors in October 1998, bringing its total annual revenue to $1.1 billion, according to a prepared company statement. Then, in a buying action similar to GroupMAC's, Building One paid $100 million for Watson Electrical Construction Co., Wilson, N.C., a leading provider of electrical installation and maintenance services in the Southeast.

"We are extremely pleased to have added Watson and Bill Boyette, Watson's president, to the Building One Electrical group," said Love. "The Watson acquisition makes Building One Services the second largest electrical services company in the country, according to industry trade publications. We are continuing to achieve our goal of building a national facilities services company."

The IES route to success

Houston-based Integrated Electrical Services (IES) (NYSE: IEE), a major provider and consolidator in the electrical construction and maintenance services industry, was born June 1997. But the company never really saw the light of day until January 1998 when it went public with its stock and news that it purchased 16 open-shop electrical contracting firms to become the nation's third largest electrical contractor.

On November 23, 1998, IES announced the acquisition of five companies with combined annual revenues of approximately $49 million. These transactions brought IES' total to 26 acquisitions, with $420 million in combined annual revenues, and increased its annualized revenue run rate to approximately $800 million. Firms joining IES included Commercial Electrical Contractors and its sister company Commercial Communications Inc, Worcester, Mass.; and Spoor Electric Co.; West Palm Beach, Fla. These firms, which generate annualcombined revenues of $12.5 million, are said to be strategic platform acquisitio ns. In early December, IES reported its total number of electrical contractors had reached 40 firms.

"IES is involved in every sector of the electrical construction and maintenance business," said company vice chairman Jon Pollock. "In addition to continuing our strategy of geographic expansion and growth, we are diversifying the business profile of the company to reduce our exposure to the economic cycles. Our business mix is now approximately 49% commercial, 27% industrial, 15% residential, 6% service and 3% line. We've become the largest residential contractor in America, even though that market represents just 15% of our total business."

"We don't just look for companies that make big money within a market sector," said Pollock. "We approach contracting firms that have proven themselves winners through attitude and experience. These transactions aren't hostile takeovers; these companies must want to buy into IES' ways of doing business."

In September 1998, IES announced the formation of a subsidiary, Integrated Communications Services Inc. (ICS), which will address the needs of the growing data communications services industry. ICS will specialize in design, engineering, installation, and maintenance services for commercial computer, telecommunication, and multimedia systems nationwide. Brad Radloff, formerly of Fisk Electric, was named executive vice president of ICS with the primary responsibility of expanding Integrated Communications' presence throughout the United States.

"With a market for these services estimated at approximately $3.4 billion and served by more than 2000 communications contractors nationwide, we see tremendous opportunities to grow this business by acquisitions as well as cross marketing with our Integrated Electrical family of companies," said Pollock.

Roll-up for corporate consistency

Electrical contracting today remains a highly fragmented industry, with an estimated 55,000 firms doing business nationwide. But today's mergers could change the scene five years down the road. The ubiquitous and homogenous Mid-American landscape of Wal-Marts, Kmarts, McDonalds, Blockbusters, and Sears shows just how ripe the nation has become for services that meet standards of corporate consistency.

For example, five years ago Wal-Mart Corp. employed nearly 400 independent local contractors for electrical construction and maintenance of their stores. Today, Wal-Mart employs far fewer and would like to narrow its number of electrical contractors nationwide to about seven. According to Building One's Ledecky, big chains want "consistency in service, customer contact, insurance, and quality standards."

"We certainly see the big chains as a big potential part of our business," said J. Patrick Millinor, GroupMAC chief executive officer. "Companies like Wal-Mart and Blockbuster haven't had anyone to look to for consistent, standardized reliable service on a national basis. We're now bringing it to them for the first time."

Millinor believes national contracting firms doing business for national clients will have to hurt local contractors. "Contractors will wake up one day and realize they've lost business-and never really had a shot at it-because somebody like us won a corporate contract for a region, or maybe even for half the country," he said.

Still, most analysts agree that future contracting for chains will probably be a mix and match arrangement. Millinor painted this scenario: If Wal-Mart wanted to bid-out their regions, but knew that five places were well-taken-care-of, it could mean that those five stores were off limits to the corporate mix.

GroupMAC's stated mission is to consolidate and integrate mechanical and electrical contractors in the commercial, industrial, and residential sectors in the United States. "We want to establish a full array of service companies-mechanical and electrical contractors-in all of the top 100 markets. So we have quite a way to go to fill out that hole. We're off to a goodstart and we're happy about that. But there's a long way to go. The electrical industry we are targeting is very fragmented, and that offers a wonderful opportunity to accumulate those companies and run them as one large company," Millinor said.

Corporate consolidators offer contractors many advantages, including national account opportunities, purchasing power, a higher level of training, and better employee benefits, thereby enhancing what the local company is capable of delivering. But first the consolidators need to be sure they're buying the right firm in the right region.

"Continental provides GroupMAC with a major foothold in the Chicago market, and sophisticated design, engineering and technical capabilities that can be leveraged in other markets," said Chet Jachimiec, executive vice president- acquisitions for GroupMAC.

All of the electrical-industry consolidators-including GroupMac, Building One, and IES-are playing right into a rapidly growing environment of utility deregulation. Large energy providers are looking for services to couple with their commodity products so they have something else to sell in a deregulated environment. Corporate consistency fits nicely with improving efficiency and lowering the cost of the utilities.

The idea of consolidation repulses many electrical contractors who resist the corporate culture and revel in the entrepreneur spirit of contracting. For this plentiful "maverick" type of contractor, independence is the only option because they don't want to report to a corporation on a regular basis.

"We don't try to argue somebody into liking this idea," said Millinor. "Our goal is to show people you don't have to give up maintaining your business to become part of GroupMAC. We don't want to tamper with the local business. Acquired companies see the value of expanding their customer base and driving their markets past where they could go as a local contractor. They realize they're part of a national corporation and they will be listened to."

As of this writing IES has purchased 40 contractors with operations extending to 76 locations in 29 states. IES electrical contracting firms include Commercial Electrical Contractors Inc. and its sister company, Commercial Communications Inc., Worcester, Mass; Spoor Electric Co., West Palm Beach, Fla.; RKT Electric Inc., Mesa, Ariz.; Kayton Electric Inc., Holdrege, Neb.; East Coast Electric, Miami; Davis Electrical Constructors Inc. Greenville, S.C.; Brink Electric Construction Co., Rapid City, S.D.; ARC Electric Inc., Chesapeake, Va.; Goss Electric Inc., Decatur, Ala.; Raines Electric Co., Dallas; T&H Electrical Corp., Wilson, N.C.; Electro Tech Inc., Sparks, Nev.; Ace Electric, Valdosta, Ga.; Aladdin-Ward Electric & Air Inc., Sarasota, Fla.; Amber Electric, Ocee, Fla.; Boxar/Calhoun/Galbraith, San Antonio, Texas; Cypress Electrical Contractors Inc., La Place, La.; Daniel Electrical Contractors Inc., Miami; Industrial Electric; Longwood, Fla.; Hatfield/Reynolds, Scottsdale, Ariz.; Haymaker Electric, Birmingham, Ala.; Houston-Stafford Electric, Stafford, Texas; Howard Brothers Electric Co., Charlotte, N.C.; H.R. Allen, Charleston, N.C.; Integrated Communications Services, Houston; J.W. Gray Electric, Stafford, Texas; Mark Henderson Inc., Decatur, Ga; Kay Electrical Supply, Houston; Holland Electric, Cumming, Ga.; Spectrol Inc.; Snellville, Ga.; Mennings Electric, Pella, Iowa; Mid-States Electric, Jackson, Tenn.; Mills Electrical Contractors, Dallas; Muth Electric, Mitchell, S.D.; Paulin Electric, Fairdale, Ky.; Pollock Summit Electric LP, Houston; Regional Electrical Systems, Euless, Texas; Rodgers Electric Co.; Everett, Wash.; Thomas Popp & Co. Inc., Cincinnati; Thurman & Connell Corp.; Louisville, Ky.; Wright Electrical Contracting, Daphne, Ala.

GroupMac Lineup

Group Maintenance America Corp. is a leading provider of mechanical and electrical services to residential and commercial/industrial customers. Headquartered in Houston, the company has operations in 54 cities in 26 states. Recent acquisitions, including Trinity Contractors, a $100-million full-service mechanical and electrical contracting firm headquartered in Grand Prairie, Texas, have brought GroupMAC's annualized revenue rate to more than $1 billion. Three contractors acquired in October 1998-Continental Electrical Construction Co., Chicago, Ill.; Gentzler Electrical Contractors Inc., Dallas; and Stephen C. Pomeroy Inc., Deerfield Beach, Fla.-have total revenues of $100 million. Other GroupMac member firms include All Service Electric, Jacksonville, Fla.; MacDonald Miller, Seattle, Wash.; Barr Electric, Chicago, Ill.; Commercial Air, Power & Cable, Beltsville, Md.; Gilbert Mechanical, Minneapolis, Minn.; Atlantic Industrial, Richmond, Va.; Romanoff Electric, Toledo, Ohio; Merritt Island, Orlando, Fla.; Phoenix Electric, Portland, Ore.; Reliable Mechanical, Louisville, Ky.; Ferguson Electric, Colorado Springs, Colo.; Converse Electric, Columbus, Ohio.

Building One lineup

Building One Services Corp. has formed Building One Electrical, Lenexa, Kan., naming William P. Love Jr. president. Building One Electrical firms now include: Garfield Electrical, Cincinnati; Oil Capital Electric, Tulsa, Okla.; Regency Electric, Jacksonville, Fla.; SKC Electric, Kansas City, Kan.; Taylor Electric, Salt Lake City; Town & Country Electric, Appleton, Wis.; Tri-City Electrical Contractors, Orlando; TriM Corp., Philadelphia; Walker Engineering, Dallas; Wilson Electric, Phoenix; Riviera Electric, Denver; Riviera of California, Los Angeles; The Lewis Companies, Tulsa, Okla.; Gulf States Inc., Freeport, Texas; National Network Services, Denver; and Watson Electrical Construction, Wilson, N.C.

In addition to electrical, Building One Services also provides mechanical and janitorial, and other services to facility owners and managers, including commercial, industrial, retail, and industrial customers.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.