CEO Bob Whalen Highlights Acquisition Success, Enhanced Retirement Security for Employee Owners
In 2010, HB McClure President and CEO Bob Whalen pushed a bold strategy to transition ownership of the privately-held Harrisburg-based heating, ventilation and air-conditioning company to an Employee Stock Ownership Plan (ESOP).
When he assumed an ownership stake in the company two years earlier, Whalen’s intention wasn’t to pursue an ESOP for the multigenerational business. But in the face of an economic slowdown, the board-backed decision to form an ESOP was viewed as a long-term strategy that best aligned with company culture and could drive greater financial prosperity for the business and its employees.
The results have surprised even Whalen.
Nine years in, the company’s ESOP journey has led to 19 successful acquisitions along the East Coast and the 2017 formation of HB Global, LLC, a parent company created to support the burgeoning brand portfolio and drive growth strategy. Due, in large part, to acquisitions, the company revenue has surged from $25 million in 2010 to $218 million in 2019, with even greater increases expected from recent acquisitions.
Read on to learn more from Whalen about the ongoing benefits of the ESOP for HB Global’s employee owners and how the growth of the organization is providing new resources to the family of brands.
Propelling Diversification and Value
According to the National Center for Employee Ownership, there are more than 6,600 ESOPs in the U.S., including more than 300 in HB Global’s home state of Pennsylvania.
“While it’s not a totally unique strategy, there’s also not that many ESOPs out there,” Whalen said.
For HB McClure, which started out in 1914 as a small mechanical services company, the ESOP has helped the company diversify its geographic footprint and rapidly expand its workforce.
When Whalen took over as president in 2008, the company had about 200 employees. With the most recent acquisition of North Shore Mechanical Contractors Inc. in Massachusetts, HB Global has increased its workforce to 1,200 employee owners.
“When we started the ESOP, we were all within about 45 miles of Harrisburg,” Whalen said. “Today we have operations in Philadelphia, Baltimore, Boston and Orlando. We’re now doing work across the entire Southeast and New England regions.”
Acquisitions also have diversified HB Global’s construction and service business across more industries, including government, life sciences and convention centers. This strategy helps provide the company with a financial buffer during turbulent economic times.
The portfolio growth also enhances share value for employee owners and helps create job promotion opportunities, allowing the individual brands to hire more skilled workers to service a wider footprint.
Recruitment and Retention Benefits
When HB Global makes a new acquisition, one of the first commitments Whalen and senior leadership make to the new employees is that layoffs are not part of the strategy.
“A big part of what private equity does is they find synergies, which is code for reducing headcount. We do none of that,” Whalen said. “My philosophy is that by reducing one person you reduce the trust of the entire organization. Our strategy is to grow these businesses, it’s not to shrink them.”
That promise and track record of following through has given HB Global a leg up in recruitment and retention of employee owners.
“Most of the employees we hire end up being referred to us by somebody within our organization, and that speaks volumes,” Whalen said.
Retirement Security on the Rise
As HB Global remains aggressive in its acquisition strategy to fuel future portfolio expansion, the mission remains the same: Create retirement security for current employees and set a course for generations that follow.
“Our intent is for this structure to go on for multiple generations and to continue to thrive,” Whalen said. “That doesn’t happen in three years or five years. It certainly doesn’t happen on a quarterly basis. Everything we’re doing is really a multigenerational project.”
The early ESOP results are paying off big. The average field technician who has been with HB McClure since the beginning of the ESOP has more than $100,000 in their retirement account.
Employees at IT Landes, which was acquired in 2014, have average account balances of more than $50,000, Whalen noted.
“That obviously has an impact on how those employees view what the ESOP is and how they viewed it nine years ago,” he said. “This starts to be a compelling story for what an ESOP can really do for employees.”
Be Part of HB Global’s Evolving ESOP Story
HB Global is actively looking for successful construction-focused mechanical services to acquire and take to new heights.
“Because of the size and diversity of our business, we can make investments in individual businesses that current owners and leaders would probably be unwilling to make themselves,” Whalen said. “Over time, we want to evolve that entity into other areas of construction. We want to bring a service mentality to reinforce what they are doing and round out that business.”
For example, HB Global is currently investing in commercial service technicians at IT Landes to help the brand expand its service offerings in the Philadelphia region.
Thinking about selling your business? HB Global will work with you on a flexible transaction structure to help you meet your retirement goals and ensure long-term financial success for your employees. To learn more about HB Global and our ESOP structure, contact us today.