Latest / Construction ESOP Collective / The ESOP Growth Story: From $5 Million to $300 Million | Bob Whalen

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The ESOP Growth Story: From $5 Million to $300 Million | Bob Whalen · Construction ESOP Collective

• speaker-0: I believe in capitalism. I believe that you should get a rate of return for the risk you take, but I also believe, probably because of my upbringing, my parents were blue-collar workers, that you should share in that upside for the labor that has to do the work. I cannot do everything that our 2,000 employees do. I can't do it without them either. I can't do it without capital, and I can't do it without the labor that does the actual work. And and so we're all in this together. speaker-1: Welcome to the Construction ESOP Collective. I'm Chuck Mazzanti, Senior Vice President at Christiansen Group Insurance, and this is the show where we explore the wins, challenges, and real-world lessons of employee ownership in construction. Each episode brings insights from CFOs, former owners, and employee owners who are building something bigger together. Let's get into it. Today's guest is Bob Whalen, CEO of HB Global and author of the book Beyond Your Ownership. Bob has helped HB McClure's transition to 100% ESOP and has since helped grow a business purchase for just over $5 million into an enterprise with roughly $300 million in equity value, all for the benefit of their employee owners. In our conversation, Bob shares the story behind that growth, lessons from the setbacks, and why an Aesop only works when leaders live the values they promote. Bob Whalen, welcome to the Construction Aesop Collective. I'm super pumped to have you here. speaker-0: Super excited to be here, Chuck looking forward to it. speaker-1: Yeah, so you're you're CEO of HB Global out of ⁓ Pennsylvania. I'd love for you to tell the audience just kind of your origin story and and how'd you end up to where you're sitting today. speaker-0: Yeah, ⁓ you know the the fast forward version ⁓ is I started off ⁓ in the employee benefits business, both ⁓ internal at large corporations, ⁓ working for a provider of a benefit plan, ⁓ as well as the brokerage business, the consulting business. And so for the last, you know, ten years before I came over to HB. ⁓ I was in the brokerage business, had my own little ⁓ niche employee benefits brokerage business and for the first five years and the the last five years I sold to Marsh and ended up being part of Mercer's employee benefit ⁓ business. But in the middle of that, ⁓ I did an executive MBA at Cornell. And I came out of that MBA really wanting an opportunity ⁓ to lead a business. And really with the thesis, if you ran it like a sports team, you got everybody running in the same direction, ⁓ you know, you could outpunch your weight. And so that's what we've gone about trying to do, you know, over the last eighteen years. and, you know, just a ton of fun doing it. and really excited about what we've been able to accomplish for the employee owners of our business and aligning everybody. speaker-1: That's awesome. Yeah. So if if I was a little bit earlier in the process, we could have been teammates. I I used to be on on that side of the house over at Marsh just on the P and C side. So it's that's kind of funny. speaker-0: learned so much in that environment too. It was really great. You got exposed to a lot of different companies. I did some Pima work there which was kinda, you know, exposed me w we called it Pima within, you know, Marsha Mercer, which was the private equity, you know, doing the diligence side of the business. So exposed me more to merger and acquisition than I had been before. So just a wonderful, you know, experience to gain along the way. speaker-1: A hundred percent. And so so now you're you're CEO. When ⁓ can you tell us a little bit about when did you guys go ESAP? Were you a part of the company? When when it became an ESAP, did you come in after? I'd love to hear that. speaker-0: Yeah, so I'm actually a very unusual story within the the ESOP world is I bought a minority interest in HB McClure, which was almost a hundred-year-old mechanical contractor in Harrisburg, Pennsylvania. I bought seven and a half percent of the business with a plan to buy the rest out from the third generation owner. And that was 2008. Of course, we were in recession and didn't know it. So you were watching the train coming at you. It was gonna you know, like run you over, which is the nice thing about construction is is you can see it in your backlog about what's about ready to happen to you. And so I went looking for ways to fulfill my obligation to Bob McClure and make the deal cheaper, which led me to ⁓ being ⁓ a more tax efficient deal, which is where I came across ⁓ the ESOP and I had been exposed to it a little bit in my, you know, my benefits experience. ⁓ And lo and behold, it perfectly aligned itself with ⁓ what I was trying to do culturally, was get everybody running in the same direction. And so unlike almost everybody else that's a founder or has a family business that you know they basically sell to the employees as part of a succession plan, I was the new leader of the business that came in and proposed this to our board of directors. you know, that we moved the company to a hundred percent ESOP. My board thought I was absolutely crazy, like what you know, what was I thinking? ⁓ but I just felt like it would make the transition so much smoother for everybody involved. And you know, I cannot say I envisioned what the next fifteen years were gonna be like at all. It was really about a solution that fit the time. ⁓ but it's it's turned out to be my professional mission. You know, and so everything I do now is really like focused on creating value for our employee owner. speaker-1: That's awesome. And so what was kind of the biggest surprise? So you you wrangle or rally the troops, get the board to buy in, then then you guys go Aesop. What was kind of the biggest surprise that that you just couldn't prepare for ahead of time, but maybe you would have done differently with the benefit of hindsight? speaker-0: Well, I don't know that I would do anything differently because of it, but the biggest surprise with the employees were like, ⁓ yeah, what's the big deal? And and to be fair to them, you know, we had our first meeting, we announced it, you know, people were interested. You get to year one, the average contribution we made to the plan in that year was six hundred bucks. You know, so like you can understand why they weren't, you know, like you know, blown over by the fact that they own the company now. ⁓ but as time has gone on and their values have increased dramatically, it's become, you know, a really different thing. And frankly, you know, getting people to appreciate the E stop is still an everyday, you know, part of of what we do. It it's it's way out in the future and that's, you know, not what the employees would prefer. You know, so it takes a lot of work to get their buy in. What I found is once the balances get up over fifty thousand dollars, all of a sudden the take up of it becomes a lot more dramatic. There'll be some people that'll you know never really appreciate it until they get that check at the end, and then you know, I'm pretty sure that everybody's gonna be ⁓ happy. but you know, at fifty thousand dollars we really start to see, you know, some take up. And now we have You know, seven hundred and ninety eight participants with over a hundred thousand in their account. And so you know, it's it's it's starting to have a real impact on people's lives. speaker-1: Yeah, it's it's real money. ⁓ it it's funny. It's Aesop's kind of a cult, right? ⁓ from the outside and and people just think they're so skeptical 'cause it sounds like it's too good to be true. But I think you encapsulate the the power of of an Aesop by the statement you just made. It's it's real money and it changes people's lives. Yeah. speaker-0: And you know, I describe, you know, I every year I get a spreadsheet with every employee, you know, what their balance is, how many shares they have, you know, what's happening. And it's like Christmas morning for me. I mean, this is what it's about. You know, and and last year when our stock increased by almost fifty percent, and now we have three hundred million ⁓ in people's account balances, you know, what when that's what you're driven by, I mean it's a huge motivator. I mean I've come out of that with so much energy and we meet with all of our employees. We have, you know, annually we have what we call owners meetings where, you know, we pull ⁓ together and we you know, basically announce what's happened and communicate about our mission, vision, core values and what we're doing. You know, it's a really exciting time. And ⁓ it's not, you know, every year is not gonna be that. We you know, in twenty twenty two we had a tough year. We had to communicate, you know, the stock actually going down because of our performance. ⁓ you know, but over time, you know, we are gonna be disciplined about doing what we need to do and and we'll get to our end goal, which is to create millionaires of all our employees that spend a career with us. speaker-1: Yeah, no, that's awesome. And I I want to make sure because some of the audience are are Aesop curious, right? Not not everyone is an ESOP now. So I'd I'd like to unpack the or make sure everyone understands. You said you have three hundred million dollars in eSOP balances across the participants. speaker-0: We do. ⁓ we do. And and so, you know, our strategy in large part has been to do a classic roll up. You know, so we have eleven subsidiary businesses. We've d ⁓ you know, done a total of thirty acquisitions. ⁓ some of those are bold-ons to existing business. That isn't our, you know, favorite mechanism to do because there's actually real integration that you gotta do with those and they're hard. You know, there's a reason why a lot of acquisitions fail is because integration is really hard. ⁓ so we like you know to have independent businesses that will continue to operate, continue their legacy. Like in 2029, we're gonna celebrate IT Landis, you know, one hundredth anniversary. And so ⁓ you know, that's really important to us. ⁓ but the strategy of the roll up has created a lot more revenue, a lot more profit. That profit gets valued higher than when you're a small company because it's less risky. You know, one of the positive byproducts of what we've done is not only have we, you know, diversified from a geographic standpoint, but we also diversified into businesses that we weren't in before. So when we acquired a business in Boston, you know, we're now in life sciences. And so, you know, we're doing lab work up in Boston. And that just happens to be slow right now. But when we were going through COVID. You know, it was a huge part of of the business. And so that's all what diversification is about. ⁓ but we just keep on reinvesting, you know, what we create back into the business. And you know, we wake up, you know, fifteen years later we bought a business for a you know a little over five million dollars total that's turned into having an equity value of three hundred million. And that's all for the benefit of the employees. It's not for some financier. you know, out ⁓ you know, in some big metropolitan area, it's right in our town. We've created over two hundred million dollars worth of value for Pennsylvania participants. And that's somewhat of a function of the length of time that the employees from Pennsylvania have been with us. You know, we've also produced over fifty million dollars of value in the state of Florida that stayed right in those markets where those businesses we've had ⁓ you know acquired. We now have multiple businesses that There's more in individual ⁓ ESOP accounts of their employees than what we purchased the business for when we originally purchased. You know, it's just a really you know, it gives you a lot of pride in what we've been able to accomplish, you know, for, you know, the 200 or 2,000 employee owners of HB Global. speaker-1: Yeah. And I I think that's just something that I I want to stress, and and obviously we're in Aesop, so maybe I'm admittedly a little biased, but numbers don't lie. Period. And not I don't want to throw shade at private equity. I mean it's it's fine and it could do good things, but the the end result is that capital ultimately flows up to the top. And they have to continuously turn it. You know, every five ⁓ holding patterns are longer now, but Historically, every five to seven years, they have to have the liquidity event. And let's say it's during a downturn, then maybe they get a cut because a dollar saved is a dollar earned, because they need to get that return to the the shareholders and and the top people. And your business is just proof that the wealth is shared. It's it's the ultimate version of capitalism. It's everybody has a seat at the table. They're getting their lives changed and then to your point, the local community, the money stays there. And and the and the people, you know, people that you've bought and now they're integrated into the ESAP, they could still go to the local diner and not have to kind of be like, ⁓ I we gotta walk out, we got so many people riled up. So it's there's just so much good to it and and I love that you're you're a great ⁓ you know, you've turned into a spokesperson really for the ESAP community. speaker-0: That's the owners we attract. You know, the owners that we attract to sell to us really want to take care of their employees because why they didn't have an ownership structure that rewarded their employees, you know, directly for their ownership in the company, they did care deeply about their employees and recognized that their employees made this happen with them. You know, like it they couldn't have done it without their employee base, and we give them a platform. Where they can not only get their liquidity off the table that they now need, you know, for their retirement, which is, you know, almost universally what the owners that are selling to us, you know, need to have happen. But they're taking care of their employees, you know, through the ESOP plan going forward. And like I mentioned, these employees end up having, you know, more value than what the company was sold for when they did as we get out. You know, IT Landis is eleven years ⁓ since we bought them and they have two times you know what we bought that company in their eSOP accounts for those employees. And what continues to surprise me is how many of these owners take a chunk of the purchase price and bonus it out to their employees on their exit too. You know, you it it doesn't get headlines, you know, like what KKR is doing with ownership works. But we see it happening with our owners that are doing it all the time. And lots of times, you know, it's a you know, what what KKR has done is about, you know, I I think it's been communicated around twelve percent of the purchase price. We've had owners that have bonused out twelve percent of what they get all the time. And nobody's writing headlines about it, but they're doing it, you know, down, you know, at Main Street. And they do we have given them a vehicle to take care of those employees as we go forward. And you know, I am absolutely a capitalist. I believe in capitalism. I believe you should get a rate of return for the risk you take. But I also believe, probably because of my upbringing, my parents were blue collar workers, that you should share in that upside for the labor that has to do the work. I cannot do everything that our 2000 employees do. I can't do it without them either. I can't do it without capital. And I can't do it without the labor that does the actual work. And and so we're all in this together. It's a team. It's one of our core values is about team. And we believe it in our core and we execute on it. And we're gonna do it through you know through our actions. speaker-1: No, no, a hundred percent. And that that reminds me, so you also have a a podcast in the last episode from a couple weeks ago. The gentleman was saying just that, that when you got to the the table before the deal closed, the the owner, the original owner, set aside a generous amount to all of them, and they're like, hey, we were rooting for the closing as much as everybody else. speaker-0: Yeah. You know, and he was also s you know, the other part of that podcast is he was skeptical about this. He thought it was too good to be true. You know, and and we we sp in a lot of different formats talk about what we're doing, why we're doing it and how we're doing it, and it is so important to us that we actually execute. Like, no kidding around. This is what we're about. And we get so much feedback from owners that have sold us. You know, that what you said is what we do, and we make our owners available to we have not been one hundred percent successful, by the way. You know, we had a failure in Phoenix, you know, and and we're very open about that. This is not a guarantee, you know. This is still, you know, really tough business to be in, and you know, we're gonna do everything in our power to make it happen, but it's not a guarantee of success. While we've had a lot of success. We've had our failures too. We're not perfect and we don't portray ourselves as being perfect. But we let all those voices to be known to the owners because we want them to make the best choice for them. And frankly, we've had a number of cases where the owner that we were talking to to buy decided to go to do their own ESOP. You know, we give a ton of autonomy to the businesses that sell to us, but it's not one hundred percent autonomy. You know, there's things there's Financial reporting that you've got to do so that we can do our job. You know, and if you're looking for a hundred percent autonomy, do the ESOP yourself and we look at that as success too. Yeah. Because maybe they learned about ESOPs because of us and said, Well, we're gonna go about doing this too. And it's so exciting for us, you know, that when we don't get a deal done six months down the road, you'll see an announcement out there that they did their own ESOP. You know, success, period. speaker-1: A hundred percent. And and so, like you said earlier, Bob, it's over 30 acquisitions at this point. ⁓ can you walk us through kind of the beginning stage, the first couple to where you're at now? I mean, you're a systems guy. I'll never forget when I saw you on the MA panel with ⁓ I think it was Chartwell and and the ASCA Leadership Summit in St. Pete's in February. I mean, you're speaker-0: First. speaker-1: You're sharp, your systems, you're numbers driven, you know what you're doing, but I have to believe the difference between your first or second acquisition and your thirtieth, you've come a long way. So can you can you share some speaker-0: I got some great stories for you there. So, first of all, ⁓ it's not like I got into this and had this vision that this is what we were gonna do. You know, obviously I wasn't afraid to do an acquisition because that's how I got into the business, you know, to start with. In essence, you know, put an acquisition together for for me ⁓ to be the leader ⁓ of HB McClure. ⁓ but then ⁓ part of our business is residential service and we had a small oil delivery ⁓ business. And oil delivery is dying. You know, people don't put new oil boilers in their houses and no new house has oil. ⁓ you know, they use some other mechanism. And so those businesses are dying, and just like a lot of others, ⁓ that you have all these owners that are retiring out. And so we started buying these businesses because it essentially was just a cash cow. You were buying it and running the business out. And so we started out doing acquisitions that way and we did that. The first major one we did was IT Landis. That was, you know, now, you know, coming up on 12 years ago. And we made so many mistakes. Like, first of all, we forgot and and I can't believe the bankers, you know, didn't pick up on this too. But in our projected balance sheet, we didn't put the current portion of the long-term debt in the working capital. Well, working capital is incredibly important for a construction company relative to bonding and and all kinds of other things. And so just thank God for us, the first one went really well ⁓ from ⁓ you know post-transaction ⁓ performance standpoint that we, you know, figured that out, we fixed that. We made so many other errors. I talked about the failure in in Phoenix. That was really a failure and we had the information that the succession leader was not a good fit for leadership. And we knew it and started to read our own press clip clippings and believed, you know, that we could bring them around to be able to do it. It didn't work. Then we put in it we're not equipped, you know, just like Warren Buffett talks about not being equipped to have leaders put in, we are not equipped for that. But we did the best we could. We had a good young ⁓ you know, potential leader, but he wasn't really ready yet. And so that didn't go well. And by the time and and then you throw in that they were doing the chip factories out there and pay was going up by like a hundred percent, you know, like overnight. It was a disaster. ⁓ and and so we learned so many steps you know, along the way. And I think one of the really key things, like that IT Landis, ⁓ if that had gone badly, we could have died. You know. Since then, the magnitude of the acquisitions that we're doing, if they go badly, are not gonna kill us. You know, they we d we do acquisition size that while it will be painful if we have an outright failure, and Spectrum was a big failure. It wasn't just the purchase price, there was a whole bunch of losses that went on top of that. ⁓ you know, when you look at it, you know, and I you know, I kind of like saying it 'cause it we lost forty million bucks on that. So like no kidding around big time loss. But we're at the size at that point. While it's very material and very painful and was reflected in our stock price, you know, in twenty one, twenty two. ⁓ it did not kill us. And I think that that's a really important lesson as you move along. You know, maybe you double down early because there, you know, there's you know not as much to lose. But that 300 million dollars that I talked about that's in people's account, I do not take that lightly. You know, that will not be good for me ⁓ if we lose that for our participants. And so we take what we do very seriously. Part of that is getting a little bit better each day. Your systems are getting better as you're going along. You're focusing more, you know, on on what could go wrong. But I think it's also important that we don't forget what's got us here is being entrepreneurial and willing to do things differently. And so it really is about continuing to do what we do, but be a little better at risk management. You know, so we're making some investments now that it's that that's one lesson we learned from Spectrum. If we make a ten million dollar investment outside of H B Global and all we can lose is that ten million dollars. You know, there's no there's no losses over above that that filter back to the organization. So we've combined some of that and we are incredibly entrepreneurial in how we think about things and adjust and I think it's an important part of what we try to do. speaker-1: Sure. And and so I'd like to go back, if you don't mind, Bob, the the forty million dollar loss. Like you said, that's y you took it on the chin. I mean, it your legs had to get a little bit wobbly. I mean, you're you're a good businessman, you could write the ship, but what did that look like as far as communicating that to the current participants and and establishing trust to have them understand that the forward direction is still solid and you know, I I bet it was a good learning exp experience for everyone involved, but I'd l I'm curious to hear how you guys communicated that and kept the confidence with with the employee base. speaker-0: I think you really are. So so first of all, the most or from my perspective, one of the most important things is I stepped up and took one hundred percent of the responsibility. You know, and how I like to explain it is it's not that somebody in our organization couldn't have mitigated that or made it better or even, you know, course corrected it. But we know very specifically what we didn't pay attention to that ended up biting us in the butt. And I'm the one that makes final decisions about where we allocate our capital. And I made that decision to make that allocation. And so therefore there is only one person that is responsible ⁓ for that forty million dollar loss, and and that's me. So, first of all, it was to step up and take responsibility because we want our techs to do that too. We don't want them to hide. you know, when they've made a mistake, you know, we want them to learn from it, take responsibility for it, and move on. And ⁓ you know, so I thought that that was very important to do. But then to your point, and and honestly, I haven't talked about this a whole bunch, ⁓ you know, in other times when I talk about the spectrum debacle, but we spent a lot of time talking about the financial strength of the organ organization as a whole. You know, while like twenty two I talked about was negatively affected. You know, we were still very profitable, just our margin was cut, you know, pretty su substantially, and it had a negative effect because the difference between what we actually produce and what we projected we were gonna produce from a valuation standpoint were different, so that's reflected in the price. ⁓ but we were financially stable, you know, and so there was never a question Of whether the organization was gonna continue ⁓ to survive because of the if I had three of these going on at the same time, it would have been a different story. But we spent a lot of time talking to our employees about how this was a big deal, we're not taking it lightly, we have a sense of urgency about it, but also the organization will live to play another day. And ⁓ we have done that, you know, and so after that we've recovered in the last two years our stock has gone up by 80% and 40 some percent. And so you you see that we now have a story around this too. And believe me, I'm talking about the fact that our stock will drop again someday. You know, this is not a straight line of success. This business is hard, you know, whether it's self-inflicted or whether the market just makes it very difficult to achieve what we're achieving today. You know, that's one of the things that people miss out on value is is really it's not that your organization is suffering to where you know it's not doing as well as it can do. But if it drops from where it was before, it's gonna have an effect on the value of your company. That's part of equity too. I mean, you know, now employees want all the good things about equity, but there's other stuff that go with it, you know, also. And I think we try to educate that, you know, in our history, we use the great game of business ⁓ you know, around some financial education for our business. We now use Grit Consulting, ⁓ you know, which is ⁓ you know, a Midwest firm ⁓ you know, that's doing great stuff, you know, around that. And so we take that responsibility very seriously in the communication to our employees and trying to make them better business people and understand both the pros and cons of being an equity holder in a business. speaker-1: Yeah, yeah. I mean to your point, the buck stops with you being at the top and so good on you for for owning it and then communicating clearly and then ultimately what what have we learned? You know? speaker-0: One one hundred percent. You know, and and some of that does come with, you know, like me saying I I've always said, you know, acquisitions is more like baseball. There's some batting average of success. It's not one hundred percent success. We've had a we've had a few bold ons that haven't, you know, gone well. Nothing to the magnitude, you know, of that. ⁓ but you're not gonna be one hundred percent successful. And it was important for us to get back on the horse after You know, spectrum and our two two of our very best return investments have happened since we did Spectrum. And so it's just really important to keep that all in perspective ⁓ of what you're doing. speaker-1: Yeah. I mean every relationship, whether it's business, personal, I don't care, you're gonna have your ups and downs. And actually oftentimes when you have a down and you band together, you come out so much stronger. And then the faith in the employee owner base of knowing, hey, you know what? We're gonna have another one that that doesn't go perfectly, but we made it through and actually we're stronger because of it. So we're not even gonna sweat it. speaker-0: Yep. Really important. And and and like this is a good point for me to highlight something about eSOPS also. Is if you've been in the plan for ten years and you're fifty five years old, you have the ability to diversify twenty five percent of your balance. Every single year I tell our employees if you can diversify diversify your account. I just turned fifty five I got my first notice this year, and I'm gonna do it, you know, Because I want to show the employees, I'm not just telling you to do this, you know, I'm gonna do it myself. And so I'm gonna diversify ⁓ you know, this year with our plan, even though I think you know things are going great, and you know, it's really hard when you've averaged a 34% return to diversify out of an investment like that. ⁓ but it's really important because this is about retirement, you know, and so it's all those little things and I cannot emphasize enough how important it is, you know, no matter what your culture is, is to align your behaviors with that as much as you possibly can. You know, I can say that my professional mission is about our employee owners, but if if employees see just a little crack in that, if they see just the smallest crack that this is really about Bob Whalen, it's not going to happen. And so you have to align that stuff. And so, you know, and that's that's not everybody's mission. You know, every you know, there's there's plenty of great ASOPs that are like maniacal about their customers. There's nothing wrong with that. ⁓ we just have a mission that's built around the engagement of our employees first because we believe that that leads to raving fans of customers. And so we align everything we do with that. speaker-1: Yeah, no, a hundred percent. And so I'd like to transition. you know, going ASOP, it's not easy, right? It's a big undertaking. You have to s have a certain level of EBITDA to even, you know, take on the frictional cost of hiring the different advisors and so forth. And and oftentimes the two biggest barriers to ASOPs, in my opinion, are one, there's just so many misnomers on it. And that's why I'm starting this podcast. And that's why it's so important to have people like you in our industry that are writing books, which we'll get to. I want to get into the book. so that's that's barrier one, and then barrier two is they're just like, hey, it's it's too much headache, you're still running a company, PE comes along, or a strategic buyer, and they're like, it's just easier. So I'll just go PE or strategic buyer. And I think. If someone's not gonna do their own ESOP, and of course the numbers have to bear out. I I want everyone that starts a company, whether it's they started it or their great grandfather started it, they deserve the liquidity event in that wealth a hundred percent. But if it could be close in an ESOP transaction and there's tax advantages and so on and so forth, you gotta at least try it out. And I think you doing over 30 acquisitions now could solve that. piece of that second puzzle of the frictional cost is too much. So I'd I'd like you to talk about, you know, what's the benefit? If someone's listening to this and they want to, you know, have some sort of exit in the next five to ten years, why should they, you know, talk to Bob in in HB Global? What does that look like? How do you engage people? If you could walk us through that process, I think that would be helpful. speaker-0: I think you you really hit on it. It's so an owner gets the ability to get their ⁓ employees in an ESOP without having to do all the work themselves around. You know, ESOPs are complex. It's you know, in in essence you're signing up for a regulated business, the Department of Labor, you know, and the IRS, you know, regulate eSOPs. And so if you don't want to do that, selling to somebody else ⁓ can be a great answer. And then, you know, we take that and said what do ⁓ folks that sell to us, what do they really well what's really important to them is taking care of their employees. So the ESOP will do that. Well, the legacy of our business is really important. I talked about IT landis, but we have, you know, of the eleven, ⁓ you know, probably the average is somewhere around that businesses are fifty years old. You know, and so the legacy of the business Is very important to them. And then ⁓ thirdly, we would be very focused on ⁓ keeping autonomy with the business. And frankly, that aligns strategically with what we think makes the most sense in the business that we are. If you're McDonald's, it's different. You know, I get that you want to have the exact same thing every single place you go and done exactly the same way. Construction is not like that. You know, we don't cookie cutter buildings, we don't cookie cutter the customer we work with, you know, all of that. And so it really plays in strategically. So then we give our business leaders a lot of autonomy. We tell them, you get to choose, you know, the the customers you work with, what projects you wanna go after, how you're gonna price those projects, you know. ⁓ what resources you need to do that, including employees, so we don't tell our businesses the employee model or the overhead model they're gonna have. and you know how you're gonna pay those people and the benefits you have. We you know our benefits aren't even the same overall. Now that's one thing that I think we'll move into in the future is have a more consistent, you know, benefit package that we offer. But our different businesses have different PTO. They're right now they have different medical plans. You know, and we really led it to the local market because frankly it's very different. You know, and you know that from your Marsh days when we did the benefit survey. Benefits in the southeast are very different from the northeast. And and so, you know, we've responded to that in in that way. So I think those are the primary factors that drive somebody to want to be with us. If autonomy is the really biggest thing, control is really big to that owner, then doing an ESOP themselves is really a great way to go about it. So they will control all that for the future. But we find a lot of them, first of all, they've waited too long, you know, so they don't start planning for this succession until it's too late in the game. And then it's just easier to give it to, you know, and I I think it's fair to say we think of ourselves as ESOP experts now at this point. You know, we understand the ESOP world, ⁓ you know, and what we're trying to do within it. And so they can just hand that over to us. We know how we want to communicate to employees. Everybody, the one thing they don't have a choice about is they're gonna come over to our mission, vision, core values, and now the principles that we add, nuance that, you know, how we think about doing business, you know, those things, you know, are things that we think are really important and will continue to move down that route. speaker-1: Yeah, I mean you're kind of striking on on most things that are important to to business, especially blue-collar businesses. And I I'd like for you to highlight one or two deals that they sold to you guys, they go ESOP, and they were maybe a a 15 or 20 or 50 million dollar contractor, and then 10 years post-acquisition, now that same business unit. That's still operating more or less autonomously, but with the horsepower of HB Global and the business acumen, they went from 50 million to now a hundred and fifty million or whatever it is. I'd like to highlight one of those. speaker-0: We we have a great example of that. ⁓ Nash Plumbing and Mechanical was that. And the story behind Nash Plumbing and Mechanical selling to us is ⁓ Cliff Nash, who was the ⁓ owner, the second generation owner of the business, ⁓ basically had ⁓ a health scare related to the pressure from the business. And this you know, this business is really hard on on owners. And and so he came out of that and the doctor basically said, you know. You can either, you know, reduce your stress ⁓ by figuring out how to deal with stress or you need to get out. And he couldn't do it. You know, he just couldn't make himself do it. So he decided to sell. And part ⁓ in right in line with what you said, they're a ⁓ you know, forty-five million dollar volume business. And really the main thing we did for that business is we just opened them up to take more risk. than they did in in the past. And so now you fast forward, you know, it's been, you know, eight years and from a $45 million business, they're now doing over $100 million of business. They have a $140 million job that we're doing, you know, right now, you know, that we that which fits fine for us to do that side. We're doing the Federal Reserve building through another ⁓ one of our subsidiaries right now that's a hundred forty million dollar project. You know, those are size projects that we could do that they just would not be able to manage ⁓ from the bonding capacity and and all of those things. And and I think that that's a big part that we've been able to add to the businesses as we go along. And again, it's not like I sat back here ten years ago and thought, boy, we put these businesses together and all of a sudden we'll wake up and you know, we're gonna be, you know, one of the contractors on the Federal Reserve building that's building, you know. digging multiple stories under the existing building and doing, you know, all this exciting stuff. It's it's it it happened just as of an evolution to what we were doing. speaker-1: I I think that's huge. And I I want to highlight that because in construction, if it's bonded work, without your bonding line, you're dead in the water. ⁓ and and so so and a lot of contractors go out of business not because they run out of money, but because they'll have a surety claim and now they can't get bonded. And so again, they're dead in the water. And so to be able to get the liquidity event, right, get taken care of to sell to you. But then also now they have this insane balance sheet that could tap into jobs that would have taken them best case twenty years to work towards or worst case, bet the farm, fail, and now everything went to zero, not only to them but their employees. And now with the growth, they're making more money than if they stayed independent in in a lot of times, if they just stayed at fifty million. And I can't even imagine let's do this again in ten years and see where they're at. It's it it's pretty cool. speaker-0: It's been really fun and honestly that's one of the detail stories behind the scenes. When we put that bonding package together when we acquired Nash PM, that was no, you know, slam dunk. This is you know that this is one of those things that talk about you know losing sleepover. I mean getting that pulled together. ⁓ because the other thing could have happened too, if we didn't have the ability to do that, we could have really constrained Nash PNM. And then it would not have been a great acquisition for them, not great for our company either. ⁓ and I think that that's and you know, for you and I, it was actually, you know, Marsh, you know, that put that, you know, together for us and really had a lot of experience working with private equity type construction companies and pulling that together. So, you know, there there are solutions out there for people. ⁓ you just really you know have to know what your primary problem is sh and then go about the you know, like you said, the process of what you're going about to solve. speaker-1: Yeah, be being at the party before, you know, it having the experience, having the the service providers that know. I mean, there there's so many reasons that just going to your firm, you've you've been there, done that, seen it, and then you have the you know service providers that have depths of of expertise too. So that's that's awesome. And and I'd like to transition to if if you guys haven't heard the book, beyond your ownership. ⁓ it's not easy writing a book and and Jamie I know helped you ⁓ immensely and she's just such a sweetheart of a lady. I'd like to, you know, hear why why'd you write a book? What did that look like and and what are you hoping to, you know, what are you hoping people get out of it? You know, get it, read it. speaker-0: Yeah, well, you know, as I said, my professional mission is to expand ⁓ you know, expand employee ownership. And and so, ⁓ the primary audience of the book is for this silver tsunami that that's coming on is to make them aware of the alternative of an ESOP. It's not to say that it's right for for every single ⁓ business owner that that's gonna be transitioning, you know, their business. ⁓ but, you know the general population, only about three percent of people know about ESOPs, you know, so if you ask about eSOPs, they don't even know about them. The business owner community is higher than that, but still, you know, significantly less than fifty percent of people are aware of ESOPs. So the primary audience is to make those business owners aware of this and and so, you know, we're trying to get distribution of the book, you know, through service providers that work with them and believe in it and You know, all of that stuff. ⁓ but that's the primary audience. And then secondarily, ⁓ we reinforce how we're going about it, you know, what our mission, vision, of core values, you know, how we're doing that. So it's just one more of those things, you know, that somebody that is thinking about selling to us can get aligned with what we're about before we even do a transaction, our employees of what we're about, you know, one more format. you know, that that they can see ⁓ you know, what we're about, so they have a language to use about making us better. And so all of those things, you know, I think are are what we're trying to do with the book. But the the primary reason is really just to create awareness around employee ownership. I am like blown away by the community impact, you know, that we can do compared to private equity or big public companies or you know, ⁓ you know, other structures, and so I'm just a real believer and want to do everything I can, you know, to help facilitate it as I kinda go into this, you know, later part of me actively, you know, running businesses and, you know, kind of, you know, this is a way, you know, for a second act, you know, too, you know, for me to get involved and just really being supportive of the ESOP industry. speaker-1: Yeah, I think that's that's one thing I just see. I mean, even at our firm, ⁓ you know, I've I've been at other firms and publicly traded and so forth. And in just the collaboration, it's kind of like what's in it for me if I help Chuck out, right? But in the Aesop culture, you start getting this the second and third generation of guys and gals that are a little bit older and I in retirement, they're so much more willing to help the younger buck. Because not only does it help their their share price, but they're kind of like, hey, I'm it's just so much more ⁓ collaborative. And and they're their success is, you know, our success. It's it's a different feel. And I know people are like, Chuck, I'm sick of you talking about esops. There's it, there's no way there's a catch. And I'm like, I I can honestly tell you there's not. If it's if it's the right setup and the people understand the work because it's not easy. But if you understand the work, it really takes care of the employees. ⁓ and and you're a perfect example of that, Bob. speaker-0: Yeah, well well thank you for that. And ⁓ you know, I I I I just think, you know, one I I think one of the things we try to do is gain wisdom, you know, over our lifetime. And I think w one of the the pieces of wisdom that I've gained over my life is the more you give, the more you get. And if you can just buy in to doing the right things all the time, that's not to say That you won't be taken advantage of at some time. Or that you put some effort forth and the person you're dealing with, it's all about them. And you know, they're they're not only not doing what's in your best interest but working against you. Those things all happen, but it's all what you focus on. And this Aesop is just a great example of this company has just continued to give to me. We aligned my incentives with what was good with the company. We work together to do this and now this company just keeps on giving back to me, you know, personally, not in the smallest way by just the satisfaction I get from what we're doing it. And I think that that's, you know, so many times that's what you don't realize when you do these things is the satisfaction that you're gonna get out of doing good things for for other people. And ⁓ that you know, that's what this that's what that measure, that three hundred million dollar measure. is really a concrete example of the things you give back. ⁓ and then there's all these non-concrete, you know, things that you get back from, you know, just being kind. And I think that that's, you know, as I get closer to the end of my career, you know, that's kind of the wisdom that I, you know, have picked up. And it's not easy, you know, because that's not what you see, you know, in being communicated to the population. But I believe it in my gut, you know, like deep down inside. You will be served well if you just, you know, spend a lot of time giving. speaker-1: A hundred percent. And and as we wind it down, I don't want the audience to think, you know, it's it's Aesop over everything. What's one thing you want the listeners to understand, you know, if this is your situation, Aesop isn't for you. speaker-0: Yeah, well I think you can be too small, first of all. ⁓ if you're too small the frictional costs are just too great. And then you do have the option of selling out to an ESOP company, whether you know it's a strategic in your business or an ESOP holding company. There's multiple ESOP holding companies out there that are getting into to different businesses if that's important to you. ⁓ but an ESOP really does not fit if you're small. ⁓ I think another problem with ECU you s you know, they're The problem with eSops is your retirement is in this one company stock. You know, so I think it's really important to diversify away from that through your 401, you know, for the individual participant from the 401k and other things. Because bad things can happen to good companies. You know, and we're gonna see disruptions because of AI. I mean, they're you know, and we've seen disruptions, you know, newspapers, for example, that were like the best business in the world in the late nineteen hundreds. you know, are not great businesses in twenty twenty five. And and so there'll be disruption and the pr you know, if you're a participant in an ESOP of one of those companies that fails, there's nothing there for you. You know, so this isn't, you know, the panacea that it's you know only works. ⁓ but there's a lot of businesses out there that it's you're just putting one foot in front of the other, that you're gonna be around for a long time. You know, we're gonna you y until We have robots that are gonna build all the buildings in the world. You know, there's there's work for for us to do, and we will have time to evolve. You know, that will not happen, you know, overnight even if it does happen. And and so I think it's it's really important that you recognize you know, the agency that we have to make all this happen too, even if our business changes. Tons of great examples of businesses today that are nothing of what they were fifty years ago. You know, and I would say, you know, we're trying to build that that we can adjust based on whatever happens in the speaker-1: A hundred percent. And so for for people that are like, hey, I I wanna go Aesop, maybe I wanna talk to Bob and and his company and see if a merger would would make more sense than, you know, biting off the whole apple on their own. How do people get in touch with you? speaker-0: hb ⁓ dash global dot com we have an acquisition part of the website that's there that you can check that out you know that we we take ⁓ people in from that that are interested in talking to us my linkedin you know page you know so you can find me on linkedin ⁓ and get to me that way and honestly you know anybody that wants to talk to you about eesops you know I'm willing to talk about it You know, it it's it's part of my mission. I'm happy to do it. And and so if anybody wants to talk Esops, you know, just you know, figure out how to get at me. And ⁓ the LinkedIn page is probably the best way in our website are the two best ways to to get a hold of me. speaker-1: Yeah, and and the last thing I'll say is don't forget about the book either. Beyond your ownership, you could get it on Amazon. It's a great book. It'll educate you on ESOPs ⁓ and it's a easy read. So Bob, thank you for coming on. This was a blast and I can't wait to get you on again. speaker-0: Appreciate it. Loved it. Thank you. speaker-1: All right, we'll see ya. Thanks for listening to the Construction Aesop Collective. If this was useful, follow the show and share it with a colleague. Join the conversation with me, Chuck Mazzanti, on LinkedIn and find all episodes at constructionesopcollective.com. Until next time, keep building ownership one conversation at a time.