Flip through the past couple issues of PM, and you’ll find a slew of articles about consolidators. The articles cover everything — how to set up your company for the sale, what to look for when selling, when to sell. After you’ve sold your life to a consolidator, it’s how your new captain sails the ship that could mean life or death to your crew.

Typically, when an owner sells his company, he’ll get a mix of cash and consolidator stock. Some owners have even taken all stock. As you can imagine, the performance of the stock is a pressing issue to $100–plus billion residential and commercial service industry, which includes plumbing.

Out of the four PHC service consolidator stocks — American Residential Services (ARS), Comfort Systems (FIX), GroupMAC (MAK) and Service Experts (SVE) — one is performing exceptionally well, one has hit the rocks and two are growing slowly. The charts below tell the consolidator story during the continuing bull market (stock performance is as of press time).

Service Experts, which just announced its 100th acquisition, has been hovering just under $30 per share, a significant rise since its $13 initial public offering (IPO) in August 1996. Service Experts is the only consolidator to focus solely on HVAC. All the other consolidators have purchased plumbing companies.

Alan Sielbeck, CEO of Service Experts, said he expects his company to acquire an additional $140 million in annualized revenues during 1998.

“We will remain the only major consolidator to focus only on HVAC,” Sielbeck said. “We want to focus on residential products, especially service and replacement.”

GroupMAC and Comfort Systems each continue to expand as well. GroupMAC is currently operating 33 companies in 22 states. Russell Bay, vice president of corporate planning and investor relations, said he expects GroupMAC to acquire $200 million in annualized revenues in 1998.

“We will grow our company on both the residential and commercial sides,” Bay said. “Our goal is to be a ‘single-source’ provider of HVAC, plumbing and electrical services to our customers. We think this will be a competitive advantage.”

Comfort Systems, at last count, was operating 30 companies in 25 cities, which perform work in 35 states. Comfort Systems provides commercial and industrial PHC services with annualized revenues in excess of $410 million.

Both Comfort Systems and GroupMAC stocks have remained solid, compared to their IPO. At the beginning of February, Comfort Systems’ stock was just over $19 per share; its IPO last summer was at $13 per share. GroupMAC has risen slightly to just under $17 per share from its $14 IPO in November 1997.

Out of all of the consolidators, American Residential Services’ stock has performed the weakest. Considered a “buy” by several mutual fund managers when the stock first came out, the company has been plagued with managerial problems.

ARS was forced to report a one-time charge in the fourth quarter of 1997, which resulted in a loss for the quarter. The charge, which was announced in January, came from “severance costs for certain former officers and employees of the company, additional severance costs, lease costs relating to facility consolidations and the company’s decision to reevaluate the previously planned implementation of a new enterprise-wide management information system.”

According to ARS spokesperson Jennifer Tweeton, the management information system was software for dispatching that was costing five times more than planned. She said the severance costs were the main bulk of the charge, which came from “two officers, two employees and a handful of others.”

ARS’ stock fell 34 percent the week of the announcement. Yet, the bigger problem for ARS is not the January announcement, but why the stock has fallen more than $20 per share in 13 months. Tweeton would not comment specifically on ARS’ stock prices, but said “The market can be harsh, and rightfully so.”

Almost certain, one of the severance packages was former CEO C. Clifford Wright Jr., who left in October to pursue opportunities outside the company. His replacement, Thomas Amonett, has not been able to steer the stock in an upward direction. Since Amonett took over, ARS has fallen more than $7 per share.

“We decided to take the charges now to start off 1998 with a clean slate,” said Tweeton.

All indications from inside and outside the company show that ARS — which operates 80 companies in 17 states — hit a bad spell with poor management decisions. Over the past year the company has grown about 4 percent.

“We’re a healthy company, we just didn’t hit street estimates,” Tweeton said. “We’ll continue to grow in 1998.”