Grunau President Paul Grunau, representing the fourth generation of family leadership, spoke with PM about his decision to sell, his thoughts on this new wave of industry consolidation, and what this new alliance will mean for his company.
“The most recent consolidation movement back in the late 1990s was driven mostly by utilities and financial roll-ups,” says Grunau, “I realized then that those were not strategically viable models.”
With the March 31 sale to APi, Grunau Co. can “expand its horizons,” Grunau says. “The potential for opportunity in a partnership allows us to consider things we couldn't on our own.”
When Grunau became president in 1995, he admits consolidation wasn't on the radar. His goal at first was to get the company set on a “course of positive change.” In 1999, after he purchased the company from his family, the objective remained to drive a positive evolution within Grunau. Grunau Co. (Oak Creek, Wis.) has offices in Wisconsin, Florida, Ohio and Pennsylvania, and employs 500 people. It was No. 54 on PM's 2005 Pipe Trades Giants list.
“Many good things have happened at Grunau in the past 10 years,” Grunau says. “In my leadership role, one of my principle responsibilities is to continue this positive change over the next 10-15 years. You can either do that by yourself or with a partner. Ultimately it was my decision.”
As he researched options for aligning Grunau with larger financial partners, he and APi found each other. The business model that APi presented impressed Grunau: APi posts nearly $1 billion in annual sales, and maintains local management and the company identity of its acquisitions, while sharing human resources, business innovations and economies of scale. Other mechanical contracting firms in APi Group include Doody Mechanical Inc. in St. Paul, Minn., No. 47 on last year's Pipe Trades Giants list.
“It was important that I remained president at Grunau, and that management remained in place because that is the core of the specialty contracting business - the people and practices, customers, and company recognition,” Grunau says.
The company's business practices and project successes at Grunau also made it attractive to APi, which nurtures the sharing of ideas and management strategies among its companies.
“You can learn from others, but you also learn when you teach,” Grunau says. “Our lean construction model is one that I believe made us attractive to a partner like APi.”
One of the downfalls of the previous decade's consolidation movement was the push for roll-ups and standardization, which just didn't work well in the plumbing and mechanical industry.
“I felt APi recognizes the uniqueness of the specialty contracting industry. I'm confident that they understand our business as one that shouldn't be standardized,” Grunau says.
“We recognize the value of our member companies maintaining their local identities, operational freedom and local decision-making,” says APi President and CEO Russell Becker. “We provide greater financial resources, while respecting the geographic and market differences inherent in the construction industry.”
To the outside world, it's business as usual at Grunau Co., with no plans to change its name or operations.
“There were some powerful lessons learned from the roll-ups,” Grunau concludes. “Whoever is concerned with the success of future purchases will have an entrepreneurial orientation and will respect individuality.”