H. Jack’s Plumbing & Heating Co. has never made an acquisition in Northeast Ohio. But John Langer can point to key deals done in New York and Pennsylvania that paved the way for the then-Erie-based company’s successful move into the market.
“These acquisitions provided valuable technical expertise early on in our growth in Ohio,” says Langer, president of the now-Wickliffe-based business. “Over the first few years, until we could build our own team in the marketplace, they would commute in from Erie and help us provide the level of service and quality workmanship that our customers had become accustomed to. So, although we never acquired any companies in Northeast Ohio, some of the individuals that we acquired in other markets played a technical role in our growth and advancement in this market.”
With 120 employees, H. Jack’s has built its reputation on 24/7 service and serves Western New York, Northwest Pennsylvania and Northeast Ohio. But as Langer looks to the future, an expected labor shortage in the plumbing profession may put him back in the dealmaking game.
We caught up with Langer to learn about the role acquisitions can play in helping companies in the service industry maintain their reputation for top-notch customer satisfaction, and the importance of culture in making those deals work.
Addressing a need
Contractors across the U.S. are reporting a significant shortage in new plumbers going into the field, a trend that Langer has been closely monitoring. By the year 2023, it’s expected that another 200,000 plumbers will be needed nationally to keep up with demand, Langer says.
“As our industry continues to change and evolve, it's making it more difficult for smaller family-owned plumbing and heating companies to continue to be viable and successful,” he says. “Plumbers possess technical skills that are in great demand in the marketplace. One of the ways that professional plumbing and heating companies, service companies and skilled trades in general can combat the labor shortage is to look for potential acquisition targets in their marketplace. It can be a good tuck-in fit that can help provide the level of technical expertise you need to continue to be successful in the industry.”
Langer is always open to having conversations with other service providers about potential deals.
“A lot of companies that are in our industry are looking to either retire or sell and they are concerned about their employees,” he says.
Provide an opportunity
Companies in the service industry that are looking to make a deal need to be transparent on the front end about their expectations.
“If the acquired company had a culture in place where you work Monday through Friday 8 to 4:30, didn't work Saturdays and didn’t take on emergency work, and we acquired that company, now all of a sudden, we have different levels of expectations from a service standpoint,” Langer says. “That probably wouldn't be a good fit for us. So one of the big things that we looked for in the companies that we acquired was, do they still have a passion for service? Do they understand this isn’t a 9 to 5 industry?”
Often, companies in the service industry that are looking to retire or sell are in that position because they feel burned out, Langer says.
“Early in the process, we really had to look at ways that we could improve their quality of life,” Langer says. “How do we take some of the stress off of them as former owner/operators that would now be field supervisors with us? They had to understand that we're not in a 40-hour a week industry. But with our resources and having other people who are able to help carry the ball, it wouldn’t all rest on their shoulders anymore.”
Along those lines, you also need to be confident that the people you are acquiring will carry themselves in a way that is consistent with your company’s culture.
“We had to make sure that they put the same value on customer service that we offer and would be comfortable within our costing structure,” Langer says. “We looked at how much growth and advancement they showed their existing people. We looked at the longevity of their people. We didn't just talk to the ownership or the management of the company. We talked to the rank-and-file to get a good feeling for culture throughout the organization.”
Create a positive environment
Finally, effective acquisitions are often a result of being a good listener.
“There is an old saying that people typically don't care how much you know until they know how much you care,” Langer says. “There's the fear of the unknown on the acquired company. You have a responsibility to make that transition as smooth as possible and make sure that for the company that merges into your company, their quality of life improves.”
If you can provide opportunities for additional growth and advancement within your organization to continue to motivate them to become better at their particular trade, the deal has a better chance of succeeding.
“If you can't provide that opportunity to improve their quality of life, or if it isn't a good fit, regardless of the additional short-term revenue that you could experience or the additional short-term help that you'll gain in technical expertise, it's not going to be a deal that is built for the long term,” Langer says.