Consolidation by the Slice: The Birth of RoofConnect
The word “consolidation” has had its own distinct meaning in the roofing industry for nearly five years. Roofing Contractor has followed the ups and downs of the various individuals and enterprises that have played a part in changing the way the commercial roof contracting business has been conducted ever since our October 1998 issue announced the founding of General Roofing Services.
Actually, the concept had been brewing since March of 1997 when Gregg Wallick began the process of devising a plan to bring together large, commercial roof contracting firms to form a publicly owned roof contracting company with a national presence. The original concept was envisioned by Wallick’s father, Ed Wallick, who dreamed of rolling up contractors on a more limited, regional basis. Owing to a shock to the market for initial public offerings (IPO), General Roofing Services nearly ceased to exist before it ever got started. Private funding and a dogged determination by the founding contractors prevailed and the enterprise became the first of several “roll-up” consolidations of roof contracting firms.
Let’s Get TogetherConsolidation of construction industry enterprises has been a natural part of the business almost since the business began. Consolidation in the roof materials manufacturing industry has been fairly routine from the post-war era up to the present. CertainTeed’s meteoric rise to a national presence in commercial and residential roofing products is a recent example of this. Ken Hendricks saw the need and opportunity for consolidation in the roofing materials distribution industry and started a trend 20 years ago with the founding of ABC Supply Co. This trend was widely imitated and continues today.
Firms seeking to grow market share and take advantage of economies of scale are attracted to many types of mergers and acquisitions as ways of achieving their goals more quickly. As some industries mature and move from “specialty” to “commodity,” the need to quickly grow larger and more efficient can become a matter of life and death. There are, for instance, only a few “small” manufacturers of roofing shingles. There are increasingly fewer independent roofing distributors. As any industry matures, the big become huge, the huge become humongous, and so on.
The Agony and the EcstasyConsolidation in the commercial roof contracting field has yielded mixed results over its short life span. There have been sweeping management shake-ups, and at least one consolidator has folded its tent. The goals of the various consolidated roof contracting firms have continuously evolved from the very beginning.
Many involved in the consolidation movement held that the roof contracting firms should be operated under a centralized “command and control” paradigm. Others believed that the operation of a commercial roof contracting enterprise is too “hands-on” for this model and thus strong local leadership must maintain control. Demands of disparate markets have made it difficult, if not impossible, to cash in on buying synergies. Varying state and local requirements create unique challenges for human resources managers and complicate the job of reaching scale to earn real savings in the area of risk management. Cultural differences in the way the independent operations carry on their safety and training programs create both opportunities and difficulties
The several consolidated roof contracting firms operating in the country have experienced some success and some challenges in all aspects of their business. In spite of the challenges, and in spite of a less than stellar marketplace, most of them are still in the game.
The Rest of the WorldOne of the realities driving the commercial construction and the building maintenance market has been enterprise growth in all sectors of the economy. For several decades, real estate investment trusts (REITs) have become super-sized building owners with large regional or national footprints. Many REITs manage their construction activity centrally, which affords an advantage to contractors who can service broad geographical territories. Super-owners such as Wal-Mart, Home Depot, Simon and many other national retailers and wholesalers make demands on the construction trades that require resources even large commercial roof contracting firms simply can not bring to bear on their own.
A New ConceptMany commercial roofing contractors were attracted to the consolidation model. Some saw it as a way of enhancing their business, some saw it as the wave of the future, while still others saw it as a way out — an exit strategy. Many more contractors visited the possibility of becoming part of, or selling out to, a consolidation than actually took the plunge.
Some commercial roofing contractors decided affirmatively that they did not want to sell out or become part of a larger firm. Some did, however, see advantages in some of the things that the consolidated firms had accomplished or sought to accomplish.
An idea for a new kind of “consolidation” began many years ago. It is not a consolidation of companies or cultures, but of key business initiatives and ideas: sharing of best practices, a national approach to sales and marketing, a consolidated approach to servicing national accounts, and others.
Roofing contractors who knew each other by way of their work as active members of the National Roofing Contractors Association discussed the possibilities, and in March of 2002 a small group incorporated the “Affiliated Independent Roofing Contractors of America.” They announced their new affiliation late in 2002 with the (more user-friendly) trade name RoofConnect.
An initial group of 30 contractors met in May of 2002 in Las Vegas. Twenty-seven of the contractors joined and made up the initial group. Tim Rainey of Supreme Roofing Systems in Dallas is the president of RoofConnect, which has been established as a not-for-profit association. The group decided to make this a non-profit organization for the sake of simplicity and because it is not designed as a venture to make a common profit, but rather to profit the individual firms by way of common initiatives.
Johnny Zamrzla of Western Pacific Roofing, Palmdale, Calif., serves as the vice-president, and Glenn Langer of Langer Roofing and Sheet Metal, Inc., Milwaukee, Wis. is the secretary. An executive committee steers the activities of the association and includes Billy Fort, Fort Roofing & Sheet Metal Works, Inc., Sumter, S.C.; Conrad Kawulok, B&M Roofing, Boulder, Colo.; Michael Beldon, Beldon Roofing Co., San Antonio, Texas; Bruce Freyer, Freyer Roofing Co. Inc., Fresno, Calif.; and Chuck Bechtel, Harold J. Becker Co., Dayton, Ohio. The rest of the membership of RoofConnect reads like a who’s who of the commercial roof contracting business and includes the president and numerous past-presidents of the NRCA. You can see the complete roster of RoofConnect members online at www.roofconnect.com.
Anything But TypicalRoofConnect has set forth a number of different goals for itself, beginning with the firms with which it chooses to associate. The initial group of 27 firms covers 21 states. As of this writing, 27 more contractors are being considered for membership. The group seeks to have a member firm operating with an office in all 50 states by March of 2003.
While this is a “trade association,” it is not typical in that its standards are considerably more stringent than most. Each firm is required to be a member of the NRCA, and also have:
- a service department
- insurance — $1,000,000 aggregate
- minimum 10 years in business
- bonding capacity
- nomination from RoofConnect member and approved by the executive committee
- written safety program
- experience modifier below 1.0 based on three-year average or approval by steering committee
- drug testing program
- defined employee training program
- e-mail address and Web site
- financial stability
- positive industry reputation: credit rating, community involvement, industry affiliations (e.g. BOMA), etc.
In addition to this, RoofConnect members must consent to an independent audit and plans call for an audit of one out of every 10 members each year.
A Slice of This and a Slice of ThatWhile RoofConnect has an impressive array of standards, it considers the independent nature of its member firms as one of its strengths. As part of its marketing initiatives, it plans to tout the passion and pride that the individual owners bring to the job, particularly the job of repair and remediation service. While there will be membership requirements for offering service, the sharing of best practices and several other initiatives will be optional. Members will be able to choose the things that will benefit their operation and leave out the things that do not fit.
RoofConnect is very much in the beginning stages of development, but has begun a number of task forces to draw on the strength of its members. To address the needs of regional and national accounts, RoofConnect has established a service task force headed by Don Ceresa, vice-president of The Lawson Roofing Co. Inc., San Francisco. Lawson is a full-service commercial, industrial and residential roofing contractor founded in 1907. The president of the firm is third-generation family member Frank Lawson Jr. Richard Lawson is senior vice-president.
Ceresa tells us that the service task force is in the process of developing a streamlined approach to service for owners of multiple buildings. His group has been meeting informally via e-mail to develop a common service form (work order) to facilitate the handling of inquiries and orders coming in by way of a central RoofConnect point of contact. Further, they are working on criteria to define their common level of service that will become the commitment for servicing RoofConnect customers. Service department managers from many of the firms are involved in this task force.
This task force is one of several working on a “Roof Asset Management Program” that will include a common form of inspection. A task force headed by Keith Post of Supreme Roofing Systems is also working on a Roof Asset Management Program. A “flow chart” is being developed to track how an order for service goes into RoofConnect, how it is routed, and tracking the response and follow-up. Lawson Roofing has a culture for repairs and service that is nearly a century old. Like many other firms associated with RoofConnect, Lawson is able to bring one of their strengths to the larger group.
In addition to serving as vice president, Zamrzla heads a group focused on relations with roofing manufacturers. His company, Western Pacific Roofing, has been in business since 1949 and was incorporated in the early 1960s when Zamrzla took over the firm. The company operates over much of the state of California from several locations and is focused primarily on commercial, institutional and industrial roofing. Western Pacific also has a residential division in Palmdale.
The manufacturer’s group is primarily engaged in telling the RoofConnect story to roofing manufacturers. Zamrzla says the group is meeting one-on-one with roofing manufacturers to talk about their plans and seek input. Significantly, Zamrlza says the group is anxious to tell manufacturers that they are not interested in becoming a buying group or mounting “power buys” to make better deals for the members. Instead, RoofConnect is looking for ways to better the roofing industry and seeks partnerships with manufacturers that will produce better results for the end user of the product — the building owner.
Let’s Roll!An intriguing concept being introduced by RoofConnect is the “Severe Weather Action Team” (SWAT Team). Rob Kornahrens, president of Advanced Roofing Inc., Oakland Park, Fla., heads this important task force. Kornahrens was asked to handle the SWAT team due to his experience with disasters, including a FEMA contract following a hurricane in St. Thomas in 1989 and with Hurricane Andrew several years later.
The first job of the SWAT team is to build a database of resources available by way of interested RoofConnect members, and then develop standards to handle:
- priority standing
- preparedness checklist
- written reports to owners
- photos on Web sites to keep up with repair progress
- disaster response team and plan
- purchasing and materials
- guaranteed pricing
All of the work that will be handled by the RoofConnect SWAT team is going to be driven by guidelines as established by the NRCA. Kornahrens emphasizes that the SWAT initiative is “…not just a marketing tool (but) a reality.” Pooling resources of a group of individual contractors will prove challenging, but if brought to fruition would prove a very strong asset for RoofConnect and its building-owner clients.
RoofConnect has established other task forces. Jamie McAdam of F.J. Dahill Co. Inc., New Haven, Conn., has been tapped to head the insurance task force. Michael Beldon is working on grievance and bylaws, and Brad Beldon is working on what is sure to be a significant task force: sales and marketing.
All For One and One for AllAt this point, the structure and the association and the corporation are all real. RoofConnect members are fast to point out, however, that it is just in the beginning stages. At present, they are planning to move beyond the “all volunteer” association and get some folks to work full-time.
To the extent that it will take some time to ramp-up some of their initiatives, it may be a while before you see RoofConnect in the marketplace. This concept, like the concept of consolidation in the commercial roof contracting industry, seeks to fill needs in an ever-changing environment. As the needs of our building-owner clientele change, the very makeup of the roof contracting industry must change to keep pace.