HB Global is the ESOP holding company for two successful business units: HB Mechanical Group and HB Home Services. The group includes eight commercial industry-leading brands in HVAC, plumbing, and mechanical design and build. Since 2011, it has completed over 20 successful acquisitions. The company now has 1,700 employees.
In the acquisitions section of its website, HB Global notes that “we are not a synergistic buyer and recognize the importance of our acquisitions to our long-term commitment to growth... Our portfolio of companies and their employees are extensions of our family. As an employee-owned company, we strive to create a substantial retirement plan for as many of our employee owners as possible.”
In its acquisition book on its website, the company notes that it is an alternative to private equity. Ninety-five percent of employees at HB Global acquisitions stayed on after the purchase. Bradford Osborne, former owner and current president of North Shore mechanical, said that “after putting 30 years into building North Shore Mechanical, I was looking for a long-term solution to transition out of having a partnership and still be very involved in the business I built…HB Global’s mission and core values and ESOP were the complete package and it has been instrumental in our success and our employees’ and our growth.”
In a 2021 podcast, HB Global’s CEO Bob Whalen, said that when seeking companies, HB Global looks for cultural alignment. Target companies should be focused on being a great place to work and providing exemplary service. While culture always comes first, they also look for companies in markets that they are not currently serving or are in adjacent industries. A major part of the strategy is focused on who is going to operate the business because acquisitions are given a lot of autonomy. Keeping current management is a priority, although some smaller “bolt-on” acquisitions are more integrated and have less autonomy.
HB Global has a development team scouring potential targets, and they find one at least every week that is a general fit, but most are just initial interviews. The next stage is when they have a conversation. Of the companies they talk to, roughly one out of every 15-20 leads to an acquisition.
Jasper Holdings is the country’s leading remanufacturer of powertrain products. It has over 4,300 employees and has made several acquisitions. CEO Doug Bauwei told us that Jasper looks for diversification in related industries. For instance, they recently bought a rotational molding company. Like HB Global, Jasper holds culture fit as a critical criterion—for Bauwei, it’s more important than strategy. Bauwei says they walk through the building and see how managers interact with people and vice versa. They also want to know if the company has peaked out. Is there an opportunity for growth because of industry, the right or wrong location, or other factors?
Jasper hired M&A firms to find targets, but that was not successful. Instead, they go to conferences looking for companies that may be a fit, including ones that may have an ESOP but need more capital. ESOP advisors may also have clients that want to be ESOPs but decide not to do it because of cost or other issues. They have one point person responsible for seeking companies suitable for acquisition.
Bauwei takes a two-pronged approach to its acquisition strategy. He explains, “We not only look for companies within the automotive and truck sector but also to diversify outside the automotive and trucking industry. If you’re a company with EBITDA in excess of $1 million, you might be a great company to join our ESOP. If an owner has thought about forming their own ESOP, selling to Jasper may be a great alternative without the cost of a full ESOP transaction. We like to take the Berkshire Hathaway approach to buying companies that have great leadership and want the opportunity to grow. We don’t want to be involved in running the business day-to-day from our holding company. We don’t bring our people into the acquired company. But we want to share best practices among all the companies.”
Jasper looks for founders who want to reward their people—they can’t get into a bidding war with private equity and so avoid those situations altogether. They want to have companies where management is sufficient to operate them as stand-alone entities that can function well on their own.
Finally, Jasper has strong Christian values, and they will only buy companies comfortable with that. Their website states: “We will be a good corporate Christian citizen, focused on preserving natural resources, supporting diversity, and giving back to our communities to help them be stronger.”
Doug Wayne, former owner of D&W Diesel, said that “we knew the company well. We did a lot of due diligence and it’s all played out very well. All the commitments that were discussed during the time leading up to the due diligence, as well as what followed after the letter of intent, all of the forecasts and promises made were realized. It didn’t surprise me because we have worked with Jasper.” John Weller of Weller Industries said, “I felt I knew the Jasper team very well. There were several examples in our industry of sales that did not go well for owners and senior management. But that was never an issue for Weller with Jasper. The ownership piece helped increase our attention to detail and customer service as owners that really care about the results. And we liked that they weren’t looking to flip and sell the business quickly. We found Jasper to be a very good fit because of the ESOP, but, even more, the transfer philosophy.”