Engineering a management transition to reignite growth
Randy Keller, President and CEO, Acousti Engineering
Kevin Kruse, Managing Director, Ardian North America Fund
Todd Welsch, Managing Director, Ardian North America Fund
The largest interior construction company in the South East and one of the largest in the United States
FY 2020 revenue
employees in 20 branches throughout the South East US
years in operation (founded in 1946)
Ardian North America Fund's willingness to take on more complex situations unlocks value in a specialist construction contractor
What was interesting for us about this transaction was that Acousti is the clear leader among interiors prime subcontractors primarily in the south-east of the US with a unique scale and range of services. And yet for the past decade or more, it had been run by the controlling family and the outgoing management mainly to generate cash rather than to grow the business.
We have grown organically since our inception in 1946 and currently have eighteen branches located primarily in the south eastern US and another branch located in Texas. Corporate headquarters is located in Orlando, Florida. The company started out focusing on acoustical ceilings but has evolved to do a wide range of interiors finishes including drywall, flooring, and architectural specialties. Our focus is on midsize commercial projects, from retail, corporate, educational, healthcare to larger projects that include airports, sports facilities, and casinos. As we have always enjoyed a great reputation in the industry, which would allow for growth, there hasn’t been a lot of strategic direction or management attention from corporate in recent years, so our branches have operated pretty independently and were not challenged to grow. The executives who retired in connection with the transaction had gotten complacent. The current management team is bringing a renewed sense of urgency, which has the next generation of leaders in our branches really excited about the future of the company.
We were convinced that by creating an exit for the family owners and promoting Randy and the next generation of management, we could really accelerate Acousti’s growth over the next few years. The new team all have a lot more enthusiasm about managing the business more intensively and making sure all the branches are working closely and offering a consistent suite of services.
This is a strong, well-established business and we’re confident that working with the new management team we can take it to the next level.
The big opportunity we see is to expand outside our current geographical footprint. Although Covid-19 has closed construction sites in other parts of the country, we’re in a region where construction was allowed to continue, and we have done very well during Covid. There have been some delays to our projects, but they’ve been less serious than in other parts of the country.
“This is a strong, well-established business and we’re confident that working with the new management team we can take it to the next level.”
We think there’s a big growth opportunity for Acousti. We haven’t ruled out doing acquisitions but we’re already the largest in the region so there aren’t many other multi-site operations to look at. But there are plenty of opportunities to expand into a city with our own people and recruit talent locally. Or we could look at accelerating the growth by buying in an established local team and their customer list.
And moving forward, there’s a lot of growth in this part of the US as a lot of people are moving here from other parts of the country because of the ability to work from home. Many sectors we serve, like education and transportation, are driven by population growth. So as people move to the southeast, that’s going to drive demand in some of our most important end-markets.
Acousti is a great example of the sort of transaction we look for. It was a more complex situation than some investors want to take on because we had to create an exit for the family owners and transition to a new management team. The complexity was certainly compounded by the outbreak of Covid-19, causing disruption in the debt markets and economic uncertainty, and just generally increasing the difficulty of getting a deal done with travel restrictions and the like. But we could see a great opportunity waiting on the other side of the management transition. We’re quite confident that we will find that the challenge in getting the deal done was well worth it, given the vast opportunities to reinvigorate the growth of this business and add some strategic direction.
“We faced unprecedented challenges during 2020, but our management teams reacted quickly and we ended the year trading strongly and well-positioned for further growth.
Vincent Fandozzi, Head of Ardian North America Fund