Rolling up the "roll-up"

Tecta America's purchase of generalRoofing forms the biggest U.S. roofing company


Back in the summer of 1998, General Roofing Industries caused significant buzz when it became the first "roll-up" company in the roofing industry with 19 member companies. Headquartered at the time in Pompano Beach, Fla., the company was regarded by some as a pioneer and others as a risky venture. And in fact, it was a little of both.

Soon after General Roofing Industries formed, others followed, all with the same idea-to form a national roofing company that could capitalize on the synergies of multiple locations.

But during the next six years, General Roofing Industries faced numerous obstacles at the corporate level. It changed its name to General Roofing Services and then to generalRoofing. Its leadership changed, as well—several times—and by 2004, the company had landed in Chapter 11 bankruptcy. It then sold its controlling interest to Republic Financial Corp., Aurora, Colo., closed most of its 36 locations, settled its debt and emerged from bankruptcy in October 2004. In July, another consolidation—Tecta America Corp., Skokie, Ill.—purchased a majority of generalRoofing's operating assets from Republic Financial, making Tecta America the biggest roofing contracting company in the U.S. with 23 divisions, 47 locations and more than 3,000 employees. (For more information about Tecta America, see "Tecta at a glance," page 29.)

Two companies with the same goal followed two different management paths, and one corporate structure proved to be more resilient than the other.

Beginning the courtship

When it became evident generalRoofing was prepared to emerge from bankruptcy, Mark Santacrose, chief executive officer (CEO) of Tecta America met with Bart Roggensack, generalRoofing's president, to discuss terms of a purchase. (For more information about the purchase, see "Terms of the deal," page 30.)

"We'd known about generalRoofing for a long time, and I always admired its sales and marketing efforts," Santacrose says. "Having gone through bankruptcy, they were able to clean up a lot of what they had: They closed several business units and resolved past litigation. They made enough changes that it made sense for us to take a look at them. When we did, we were impressed with the people and work quality, as well as the customer relationships."

Once Tecta America and Republic Financial agreed on the purchase terms in principal, the deal was announced to the various generalRoofing unit presidents in March. At that time, the generalRoofing group began to learn how differently Tecta America operated from generalRoofing.

Choosing a path

When running a company with several locations, a corporation has to decide whether decision-making power and financial control will be centralized at the corporate level or shared among the various locations. When generalRoofing and Tecta America each arrived at this proverbial fork in the road, generalRoofing went the way of centralization, and Tecta America chose a decentralized approach. And that, as the poem goes, has made all the difference.

generalRoofing's traditional approach to corporate structure overlooked one important thing: roofing companies succeed when they can connect on a local level—not when they have to be managed by a headquarters office hundreds of miles away telling them how to price a project, for example.

"generalRoofing took a lot out of their hands," says Kent Schwickert, president of Schwickert's Inc., Mankato, Minn., an original Tecta America company. "I was stunned to find out how little they knew about their costs."

Mike McClain, president of CEI West, Sacramento, Calif., a previous generalRoofing unit, expresses his frustration with how the company operated.

"generalRoofing went through a series of presidents and CEOs with conflicting personalities and missions," he explains. "We really struggled and never got an opportunity with solid, professional leadership to get any good momentum. generalRoofing saw centralization as key but kind of forgot local relationships drive revenue. The corporate office took all our business decisions away."

Tecta America, on the other hand, relies on its local business units to determine what is best for their particular markets. In addition, the company is backed by strong financials, insurance programs, safety programs and shared resources.

Santacrose says: "We believe in decentralized control. Local company presidents have the autonomy to make decisions about projects, materials, etc."

Steve Brown, president of Anthony Roofing Ltd., Chicago, another former generalRoofing company, says Tecta America's approach has served the company well.

"generalRoofing tried to make operations more national, and it cost the company a lot to organize in that fashion," he says. "Tecta America delegates more of those responsibilities to the individual units and keeps corporate overhead down."

McClain sums up the differences: "generalRoofing was the industry leader six years ago when it was the first group to roll up. Tecta America had the advantage coming in later and learning from generalRoofing's mistakes."

Becoming one

Change never is easy, and for those former generalRoofing companies, change became too common an occurrence. With the Tecta America acquisition, both sides are looking forward to a productive, profitable future but neither are naïve enough to believe it will be smooth.

"generalRoofing is in rebuilding mode, and one of our concerns is that it lost key relationships because of the bankruptcy," Santacrose explains. "There is some skepticism on the part of general contractors and building owners. We need to rebuild those relationships.

"There also will be some integration issues: putting what was handled by the corporate office of generalRoofing back in the hands of the local companies, primarily accounting and back-office functions," he continues.

And getting used to the added responsibility will be difficult, says Mark Gaulin, president of MAGCO Inc., Jessup, Md., a founding Tecta America company.

"It will be a challenge for them to get used to our culture," Gaulin says.

He continues: "They now have the opportunity to run their businesses without a financial burden. But with freedom, comes responsibility, and they will be held accountable."

John Miller, CEO of Western Roofing Service, San Francisco, another founding Tecta America company, agrees: "The main challenge will be cultural. Some of the newly acquired companies approached the market from a growth and volume standpoint. We need everyone to be focused on the bottom line."

And though they acknowledge the transition will have its ups and downs, former generalRoofing companies also are facing some potential challenges from their competitors.

McClain, for example, says: "I am sure our competitors will talk about how we may be unstable because of the acquisition and all we've been through with generalRoofing. I'm sure there will be some fallout. But I tell the guys in the field they will continue to do the same thing they have been doing. I want to seize the opportunity we've been given."

He continues: "During the past 18 months under generalRoofing, all we had was obstacles: no cash flow, trouble renting equipment, cut off from suppliers, no materials. Just getting back to operating as a normal company is like heaven."

Moving forward

Luckily, the former generalRoofing company presidents report no major employee changes or customer concerns are on their horizons. And Tecta America is looking forward to expanding its reach as a result of the acquisition.

"Tecta America wasn't as geographically situated as it would have liked to have been," McClain explains. "We helped expand the company and gave it a national sales force."

Although Santacrose says Tecta America isn't looking to acquire any more roofing divisions soon, the company still plans to grow. But even with the anticipated growth, he says Tecta America, though large, will have a small effect on the industry.

Schwickert agrees. He says: "This industry is huge. If anyone thinks one company will make a significant impact on the industry, they are wrong. We're nothing in the bigger picture."

Ambika Puniani Bailey is editor of Professional Roofing and NRCA's director of communications.



Tecta at a glance

Headquarters: Skokie, Ill.
Size: Following the generalRoofing acquisition, 23 divisions, 47 locations and more than 3,000 employees
Governance: Privately held company; board of directors composed of five shareholders, chief executive officer and independent director
Revenue: $236 million in 2004; projected revenue of $380 million following generalRoofing acquisition
Union involvement: 500 union employees; largest union roofing contractor in U.S.



Terms of the deal

Tecta America, Skokie, Ill., acquired generalRoofing, Fort Lauderdale, Fla. As part of the acquisition, Tecta America assumed asset purchase with no assumption of liabilities; the parties have worked out an arrangement to service warranty obligations on past contracts.

The following companies were acquired by Tecta America as part of the deal:

    Anthony Roofing Ltd., Chicago
    Blackmore & Buckner, Indianapolis
    CEI Florida, Orlando
    CEI West, Sacramento, Calif.
    CEI West, Denver
    CEI Texas, Dallas
    Cyclone Roofing, Charlotte, N.C.
    SAI Inc., Milwaukee
    Roofers Inc., Baltimore

They join the following existing Tecta America companies:

    Central Roofing Inc., San Francisco
    Construction Services, Lubbock, Texas
    F.J.A. Christiansen Roofing Co. Inc., Milwaukee
    General Works Inc. LLC, Orange City, Fla.
    Greenberg Roofing Co., Grand Fork, N.D.
    J.P. Patti Co. Inc., Saddle Brook, N.J.
    Patti Roofing, Belleville, N.J.
    Lavey Roofing Services Inc., Santa Ana, Calif.
    MAGCO Inc., Jessup, Md.
    Murton Roofing Corp., Miami
    Potteiger-Raintree Inc., Glen Rock, Pa.
    Schwickert's Inc., Mankato, Minn.
    Stock Roofing, Minneapolis
    Western Roofing Service, San Francisco
    The Zero Co., Louisville, Ky.
    Zero-Breese Co., Cincinnati

According to the terms of the agreement, CEI Florida has merged with General Works; SAI has merged with F.J.A. Christiansen; and F.J.A. Christiansen's Chicago office has been absorbed by Anthony Roofing.

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