I have often wondered what it was like for the owner of a company we were acquiring to tell his employees the company had been sold. I felt it firsthand last Thursday when we announced the sale of Marco to Norwest Equity Partners (NEP), the largest private equity investment firm based in Minnesota.
I have been with Marco for 31 years, so this was a decision that I took very personally. To sell Marco under my watch, it needed to be the best possible transaction for everyone involved. It was not an easy decision to make, but we felt it was the right one – for our employees, our clients and our communities.
We’ve executed well on our strategy to become one of the largest independent technology service companies in the United States. This has helped us create a workplace where people really want to work and build their careers. It’s been a good run and we wanted to make sure we could sustain it.
So why did we sell?
- Near future retirements.
Our Employee Stock Ownership Plan (ESOP) has served us well over the past 26 years. As a result of our strong financial performance, our stock appreciated 1,400 percent in the past 10 years. However, this created some predictable challenges. At age 57, I could see my future with the ESOP, but it was less clear for the new 26-year-old sales guy, the 32-year-old manager or the 41-year-old service technician. When I looked out the windshield 5 to 7 years, it was obvious that the retirements of long-term employees were going to create a significant stock repurchase obligation. Using our cash to buy stock of retired employees instead of buying companies would impact our growth strategy. This move was about our future and ensuring the company was best positioned for continued success.
- Our ESOP became less fair.
Keeping our ESOP fair was becoming more difficult in our performance-driven company. We added a significant number (doubled) of new team members in recent years, and there was no longer enough available shares to distribute fairly. In addition, more than 300 employees were not eligible for the plan. I do not believe this fostered an ongoing culture of fairness.
- Commitment to growth.
Our growth strategy has been aggressive and we are executing plans to go national. That’s a costly venture. We’ll need more financial resources, leadership and talent to pull it off. Our partnership with NEP will expand career opportunities for our employees and create more jobs throughout the communities we serve. So if you know of any good people, have them check out our careers page.
The timing is right.
I know saying that “the timing is right” is cliché (and I don’t like clichés), but it really is. Our business model along with our ability to execute our strategies has made our company very desirable. The economy and the demand for our services has been strong. And mergers and acquisition activity has accelerated. So it was easy to conclude that this was a good time for Marco to sell.
There will be times of transition in the life cycle of any business. Most companies start out small and transition through different ownership structures as they grow. Apple and HP started in a garage. Today, they are multi-national companies and technology powerhouses. Over time, their ownership structures had to change. And they have become better because of it.
I know that it’s often communicated in transactions like this that “nothing is going to change.” I can’t guarantee that everything is going to be exactly the same, nor do I think we want it to be. Here’s some things I know will change: we’re going to expand our workforce, our geography and our service offerings. Here’s what won’t change: our commitment to our clients, communities and culture of being a great place to work.