James Wendle and EQM Technologies & Energy Inc. are largely reliant upon government spending to drive business. However, with the lack of funds and resources from the government recently, Wendle has had to resort to alternative ways to keep the company flush.
EQM is a $75 million, 240-employee sustainable solutions company that provides consulting and technology to business and government. Wendle became EQM’s president and COO in 2010 after the board brought him in to help grow the business.
“What I bring to the table is accountability and know-how in the construction and the engineering world and growing more on the engineering side and developing that part of the business to get us more diverse,” Wendle says.
That diversity is what Wendle expects will ease EQM’s reliance on government spending. His acquisition strategy is to find companies that will get EQM into different aspects of the environmental and engineering industries. Most recently, EQM, which at the time was Environmental Quality Management Inc., merged with Beacon Energy Holdings Inc. in 2011 to become EQM Technologies & Energy Inc.
“The Beacon merger was a reverse merger,” Wendle says. “Beacon Energy gives EQM an added benefit that wasn’t there before.”
EQM has five different divisions that give the company a wide range of capabilities. Now Wendle is searching for the next company that will bring added value to the business.
Here is how Wendle is diversifying EQM through mergers and acquisitions.
Look for opportunity
EQM was looking to broaden its business and get into an industry that it wasn’t in yet, but one that was similar to the work it did. The company came across Beacon Energy Corp., a biodiesel production business.
“The plant was sitting idle, and we had a strategy that we were going to restart the plant, which we did, and be in the biodiesel business, which we are, and the plant is running now,” Wendle says. “It helped diversify us.”
Wendle and EQM put together an acquisition strategy that focused on finding companies in the engineering business and environmental services business that would help the company grow.
“Growth is an expectation,” he says. “It’s not something that you just do by mistake. Growth of companies is what’s expected, and it’s expected by our board. Growing organically can be difficult, and I think a lot of companies are experiencing that.
“So with our equity partner, we have a company that is an expert at it. They’re on a constant search, and raising the capital to make the acquisitions is something that they do every day and they’re very good at.”
In today’s market, if you’re going to grow, you have to look at growing both through acquisition and organically. If you grow through acquisition, you have to understand the business you’re interested in.
“We set up a model of companies that are in a certain range of what their revenue is, what their margins are, how we can be more of a strategic acquisition and what synergies there are,” he says. “If we merged, how can both firms benefit from it? It is something that we need to know something about. We’re not going to buy a company we have very little knowledge about.”
The other part of acquiring a company is what leadership comes with it.
“That is just as important as the company itself, because we are constantly looking for leaders and leadership,” he says. “When you acquire a company, you also acquire the leadership and you have to look at how those leaders can help you grow in other areas.”
One of the most challenging aspects of the acquisition process is not losing sight of your current business.
“You have to align yourself with a private equity company that can assist you in your search, because it can be very distracting, not only for the buyer but for the seller,” Wendle says. “You have a business to run while you’re doing all this and you want to keep your eye on the ball.
“I’ve seen sellers particularly get so distracted through the process that they don’t watch their business. You have to stay focused and keep your eye on the ball. Don’t get all consumed in an acquisition potential.”
Wendle understands how difficult a merger process can be, so he makes sure he is as helpful to those involved as he can be.
“That’s the way I develop a relationship with the people, because it is a relationship,” he says. “If the process goes well, then the closure is going to go well. It can’t be adversarial. It needs to be very friendly and very professional. Instead of looking at it like you’re out there buying assets, you should look at it as you’re being an advocate of the seller’s and you’re helping them sell their business.”
Integrate the merger
Once a deal is made to move forward with the merger and you’ve gone through and agreed on terms and produced a letter of intent, then you need to go through due diligence.
“We’re really trying to understand more and more about the company and they’re trying to understand more and more about us,” Wendle says.
“The integration actually starts in the due diligence process. You want them to learn as much about you as you learn about them. You want them to learn about what your benefits program is. The key for owners selling is how are my employees that I hired going to be treated.”
EQM gets its HR department involved to look through the merging company’s benefits program and matches it up with theirs.
“Typically ours is going to be overall in a better position, so the new employees are going to benefit from it,” he says. “Then it’s integrating the financial packages or the business systems. How do we communicate financially? Rarely do the new companies coming in have the same types of systems that we have.
“From there, we really try not to make changes. Any changes we have to make we want them to go slowly. What’s working obviously has been working and the last thing you want to do is keep it from working. You want the leaders and the employees to keep on doing what they’re doing.”
In a merger process, there are two sides: a legal side and an emotional side. The due diligence process focuses primarily on the emotional side.
“The legal side is pretty cut and dry,” Wendle says. “The emotional side is more cultural. What kind of culture are they coming into and how comfortable do they feel with it? I start explaining that once I first meet a potential acquisition candidate.
“For someone who’s going to sell their business, it’s a very emotional process and they have to be very comfortable with it. You have to pay attention to how you get the cultures to integrate and whether they feel they still have autonomy.
“That’s the one thing about running your own business that’s good, but now they’re part of a much larger organization and they have more potential for growth.”
Making this transition successful relies on strong communication between the two companies, specifically among leadership.
“You cannot communicate enough,” he says. “We have town-hall meetings. We have staff meetings every week. Each business unit has staff meetings every week and you’re just trying to keep the lines of communication open. It really comes down to employee engagement and whether the employees feel that they have a say and whether they’re being listened to.”
While cultural alignment is a big part of making a merger successful, there still has to be a good fit in other aspects of the business.
“Cultural alignment isn’t necessarily more important, but it is as important,” he says. “There still has to be intrinsic value and what the company brings to the table as far as net income. There has to be value-added services that customers want to buy. What I find is if employees have the right attitude and they’re happy, then they have a pretty good customer base. They walk hand in hand.
“If the employees are not happy, customers are going to hear about it because there are close relationships between the employees and the clients. And vice versa, if our client’s employees aren’t happy, we hear about it.”
EQM’s strategy is to leave the incoming company alone to continue the work it was already doing. You have to make a judgment call whether or not to make any changes to a company you’ve acquired.
“There are two aspects of it,” Wendle says. “When we look at a company we look at the brand. Most the time the companies that we acquire have a good brand and we want them to keep that name and that brand and operate it as a subsidiary, unless it is parallel to one of our business units and our brand may be stronger than theirs.”
Develop a strategy
The key to being successful at acquisitions and mergers and with the growth of your business in general is to have a strategy with goals that you hope to achieve.
“I think the business changes so fast that you can have a five-year plan, but to really put tactics behind that strategy is very difficult to do because it changes so fast,” Wendle says. “It’s been my experience that if you look in two to three years, you’re going to have a better chance of meeting your goals and putting more realistic goals out there. We’re in a different climate now than we were in four or five years ago. We’ve all managed downturns and now we’re trying to grow.”
Wendle is looking to keep EQM doing more of the same it did with Beacon Energy Corp. He is focusing on the private side more so than the public side.
“My belief system is that private industry is not investing in itself right now so there is a pent-up demand for capital improvement and industries are hoarding cash,” he says. “And I don’t think it’s going to matter who the president is, companies will start spending money on capital and start investing in themselves again. The first companies that private owners spend money on are environmental and engineering companies. We are going to be positioned to be there when companies start spending on themselves again.”
One of the biggest aspects of laying out any kind of growth strategy is the need to constantly change to stay ahead of competition.
“Presidents and CEOs have to constantly be looking to reinvent themselves and reinvent their companies,” Wendle says. “I think that the business moves so fast in the world we are in that you cannot restrict yourself geographically and you really have to reinvent yourself every three years.”
Part of that reinvention is attracting entrepreneurial people to your business to keep ideas fresh.
“To really look at new services, one of the keys is hiring entrepreneurial leaders in your company and creating a culture and environment that allows people to think freely and say their mind and be able to put strategies together without being frowned upon,” he says. “You have to create that kind of culture of growth … and have the right kind of people to create that culture.” <<
How to Reach: EQM Technologies & Energy Inc.,
(800) 229-7495 or www.eqm.com
Takeaways
– Acquire companies that will allow you to grow.
– Integrate the acquisition by developing a relationship.
– Develop a growth strategy with two- and three-year goals.
The Wendle File
James Wendle
President and COO
EQM Technologies & Energy Inc.
Born: Alton, Ill.
Education: AAS degree in architectural engineering and a B.S. degree in construction management from Southern Illinois University.
What was your first job and what did you learn from that experience?
When I was 10, I swept hair in a barber shop and I also had a paper route. I was raised by parents who were born in the Depression. I was taught that if you worked hard everything would be fine. So I always had a job and I always had money. It’s about the work ethic. I knew I could get a job if I could prove I could work hard. People would want to hire me.
Who is somebody you look up to in leadership?
Abraham Lincoln. The man failed so many times. He had no way of becoming president of this country because of all his failures, but he did and he was the right president at the right time. Another man that had so much against him at the time was Winston Churchill.
What is the best advice that someone has given you?
I was taught by the CEO of the first professional job that I had to be friendly and be professional, but don’t be abused. Don’t let anyone treat you poorly. Stand up to it no matter what.
If you could do something dangerous one time without consequence, what would want to do?
I would ride my Harley through the Alps.
