Liquid assets Featured

8:00pm EDT October 28, 2006
 If acquisitions are a key part of your company’s strategy, Nick DeBenedictis has some advice for you: Be visible.

The chairman, president and CEO of Aqua America Inc. says it’s important to get the name and faces of your company out into prospective markets prior to making a purchase or acquisition. It’s a tried-and-true method that DeBenedictis has used to lead the Bryn Mawr-based water utility holding company since rising to the top post in 1993.

Aqua America purchases small, privately owned and municipally owned water systems, and it has a lot of people to win over before making an acquisition. Everyone from the mayor and city council, to city water employees, to residents wants to know what Aqua America is all about, what it is going to improve, and if it will deliver on the promises it makes.

In addition, the company is in a business closely regulated by industry officials.

The close scrutiny from multiple angles has caused DeBenedictis to formulate a plan that increases the company’s visibility around the country and educates municipalities about its history and customer service.

“We try to be very visible well ahead of buying,” he says. “Keeping good local political and regulatory relations is very important. That’s where we really have to sell ourselves.”

The company’s philosophy of visibility is the spearhead for a methodical growth strategy that has propelled Aqua America from a small utility holding company in suburban Philadelphia to a 1,500-employee industry leader with holdings in 13 states and 2005 operating revenue of nearly $497 million.

Making the pitch
To most people, patience is a virtue. DeBenedictis says when growing a business, it’s a necessity.

Acquisitions seldom come together overnight, and while you need to have the initiative to spur growth, you also need to have the ability to let the process run its course.

It can be much easier said than done, especially when dealing with a large, bureaucratic organization where items might have to be considered by multiple executives and boards, increasing the probability of business getting hung up in the corporate and governmental channels.

DeBenedictis says a CEO must learn to control the urge to force things.

“I think you get frustrated because you are not in control,” he says. “Especially with government, it’s not like a deal where you’ve offered so much per share, and the shareholders either have to vote it up or down. There is no public reason why a city has to sell its water system to us. They can sell when they want to sell.”

DeBenedictis says in many cases, the only ammunition a CEO has in making an acquisition is repeating and modifying the initial purchase pitch. Since a business leader can’t force an entity to sell, the only thing he or she really can do is have the company’s senior managers keep reiterating the advantages of selling to the decision-makers. It’s a one-pronged approach that doesn’t guarantee expeditious success, but in the end, it can work.

Business leaders should also be aware of what selling points their business has that other businesses don’t. In most cases, it’s a matter of research, comparing your business to others in the industry. In the case of Aqua America, it has the advantage of providing a vital service.

“We realize the service we provide is vital to your well-being,” DeBenedictis says. “You want to know that when a fire starts, there will be enough water pressure to put the fire out.”

But even with all the selling points Aqua America officials can piece together, the purchase process might still ultimately become a waiting game as private owners and government leaders mull over the proposal with no reason to move on it.

DeBenedictis calls it a “value-destroying period” for the acquisition candidate, and says a CEO’s ability to stay focused on the final goal of making the acquisition will be tested during a long wait when little is accomplished.

“Our acquisitions can take nine to 12 months, and that’s a very value-destroying period, especially if you are selling the company,” he says. “You know what happens when a company is changing. It gets even more intense when you’re being sold and you don’t know what the vision is going to be or you don’t know who your new boss is.

“You spend more time speculating around the water cooler than working. That’s why it can be a value-destroying period, and that’s just something you can’t get around.”

Doing what you say
DeBenedictis says once a company is able to make a purchase, the main factor that will determine its success is action.

A well-honed and persistently placed purchase pitch is hollow without subsequent action. If a company doesn’t do what its leaders said it was going to do prior to the purchase, not only will the acquisition suffer, but the acquiring company’s long-term reputation can suffer, as well.

DeBenedictis says investing money to perform necessary upgrades to an acquisition is paramount.

In Aqua America’s case, the first task is usually to spend money on a municipality’s water infrastructure. It creates an initial impression that the company is concerned about not just distributing water and collecting payments, but also about the quality of the system it is managing.

“People say ‘Yeah, that pipe should have been replaced years ago, they’re replacing a 100-year-old pipe, this company is responsible,’” he says. “It’s not sexy in the sense that, ‘Oh, a pipe just got replaced,’ but it is subliminal in the sense that, ‘This never happened before until these guys came in.’”

Aqua America’s extensive history of acquisitions — more than 200 since 1995 — has taught DeBenedictis that the key to making good on your promises is to not get too far ahead of yourself as a company. Once an acquisition or purchase is secured, focus on that acquisition and get it up and running before moving on to the next opportunity.

“Following through is very important,” he says. “Don’t get on to the next thing ahead of time. Make sure you are delivering what you said you would deliver. If you promise the world, [and] then drop everything and move on to the next opportunity, it leaves a bad taste in people’s mouths.”

DeBenedictis says he and his regional leaders make sure that Aqua America doesn’t buy a city’s water system, lay some new pipe and then vanish behind the curtain. An extensive network of executives helps to make the company more visible on the local level, something that plays back into DeBenedictis’ mantra of remaining accessible to customers.

Each of the 13 states in Aqua America’s network — as far north as Maine and as far south as Texas and Florida — is governed by its own president.

DeBenedictis says allowing ideas to start at the state level and work their way up to corporate is a key component of how Aqua America is run. He believes that those further down the ladder can better see what is happening in the field and will give the company’s corporate leaders a better view of the details below.

“My theory is that the small stuff is the stuff that needs to be taken care of,” he says. “If you don’t take care of the small stuff, it can hurt you in big ways.”

A new name
DeBenedictis says a sometimes-overlooked aspect of growth is making sure your company’s name accurately reflects what the company is. It is something Aqua America addressed nearly three years ago.

In 2003, the company was still known as Philadelphia Suburban Water Co., which had existed in various incarnations since 1886. Up until the late 1980s, the company had never really ventured outside suburban Philadelphia, but between 1985 and 1990, it acquired three Chester County water systems, and its growth-by-acquisition strategy was born.

By 2003, Philadelphia Suburban Water Company no longer described the business. In January 2004, it adopted the name Aqua America.

To DeBenedictis, it was more than an aesthetic change; it announced the company’s arrival on the national stage.

“It’s how we got our name out there to the regulators and government officials in the other states,” he says. “Ten years ago, Philadelphia Suburban fit us perfectly. But soon we realized it no longer affected our goals and vision. So we changed it, and now the name reflects that we are in the water business, and we are throughout a large part of America.”

DeBenedictis says that as a company grows and changes, it is important that the name identify it accurately. Don’t allow sentimentality to rule your company’s name; if the name no longer reflects the company, find one that does.

“Our name change sent a very important message to the regulators, that we have the benefits of a large, domestic water company, but you get the benefits of it being locally run,” he says.

HOW TO REACH: Aqua America, http://www.aquaamerica.com/