The landscape of the large scaffolding companies has changed significantly in the last few months.  Movement among these  industry players is creating an unusual competitive playing field and some interesting opportunities.  

Now that American Industrial Partners (AIP) has acquired The Brock Group (Brock), here are a couple of areas to keep your eye on

Fix What’s Broken

AIP should immediately focus on fixing what’s wrong with Brock and unfortunately for AIP, there are many issues that need to be repaired, spanning nearly every area of the business.  When improvement consultants are brought in to help a company, and they identify nearly 500 initiatives,  it is obvious there is plenty of work to do.  No matter how great the bargain AIP got for Brock, they will be forced to deal with a series of historical operational missteps, or be doomed to the same fate as Lindsay Goldberg.  The issues run deep and initiatives will need to be  enacted to fix challenges in operations, spending, customer retention, SG&A and balance sheet management.  These can be difficult to fix, and unfortunately, having a consultant “identify” $100 million of improvements is not the same as making the changes to actually capture the $100 million of benefit. 

These can be difficult to fix, and unfortunately, having a consultant “identify” $100 million of improvements is not the same as making the changes to actually capture the $100 million of benefit. 

Show Up to the Party

On the bright side, Brock will improve just by showing up.  Given what is going on in the industry, Brock should see revenue improvement just by staying in business and showing up at opportunities.  The argument goes something like this.  Before the recent consolidation, most notably, Brand and Safway (and potentially other significant providers  in the near term), potential customers were able to collect competing bids from a number of groups, possibly including Brock or possibly not.  Now that one of the big three providers (Safway) has been eliminated, potential customers who seek to get competing bids will likely have to expand the providers they talk to, which should mean more bidding opportunities for Brock.  This alone should allow Brock to grow revenue because it will obviously win some of the bids it is now invited into, where previously they may not have been asked.

Acquire Available Talent

Brock can strengthen its bench if it is opportunistic.  Given that BrandSafway is still working through its consolidation and through its new policies (watch for a new compensation system for branch personnel in 2018 that will cause additional personnel to leave BrandSafway), it is expected that many talented workers will be available and moving away from BrandSafway.   In the coming months, Brock will have plenty of opportunities to pick up a number of highly skilled and deeply experienced workers.  

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Commercial Scaffolding Could Be An Opportunity

Will Brock expand into commercial scaffolding?  Highly doubtful, at least in the short term. Brock does not have personnel that understand commercial scaffolding and they have plenty of other things to work on (see point 1, above).  Obviously, there are many more acquisition opportunities in commercial scaffolding compared to industrial scaffolding, where consolidation has already consumed most of the smaller, more affordable targets.  The only caveat here is if Brock were to recruit a commercial scaffolding specialist that could lead the charge into commercial scaffolding (likely ex-Safway), but even then, it is likely they would need to stabilize the core business before growing into an area where they have no experience.

Who Will Captain the Ship?

It will be interesting to see whether AIP will trust the existing management with implementing some of the identified changes or whether they bring a new leader.  Lindsay Goldberg’s recent attempt at bringing in a new leader was a short term failure and caused them to return to an executive with more industry experience. Brand had success bringing in an outsider (Paul Wood), as did Safway (Bill Hayes).  Will AIP follow this path, or ride the established industry veteran?  This will be an important, early call by AIP.

My Prediction

I would expect that Brock’s performance will improve in the short term.  Industry dynamics along with the elimination of a major competitor set Brock up for short term success.  I would also expect that heightened focus on operational and company-wide “improvements”, coupled with the energy of a new owner, will result in improved company dynamics. Long-term, sustainable success will ultimately depend on fixing the issues that caused Brock’s performance to steeply decline in 2014, and led to Lindsay Goldberg selling the business.  This is a very steep hill, and unlike short term revenue growth or improvement of the employee base, will likely take a couple of years to implement.  If the improvements can be made, Brock will be a worthy competitor for BrandSafway, if not, I will be writing a similar post 3 years from now about AIP selling Brock or breaking it into pieces.

This post is second in a series. The first post  “American Industrial Partner’s Rescue of The Brock Group” can be found here.

Related Articles:

• Brand is Acquiring Safway. Now What? Four Key Takeaways byTimothy Oleszczuk
• The Safway/Brand Merger – An Integration Nightmare byTimothy Oleszczuk
• 7 Things to Think About When Selling Your Scaffolding Business by Timothy Oleszczuk
• Managing the Scaffolding Sales Process by Marc Wilson
• Q3 Industrial Newsletter byTimothy Oleszczuk
• Scaffolding Inventory Control by Marc Wilson

Header image courtesy of brockgroup.com.