True, ARS may have originally started out as a consolidator, with an aggressive acquisition program. What makes LeBaron’s situation a little different than others is that his parent company, ServiceMaster, acquired ARS in May of 1999 after it ran into some operational difficulties.
You can now call ARS an operating company, thank you.
But LeBaron said his company’s roots in the hvac business began before its acquisition of ARS.
“We got into the business almost three years ago, acquiring some a/c contractors,” he said.
“Prior to ARS, we also acquired Rescue Rooter [drain cleaning/plumbing services].
“We went in this [acquisition] with a detailed strategic operating plan revolving around emphasis on people, growth initiatives, customer satisfaction, profit enhancement, and best practices.”
Since the ARS acquisition, the company has purchased 40 additional companies to join the ARS/Rescue Rooter operating team. The latest acquisitions bring the total number of ARS/Rescue Rooter operating units to 115, although not all enjoy the dual moniker. Some of the businesses are standalone hvac or plumbing companies.
“We strategically combine operations if it is feasible,” said LeBaron. “However, we believe in staying focused on each market, even if the businesses are combined under one roof.”
Despite the dual name, there is no doubt which identity the company is focusing on.
“We’ve used ARS as the name of our division [of ServiceMaster],” said LeBaron. “We are utilizing Rescue Rooter as a sub-branding strategy in the plumbing business.”
“Although a significant portion of our facilities and vehicles reflect ARS today, we will continue to move slowly forward with regards to our branding strategy.”
LeBaron projects that revenues from his division will reach $810 million this year.
FUTURE FOCUS
Since ARS/Rescue Rooter downplays its ties to the consolidation plans of the original ARS model, it has a different future.“We have two focuses: the people side of the business and customer satisfaction,” said LeBaron. “Acquisitions are an important piece of our overall growth strategy, but internal growth is our priority. We have been growing by double digits internally to date.”
LeBaron said another key to his division’s success is the strong leadership of the company presidents, former business owners.
“We still have a lot of the original owners who are enthusiastic about running the business,” he said. “We think success depends on relationship building and keeping owners who care about their people.”
LeBaron said the facts speak for themselves.
“Over 70% of our service centers are showing major operational improvements.”
Even if ARS/Rescue Rooter is focusing on internal growth, LeBaron maintains that the operating company is still looking to acquire contractors to meld with the existing service centers.
“We have an ongoing list of 35 major markets we would like to be in, as well as a top 35 markets for tuck-in deals,” he said. “We are looking at the Sunbelt and other warm weather markets to grow our air conditioning business.”
LeBaron added that one of the things that makes ARS attractive to business owners and employees is the chance to tap into the benefits of being part of a larger organization — ServiceMaster.
“ServiceMaster is a fantastic company that has businesses like TruGreen/ChemLawn, Terminix, Merry Maids, American Home Shield (AHS), etc.”
“AHS is a huge way to grow the business,” LeBaron said. “Last year, we handled 300,000 calls through AHS.
“A lot of our people are able to offer homeowners bundled services [lawn care, warranties, etc.]. This has also led to a lot of activity with our light commercial contracts. We also have gotten larger contracts thanks to our association with ServiceMaster.”
If ARS/Rescue Rooter is looking to acquire, just what does the typical contractor look like?
“The average contractor does almost $8 million and employs 125 people,” answered LeBaron. “We look at platform companies [also known as hubs or service centers] that do $2.5 million or more. Tuck-in companies [acquired to run under the platform business] can have revenues as low as $400,000.”
LeBaron added that the largest ARS company (located in the Wash-ington, DC, area) earns $42 million.
LESSONS LEARNED
Such numbers are pleasing to LeBaron, but his drive to improve existing companies and grow internally is what’s on his mind now. And he wants to avoid some of the mistakes made in the past, prior to the acquisition of ARS.“ARS made the mistake of putting their name on everything right away,” he said. “And there were some markets where our construction business was underperforming. But we have never closed down a center. Our strength is our front-line people. We have a fired-up management team.”
According to LeBaron, the company’s five-year plan is to grow the business by double digits each year, both in revenues and profits.
“We will plod along, not looking for that big growth spike,” he said. “We are very excited about our company and pleased with its progress. We are going to be in this business for a long time.”
Publication date: 09/11/2000
