The ESOP Growth Story: From $5 Million to $300 Million

Bob Whalen bought seven and a half percent of a nearly hundred-year-old mechanical contractor in 2008, then talked his own board into selling the rest of it to the employees. Fifteen years later that business is HB Global: eleven companies, roughly 2,000 employee owners, and about $300 million sitting in ESOP accounts. In this episode of the Construction ESOP Podcast, Bob walks through the roll-up strategy behind that growth, the $40 million acquisition loss he took sole responsibility for in front of every employee owner, and why an employee-owned contractor only works when leaders actually live the values they put on the wall.

About HB Global

HB Global is an employee-owned mechanical and specialty contracting group headquartered in Harrisburg, Pennsylvania, built around HB McClure, a mechanical contractor that was already close to a century old when Bob Whalen bought into it in 2008. Today it runs eleven subsidiary businesses from Pennsylvania into New England, the Southeast and Florida, employs roughly 2,000 people, and has completed about thirty acquisitions since converting to 100 percent employee ownership. More at hb-global.com.

What we covered

Buying seven and a half percent of a hundred-year-old mechanical contractor in 2008, then proposing a 100 percent ESOP to a board that thought it was crazy
Why year one landed flat: an average contribution of about six hundred dollars and employees asking what the big deal was
The fifty thousand dollar balance where buy-in changes, and the 798 participants now sitting above a hundred thousand
The roll-up thesis: eleven subsidiaries, thirty acquisitions, and why bolt-ons are harder than independent businesses
The working capital mistake on the first major deal that the bankers missed too
Spectrum: a forty million dollar loss, how it showed up in the share price, and taking sole responsibility for it in front of 2,000 employee owners
Nash Plumbing and Mechanical, from forty-five million to over a hundred million in eight years once the bonding capacity opened up
Why bonding capacity, not cash, is what actually kills contractors
Diversification at fifty-five, and why he is taking his own advice this year
Where an ESOP does not fit, and what he wants the retiring-owner wave to understand

Key takeaways

Ownership does not feel real at six hundred dollars a year. It starts landing somewhere around a fifty thousand dollar balance, and everything before that is patient communication.
Acquisitions have a batting average, not a success rate. Size the deals so a failure is painful rather than fatal.
When a deal loses forty million dollars, the CEO owns it out loud. That is how you earn the right to ask a technician to own a mistake.
Bonding capacity is the growth lever most contractors never get to pull. A forty-five million dollar shop became a hundred million dollar shop largely by being allowed to take more risk.
Alignment has to be behavioral. Tell employee owners to diversify at fifty-five and then diversify yourself, or the message is just a poster.
An ESOP is not a panacea. If the business is too small the frictional cost eats it, and a participant whose whole retirement is one company's stock is carrying real risk.

Full transcript

Bob Whalen: I believe in capitalism. I believe that you should get a rate of return for the risk you take, but I also believe, probably because of my upbringing, my parents were blue-collar workers, that you should share in that upside for the labor that has to do the work. I cannot do everything that our 2,000 employees do. I can't do it without them either. I can't do it without capital, and I can't do it without the labor that does the actual work. And so we're all in this together.

Chuck Mazzanti: Welcome to the Construction ESOP Collective. I'm Chuck Mazzanti, Senior Vice President at Christensen Group Insurance, and this is the show where we explore the wins, challenges, and real-world lessons of employee ownership in construction. Each episode brings insights from CFOs, former owners, and employee owners who are building something bigger together. Let's get into it. Today's guest is Bob Whalen, CEO of HB Global and author of the book Beyond Your Ownership. Bob has helped HB McClure's transition to 100% ESOP and has since helped grow a business purchase for just over $5 million into an enterprise with roughly $300 million in equity value, all for the benefit of their employee owners. In our conversation, Bob shares the story behind that growth, lessons from the setbacks, and why an ESOP only works when leaders live the values they promote. Bob Whalen, welcome to the Construction ESOP Collective. I'm super pumped to have you here.

Bob Whalen: Super excited to be here, Chuck looking forward to it.

Chuck Mazzanti: Yeah, so you're CEO of HB Global out of Pennsylvania. I'd love for you to tell the audience just kind of your origin story and how'd you end up to where you're sitting today.

Bob Whalen: Yeah, the fast forward version is I started off in the employee benefits business, both internal at large corporations, working for a provider of a benefit plan, as well as the brokerage business, the consulting business. And so for the last, ten years before I came over to HB. I was in the brokerage business, had my own little niche employee benefits brokerage business and for the first five years and the last five years I sold to Marsh and ended up being part of Mercer's employee benefit business. But in the middle of that, I did an executive MBA at Cornell. And I came out of that MBA really wanting an opportunity to lead a business. And really with the thesis, if you ran it like a sports team, you got everybody running in the same direction, you could outpunch your weight. And so that's what we've gone about trying to do, over the last eighteen years. And, just a ton of fun doing it. And really excited about what we've been able to accomplish for the employee owners of our business and aligning everybody.

Chuck Mazzanti: That's awesome. Yeah. So if I was a little bit earlier in the process, we could have been teammates. I used to be on that side of the house over at Marsh just on the P and C side. So it's that's kind of funny.

Bob Whalen: Learned so much in that environment too. It was really great. You got exposed to a lot of different companies. I did some Pima work there which was kinda, exposed me we called it Pima within, Marsha Mercer, which was the private equity, doing the diligence side of the business. So exposed me more to merger and acquisition than I had been before. So just a wonderful, experience to gain along the way.

Chuck Mazzanti: A hundred percent. And so now you're CEO. When can you tell us a little bit about when did you guys go ESOP? Were you a part of the company? When it became an ESOP, did you come in after? I'd love to hear that.

Bob Whalen: Yeah, so I'm actually a very unusual story within the ESOP world is I bought a minority interest in HB McClure, which was almost a hundred-year-old mechanical contractor in Harrisburg, Pennsylvania. I bought seven and a half percent of the business with a plan to buy the rest out from the third generation owner. And that was 2008. Of course, we were in recession and didn't know it. So you were watching the train coming at you. It was gonna like run you over, which is the nice thing about construction is you can see it in your backlog about what's about ready to happen to you. And so I went looking for ways to fulfill my obligation to Bob McClure and make the deal cheaper, which led me to being a more tax efficient deal, which is where I came across the ESOP and I had been exposed to it a little bit in my, my benefits experience. And lo and behold, it perfectly aligned itself with what I was trying to do culturally, was get everybody running in the same direction. And so unlike almost everybody else that's a founder or has a family business that they basically sell to the employees as part of a succession plan, I was the new leader of the business that came in and proposed this to our board of directors. That we moved the company to a hundred percent ESOP. My board thought I was absolutely crazy, like what what was I thinking? But I just felt like it would make the transition so much smoother for everybody involved. And I cannot say I envisioned what the next fifteen years were gonna be like at all. It was really about a solution that fit the time. But it's turned out to be my professional mission. And so everything I do now is really like focused on creating value for our employee owner.

Chuck Mazzanti: That's awesome. And so what was kind of the biggest surprise? So you wrangle or rally the troops, get the board to buy in, then you guys go ESOP. What was kind of the biggest surprise that you just couldn't prepare for ahead of time, but maybe you would have done differently with the benefit of hindsight?

Bob Whalen: Well, I don't know that I would do anything differently because of it, but the biggest surprise with the employees were like, yeah, what's the big deal? And to be fair to them, we had our first meeting, we announced it, people were interested. You get to year one, the average contribution we made to the plan in that year was six hundred bucks. So like you can understand why they weren't, like blown over by the fact that they own the company now. But as time has gone on and their values have increased dramatically, it's become, a really different thing. And frankly, getting people to appreciate the ESOP is still an everyday, part of what we do. It's way out in the future and that's, not what the employees would prefer. So it takes a lot of work to get their buy in. What I found is once the balances get up over fifty thousand dollars, all of a sudden the take up of it becomes a lot more dramatic. There'll be some people that'll never really appreciate it until they get that check at the end, and then I'm pretty sure that everybody's gonna be happy. But at fifty thousand dollars we really start to see, some take up. And now we have seven hundred and ninety eight participants with over a hundred thousand in their account. And so it's starting to have a real impact on people's lives.

Chuck Mazzanti: Yeah, it's real money. It's funny. It's ESOP's kind of a cult, right? From the outside and people just think they're so skeptical 'cause it sounds like it's too good to be true. But I think you encapsulate the power of an ESOP by the statement you just made. It's real money and it changes people's lives. Yeah.

Bob Whalen: And I describe, I every year I get a spreadsheet with every employee, what their balance is, how many shares they have, what's happening. And it's like Christmas morning for me. I mean, this is what it's about. And last year when our stock increased by almost fifty percent, and now we have three hundred million in people's account balances, what when that's what you're driven by, I mean it's a huge motivator. I mean I've come out of that with so much energy and we meet with all of our employees. We have, annually we have what we call owners meetings where, we pull together and we basically announce what's happened and communicate about our mission, vision, core values and what we're doing. It's a really exciting time. And it's not, every year is not gonna be that. In 2022 we had a tough year. We had to communicate, the stock actually going down because of our performance. But over time, we are gonna be disciplined about doing what we need to do and we'll get to our end goal, which is to create millionaires of all our employees that spend a career with us.

Chuck Mazzanti: Yeah, no, that's awesome. And I want to make sure because some of the audience are ESOP curious, right? Not everyone is an ESOP now. So I'd like to unpack the or make sure everyone understands. You said you have three hundred million dollars in ESOP balances across the participants.

Bob Whalen: We do. We do. And so, our strategy in large part has been to do a classic roll up. So we have eleven subsidiary businesses. We've d done a total of thirty acquisitions. Some of those are bold-ons to existing business. That isn't our, favorite mechanism to do because there's actually real integration that you gotta do with those and they're hard. There's a reason why a lot of acquisitions fail is because integration is really hard. So we like to have independent businesses that will continue to operate, continue their legacy. Like in 2029, we're gonna celebrate IT Landis, one hundredth anniversary. And so that's really important to us. But the strategy of the roll up has created a lot more revenue, a lot more profit. That profit gets valued higher than when you're a small company because it's less risky. One of the positive byproducts of what we've done is not only have we, diversified from a geographic standpoint, but we also diversified into businesses that we weren't in before. So when we acquired a business in Boston, we're now in life sciences. And so, we're doing lab work up in Boston. And that just happens to be slow right now. But when we were going through COVID. It was a huge part of the business. And so that's all what diversification is about. But we just keep on reinvesting, what we create back into the business. And we wake up, fifteen years later we bought a business for a a little over five million dollars total that's turned into having an equity value of three hundred million. And that's all for the benefit of the employees. It's not for some financier. Out in some big metropolitan area, it's right in our town. We've created over two hundred million dollars worth of value for Pennsylvania participants. And that's somewhat of a function of the length of time that the employees from Pennsylvania have been with us. We've also produced over fifty million dollars of value in the state of Florida that stayed right in those markets where those businesses we've had acquired. We now have multiple businesses that There's more in individual ESOP accounts of their employees than what we purchased the business for when we originally purchased. It's just a really it gives you a lot of pride in what we've been able to accomplish, for, the 200 or 2,000 employee owners of HB Global.

Chuck Mazzanti: Yeah. And I think that's just something that I want to stress, and obviously we're in ESOP, so maybe I'm admittedly a little biased, but numbers don't lie. Period. And not I don't want to throw shade at private equity. I mean it's fine and it could do good things, but the end result is that capital ultimately flows up to the top. And they have to continuously turn it. Every five holding patterns are longer now, but Historically, every five to seven years, they have to have the liquidity event. And let's say it's during a downturn, then maybe they get a cut because a dollar saved is a dollar earned, because they need to get that return to the shareholders and the top people. And your business is just proof that the wealth is shared. It's the ultimate version of capitalism. It's everybody has a seat at the table. They're getting their lives changed and then to your point, the local community, the money stays there. And the and the people, people that you've bought and now they're integrated into the ESOP, they could still go to the local diner and not have to kind of be like, I we gotta walk out, we got so many people riled up. So it's there's just so much good to it and I love that you're a great you've turned into a spokesperson really for the ESOP community.

Bob Whalen: That's the owners we attract. The owners that we attract to sell to us really want to take care of their employees because why they didn't have an ownership structure that rewarded their employees, directly for their ownership in the company, they did care deeply about their employees and recognized that their employees made this happen with them. Like it they couldn't have done it without their employee base, and we give them a platform. Where they can not only get their liquidity off the table that they now need, for their retirement, which is, almost universally what the owners that are selling to us, need to have happen. But they're taking care of their employees, through the ESOP plan going forward. And like I mentioned, these employees end up having, more value than what the company was sold for when they did as we get out. IT Landis is eleven years since we bought them and they have two times what we bought that company in their ESOP accounts for those employees. And what continues to surprise me is how many of these owners take a chunk of the purchase price and bonus it out to their employees on their exit too. You it doesn't get headlines, like what KKR is doing with ownership works. But we see it happening with our owners that are doing it all the time. And lots of times, it's a what KKR has done is about, I think it's been communicated around twelve percent of the purchase price. We've had owners that have bonused out twelve percent of what they get all the time. And nobody's writing headlines about it, but they're doing it, down, at Main Street. And they do we have given them a vehicle to take care of those employees as we go forward. And I am absolutely a capitalist. I believe in capitalism. I believe you should get a rate of return for the risk you take. But I also believe, probably because of my upbringing, my parents were blue collar workers, that you should share in that upside for the labor that has to do the work. I cannot do everything that our 2000 employees do. I can't do it without them either. I can't do it without capital. And I can't do it without the labor that does the actual work. And so we're all in this together. It's a team. It's one of our core values is about team. And we believe it in our core and we execute on it. And we're gonna do it through through our actions.

Chuck Mazzanti: No, no, a hundred percent. And that reminds me, so you also have a podcast in the last episode from a couple weeks ago. The gentleman was saying just that, that when you got to the table before the deal closed, the owner, the original owner, set aside a generous amount to all of them, and they're like, hey, we were rooting for the closing as much as everybody else.

Bob Whalen: Yeah. And he was also s the other part of that podcast is he was skeptical about this. He thought it was too good to be true. And we sp in a lot of different formats talk about what we're doing, why we're doing it and how we're doing it, and it is so important to us that we actually execute. Like, no kidding around. This is what we're about. And we get so much feedback from owners that have sold us. That what you said is what we do, and we make our owners available to we have not been one hundred percent successful, by the way. We had a failure in Phoenix, and we're very open about that. This is not a guarantee,. This is still, really tough business to be in, and we're gonna do everything in our power to make it happen, but it's not a guarantee of success. While we've had a lot of success. We've had our failures too. We're not perfect and we don't portray ourselves as being perfect. But we let all those voices to be known to the owners because we want them to make the best choice for them. And frankly, we've had a number of cases where the owner that we were talking to buy decided to go to do their own ESOP. We give a ton of autonomy to the businesses that sell to us, but it's not one hundred percent autonomy. There's things there's Financial reporting that you've got to do so that we can do our job. And if you're looking for a hundred percent autonomy, do the ESOP yourself and we look at that as success too. Yeah. Because maybe they learned about ESOPs because of us and said, Well, we're gonna go about doing this too. And it's so exciting for us, that when we don't get a deal done six months down the road, you'll see an announcement out there that they did their own ESOP. Success, period.

Chuck Mazzanti: A hundred percent. And so, like you said earlier, Bob, it's over 30 acquisitions at this point. Can you walk us through kind of the beginning stage, the first couple to where you're at now? I mean, you're a systems guy. I'll never forget when I saw you on the MA panel with I think it was Chartwell and the ASCA Leadership Summit in St. Pete's in February. I mean, you're

Bob Whalen: First.

Chuck Mazzanti: You're sharp, your systems, you're numbers driven, what you're doing, but I have to believe the difference between your first or second acquisition and your thirtieth, you've come a long way. So can you can you share some

Bob Whalen: I got some great stories for you there. So, first of all, it's not like I got into this and had this vision that this is what we were gonna do. Obviously I wasn't afraid to do an acquisition because that's how I got into the business, to start with. In essence, put an acquisition together for me to be the leader of HB McClure. But then part of our business is residential service and we had a small oil delivery business. And oil delivery is dying. People don't put new oil boilers in their houses and no new house has oil. They use some other mechanism. And so those businesses are dying, and just like a lot of others, that you have all these owners that are retiring out. And so we started buying these businesses because it essentially was just a cash cow. You were buying it and running the business out. And so we started out doing acquisitions that way and we did that. The first major one we did was IT Landis. That was, now, coming up on 12 years ago. And we made so many mistakes. Like, first of all, we forgot and I can't believe the bankers, didn't pick up on this too. But in our projected balance sheet, we didn't put the current portion of the long-term debt in the working capital. Well, working capital is incredibly important for a construction company relative to bonding and all kinds of other things. And so just thank God for us, the first one went really well from post-transaction performance standpoint that we, figured that out, we fixed that. We made so many other errors. I talked about the failure in Phoenix. That was really a failure and we had the information that the succession leader was not a good fit for leadership. And we knew it and started to read our own press clip clippings and believed, that we could bring them around to be able to do it. It didn't work. Then we put in it we're not equipped, just like Warren Buffett talks about not being equipped to have leaders put in, we are not equipped for that. But we did the best we could. We had a good young potential leader, but he wasn't really ready yet. And so that didn't go well. And by the time and then you throw in that they were doing the chip factories out there and pay was going up by like a hundred percent, like overnight. It was a disaster. And so we learned so many steps along the way. And I think one of the really key things, like that IT Landis, if that had gone badly, we could have died.. Since then, the magnitude of the acquisitions that we're doing, if they go badly, are not gonna kill us. They we d we do acquisition size that while it will be painful if we have an outright failure, and Spectrum was a big failure. It wasn't just the purchase price, there was a whole bunch of losses that went on top of that. When you look at it, and I I kind of like saying it 'cause it we lost forty million bucks on that. So like no kidding around big time loss. But we're at the size at that point. While it's very material and very painful and was reflected in our stock price, in twenty one, twenty two. It did not kill us. And I think that's a really important lesson as you move along. Maybe you double down early because there, there's not as much to lose. But that 300 million dollars that I talked about that's in people's account, I do not take that lightly. That will not be good for me if we lose that for our participants. And so we take what we do very seriously. Part of that is getting a little bit better each day. Your systems are getting better as you're going along. You're focusing more, on what could go wrong. But I think it's also important that we don't forget what's got us here is being entrepreneurial and willing to do things differently. And so it really is about continuing to do what we do, but be a little better at risk management. So we're making some investments now that it's that's one lesson we learned from Spectrum. If we make a ten million dollar investment outside of H B Global and all we can lose is that ten million dollars. There's no there's no losses over above that filter back to the organization. So we've combined some of that and we are incredibly entrepreneurial in how we think about things and adjust and I think it's an important part of what we try to do.

Chuck Mazzanti: Sure. And so I'd like to go back, if you don't mind, Bob, the forty million dollar loss. Like you said, that's you took it on the chin. I mean, it your legs had to get a little bit wobbly. I mean, you're a good businessman, you could write the ship, but what did that look like as far as communicating that to the current participants and establishing trust to have them understand that the forward direction is still solid and I bet it was a good learning exp experience for everyone involved, but I'd l I'm curious to hear how you guys communicated that and kept the confidence with the employee base.

Bob Whalen: I think you really are. So first of all, the most or from my perspective, one of the most important things is I stepped up and took one hundred percent of the responsibility. And how I like to explain it is it's not that somebody in our organization couldn't have mitigated that or made it better or even, course corrected it. But we know very specifically what we didn't pay attention to that ended up biting us in the butt. And I'm the one that makes final decisions about where we allocate our capital. And I made that decision to make that allocation. And so therefore there is only one person that is responsible for that forty million dollar loss, and that's me. So, first of all, it was to step up and take responsibility because we want our techs to do that too. We don't want them to hide. When they've made a mistake, we want them to learn from it, take responsibility for it, and move on. And so I thought that was very important to do. But then to your point, and honestly, I haven't talked about this a whole bunch, in other times when I talk about the spectrum debacle, but we spent a lot of time talking about the financial strength of the organization as a whole. While like twenty two I talked about was negatively affected. We were still very profitable, just our margin was cut, pretty su substantially, and it had a negative effect because the difference between what we actually produce and what we projected we were gonna produce from a valuation standpoint were different, so that's reflected in the price. But we were financially stable, and so there was never a question Of whether the organization was gonna continue to survive because of the if I had three of these going on at the same time, it would have been a different story. But we spent a lot of time talking to our employees about how this was a big deal, we're not taking it lightly, we have a sense of urgency about it, but also the organization will live to play another day. And we have done that, and so after that we've recovered in the last two years our stock has gone up by 80% and 40 some percent. And so you see that we now have a story around this too. And believe me, I'm talking about the fact that our stock will drop again someday. This is not a straight line of success. This business is hard, whether it's self-inflicted or whether the market just makes it very difficult to achieve what we're achieving today. That's one of the things that people miss out on value is really it's not that your organization is suffering to where it's not doing as well as it can do. But if it drops from where it was before, it's gonna have an effect on the value of your company. That's part of equity too. I mean, now employees want all the good things about equity, but there's other stuff that go with it, also. And I think we try to educate that, in our history, we use the great game of business around some financial education for our business. We now use Grit Consulting, which is a Midwest firm that's doing great stuff, around that. And so we take that responsibility very seriously in the communication to our employees and trying to make them better business people and understand both the pros and cons of being an equity holder in a business.

Chuck Mazzanti: Yeah, yeah. I mean to your point, the buck stops with you being at the top and so good on you for owning it and then communicating clearly and then ultimately what have we learned??

Bob Whalen: One hundred percent. And some of that does come with, like me saying I've always said, acquisitions is more like baseball. There's some batting average of success. It's not one hundred percent success. We've had a we've had a few bold ons that haven't, gone well. Nothing to the magnitude, of that. But you're not gonna be one hundred percent successful. And it was important for us to get back on the horse after spectrum and our two of our very best return investments have happened since we did Spectrum. And so it's just really important to keep that all in perspective of what you're doing.

Chuck Mazzanti: Yeah. I mean every relationship, whether it's business, personal, I don't care, you're gonna have your ups and downs. And actually oftentimes when you have a down and you band together, you come out so much stronger. And then the faith in the employee owner base of knowing, hey, what? We're gonna have another one that doesn't go perfectly, but we made it through and actually we're stronger because of it. So we're not even gonna sweat it.

Bob Whalen: Yep. Really important. And like this is a good point for me to highlight something about ESOPs also. Is if you've been in the plan for ten years and you're fifty five years old, you have the ability to diversify twenty five percent of your balance. Every single year I tell our employees if you can diversify your account. I just turned fifty five I got my first notice this year, and I'm gonna do it, Because I want to show the employees, I'm not just telling you to do this, I'm gonna do it myself. And so I'm gonna diversify this year with our plan, even though I think things are going great, and it's really hard when you've averaged a 34% return to diversify out of an investment like that. But it's really important because this is about retirement, and so it's all those little things and I cannot emphasize enough how important it is, no matter what your culture is, is to align your behaviors with that as much as you possibly can. I can say that my professional mission is about our employee owners, but if employees see just a little crack in that, if they see just the smallest crack that this is really about Bob Whalen, it's not going to happen. And so you have to align that stuff. And so, and that's not everybody's mission. Every there's plenty of great ASOPs that are like maniacal about their customers. There's nothing wrong with that. We just have a mission that's built around the engagement of our employees first because we believe that leads to raving fans of customers. And so we align everything we do with that.

Chuck Mazzanti: Yeah, no, a hundred percent. And so I'd like to transition. Going ASOP, it's not easy, right? It's a big undertaking. You have to s have a certain level of EBITDA to even, take on the frictional cost of hiring the different advisors and so forth. And oftentimes the two biggest barriers to ASOPs, in my opinion, are one, there's just so many misnomers on it. And that's why I'm starting this podcast. And that's why it's so important to have people like you in our industry that are writing books, which we'll get to. I want to get into the book. So that's barrier one, and then barrier two is they're just like, hey, it's too much headache, you're still running a company, PE comes along, or a strategic buyer, and they're like, it's just easier. So I'll just go PE or strategic buyer. And I think. If someone's not gonna do their own ESOP, and of course the numbers have to bear out. I want everyone that starts a company, whether it's they started it or their great grandfather started it, they deserve the liquidity event in that wealth a hundred percent. But if it could be close in an ESOP transaction and there's tax advantages and so on and so forth, you gotta at least try it out. And I think you doing over 30 acquisitions now could solve that. Piece of that second puzzle of the frictional cost is too much. So I'd like you to talk about, what's the benefit? If someone's listening to this and they want to, have some sort of exit in the next five to ten years, why should they, talk to Bob in HB Global? What does that look like? How do you engage people? If you could walk us through that process, I think that would be helpful.

Bob Whalen: I think you really hit on it. It's so an owner gets the ability to get their employees in an ESOP without having to do all the work themselves around. ESOPs are complex. It's in essence you're signing up for a regulated business, the Department of Labor, and the IRS, regulate ESOPs. And so if you don't want to do that, selling to somebody else can be a great answer. And then, we take that and said what do folks that sell to us, what do they really well what's really important to them is taking care of their employees. So the ESOP will do that. Well, the legacy of our business is really important. I talked about IT landis, but we have, of the eleven, probably the average is somewhere around that businesses are fifty years old. And so the legacy of the business Is very important to them. And then thirdly, we would be very focused on keeping autonomy with the business. And frankly, that aligns strategically with what we think makes the most sense in the business that we are. If you're McDonald's, it's different. I get that you want to have the exact same thing every single place you go and done exactly the same way. Construction is not like that. We don't cookie cutter buildings, we don't cookie cutter the customer we work with, all of that. And so it really plays in strategically. So then we give our business leaders a lot of autonomy. We tell them, you get to choose, the customers you work with, what projects you wanna go after, how you're gonna price those projects,. What resources you need to do that, including employees, so we don't tell our businesses the employee model or the overhead model they're gonna have. And how you're gonna pay those people and the benefits you have. We our benefits aren't even the same overall. Now that's one thing that I think we'll move into in the future is have a more consistent, benefit package that we offer. But our different businesses have different PTO. They're right now they have different medical plans. And we really led it to the local market because frankly it's very different. And that from your Marsh days when we did the benefit survey. Benefits in the southeast are very different from the northeast. And so, we've responded to that in that way. So I think those are the primary factors that drive somebody to want to be with us. If autonomy is the really biggest thing, control is really big to that owner, then doing an ESOP themselves is really a great way to go about it. So they will control all that for the future. But we find a lot of them, first of all, they've waited too long, so they don't start planning for this succession until it's too late in the game. And then it's just easier to give it to, and I think it's fair to say we think of ourselves as ESOP experts now at this point. We understand the ESOP world, and what we're trying to do within it. And so they can just hand that over to us. We know how we want to communicate to employees. Everybody, the one thing they don't have a choice about is they're gonna come over to our mission, vision, core values, and now the principles that we add, nuance that, how we think about doing business, those things, are things that we think are really important and will continue to move down that route.

Chuck Mazzanti: Yeah, I mean you're kind of striking on most things that are important to business, especially blue-collar businesses. And I'd like for you to highlight one or two deals that they sold to you guys, they go ESOP, and they were maybe a 15 or 20 or 50 million dollar contractor, and then 10 years post-acquisition, now that same business unit. That's still operating more or less autonomously, but with the horsepower of HB Global and the business acumen, they went from 50 million to now a hundred and fifty million or whatever it is. I'd like to highlight one of those.

Bob Whalen: We have a great example of that. Nash Plumbing and Mechanical was that. And the story behind Nash Plumbing and Mechanical selling to us is Cliff Nash, who was the owner, the second generation owner of the business, basically had a health scare related to the pressure from the business. And this this business is really hard on owners. And so he came out of that and the doctor basically said,. You can either, reduce your stress by figuring out how to deal with stress or you need to get out. And he couldn't do it. He just couldn't make himself do it. So he decided to sell. And part in right in line with what you said, they're a forty-five million dollar volume business. And really the main thing we did for that business is we just opened them up to take more risk. Than they did in the past. And so now you fast forward, it's been, eight years and from a $45 million business, they're now doing over $100 million of business. They have a $140 million job that we're doing, right now, that we that which fits fine for us to do that side. We're doing the Federal Reserve building through another one of our subsidiaries right now that's a hundred forty million dollar project. Those are size projects that we could do that they just would not be able to manage from the bonding capacity and all of those things. And I think that's a big part that we've been able to add to the businesses as we go along. And again, it's not like I sat back here ten years ago and thought, boy, we put these businesses together and all of a sudden we'll wake up and we're gonna be, one of the contractors on the Federal Reserve building that's building,. Digging multiple stories under the existing building and doing, all this exciting stuff. It's it happened just as of an evolution to what we were doing.

Chuck Mazzanti: I think that's huge. And I want to highlight that because in construction, if it's bonded work, without your bonding line, you're dead in the water. And so and a lot of contractors go out of business not because they run out of money, but because they'll have a surety claim and now they can't get bonded. And so again, they're dead in the water. And so to be able to get the liquidity event, right, get taken care of to sell to you. But then also now they have this insane balance sheet that could tap into jobs that would have taken them best case twenty years to work towards or worst case, bet the farm, fail, and now everything went to zero, not only to them but their employees. And now with the growth, they're making more money than if they stayed independent in a lot of times, if they just stayed at fifty million. And I can't even imagine let's do this again in ten years and see where they're at. It's pretty cool.

Bob Whalen: It's been really fun and honestly that's one of the detail stories behind the scenes. When we put that bonding package together when we acquired Nash PM, that was no, slam dunk. This is that this is one of those things that talk about losing sleepover. I mean getting that pulled together. Because the other thing could have happened too, if we didn't have the ability to do that, we could have really constrained Nash PNM. And then it would not have been a great acquisition for them, not great for our company either. And I think that's and for you and I, it was actually, Marsh, that put that, together for us and really had a lot of experience working with private equity type construction companies and pulling that together. So, there are solutions out there for people. You just really have to know what your primary problem is sh and then go about the like you said, the process of what you're going about to solve.

Chuck Mazzanti: Yeah, be being at the party before, it having the experience, having the service providers that know. I mean, there's so many reasons that just going to your firm, you've been there, done that, seen it, and then you have the service providers that have depths of expertise too. So that's awesome. And I'd like to transition to if you guys haven't heard the book, beyond your ownership. It's not easy writing a book and Jamie I know helped you immensely and she's just such a sweetheart of a lady. I'd like to, hear why'd you write a book? What did that look like and what are you hoping to, what are you hoping people get out of it? Get it, read it.

Bob Whalen: Yeah, well, as I said, my professional mission is to expand expand employee ownership. And so, the primary audience of the book is for this silver tsunami that's coming on is to make them aware of the alternative of an ESOP. It's not to say that it's right for every single business owner that's gonna be transitioning, their business. But, the general population, only about three percent of people know about ESOPs, so if you ask about ESOPs, they don't even know about them. The business owner community is higher than that, but still, significantly less than fifty percent of people are aware of ESOPs. So the primary audience is to make those business owners aware of this and so, we're trying to get distribution of the book, through service providers that work with them and believe in it and all of that stuff. But that's the primary audience. And then secondarily, we reinforce how we're going about it, what our mission, vision, of core values, how we're doing that. So it's just one more of those things, that somebody that is thinking about selling to us can get aligned with what we're about before we even do a transaction, our employees of what we're about, one more format. That they can see what we're about, so they have a language to use about making us better. And so all of those things, I think are what we're trying to do with the book. But the primary reason is really just to create awareness around employee ownership. I am like blown away by the community impact, that we can do compared to private equity or big public companies or other structures, and so I'm just a real believer and want to do everything I can, to help facilitate it as I kinda go into this, later part of me actively, running businesses and, kind of, this is a way, for a second act, too, for me to get involved and just really being supportive of the ESOP industry.

Chuck Mazzanti: Yeah, I think that's one thing I just see. I mean, even at our firm, I've been at other firms and publicly traded and so forth. And in just the collaboration, it's kind of like what's in it for me if I help Chuck out, right? But in the ESOP culture, you start getting this the second and third generation of guys and gals that are a little bit older and in retirement, they're so much more willing to help the younger buck. Because not only does it help their share price, but they're kind of like, hey, I'm it's just so much more collaborative. And they're their success is, our success. It's a different feel. And I know people are like, Chuck, I'm sick of you talking about ESOPs. There's it, there's no way there's a catch. And I'm like, I can honestly tell you there's not. If it's if it's the right setup and the people understand the work because it's not easy. But if you understand the work, it really takes care of the employees. And you're a perfect example of that, Bob.

Bob Whalen: Yeah, well thank you for that. And I just think, one I think one of the things we try to do is gain wisdom, over our lifetime. And I think w one of the pieces of wisdom that I've gained over my life is the more you give, the more you get. And if you can just buy in to doing the right things all the time, that's not to say That you won't be taken advantage of at some time. Or that you put some effort forth and the person you're dealing with, it's all about them. And they're not only not doing what's in your best interest but working against you. Those things all happen, but it's all what you focus on. And this ESOP is just a great example of this company has just continued to give to me. We aligned my incentives with what was good with the company. We work together to do this and now this company just keeps on giving back to me, personally, not in the smallest way by just the satisfaction I get from what we're doing it. And I think that's, so many times that's what you don't realize when you do these things is the satisfaction that you're gonna get out of doing good things for other people. And that that's what this that's what that measure, that three hundred million dollar measure. Is really a concrete example of the things you give back. And then there's all these non-concrete, things that you get back from, just being kind. And I think that's, as I get closer to the end of my career, that's kind of the wisdom that I, have picked up. And it's not easy, because that's not what you see, in being communicated to the population. But I believe it in my gut, like deep down inside. You will be served well if you just, spend a lot of time giving.

Chuck Mazzanti: A hundred percent. And as we wind it down, I don't want the audience to think, it's ESOP over everything. What's one thing you want the listeners to understand, if this is your situation, ESOP isn't for you.

Bob Whalen: Yeah, well I think you can be too small, first of all. If you're too small the frictional costs are just too great. And then you do have the option of selling out to an ESOP company, whether it's a strategic in your business or an ESOP holding company. There's multiple ESOP holding companies out there that are getting into to different businesses if that's important to you. But an ESOP really does not fit if you're small. I think another problem with ECU you s they're The problem with ESOPs is your retirement is in this one company stock. So I think it's really important to diversify away from that through your 401, for the individual participant from the 401k and other things. Because bad things can happen to good companies. And we're gonna see disruptions because of AI. I mean, they're and we've seen disruptions, newspapers, for example, that were like the best business in the world in the late nineteen hundreds. Are not great businesses in 2025. And so there'll be disruption and the pr if you're a participant in an ESOP of one of those companies that fails, there's nothing there for you. So this isn't, the panacea that it's only works. But there's a lot of businesses out there that it's you're just putting one foot in front of the other, that you're gonna be around for a long time. We're gonna you y until We have robots that are gonna build all the buildings in the world. There's work for us to do, and we will have time to evolve. That will not happen, overnight even if it does happen. And so I think it's really important that you recognize the agency that we have to make all this happen too, even if our business changes. Tons of great examples of businesses today that are nothing of what they were fifty years ago. And I would say, we're trying to build that we can adjust based on whatever happens in the

Chuck Mazzanti: A hundred percent. And so for people that are like, hey, I wanna go ESOP, maybe I wanna talk to Bob and his company and see if a merger would make more sense than, biting off the whole apple on their own. How do people get in touch with you?

Bob Whalen: Hb dash global dot com we have an acquisition part of the website that's there that you can check that out that we take people in from that are interested in talking to us my LinkedIn page so you can find me on LinkedIn and get to me that way and honestly anybody that wants to talk to you about ESOPs I'm willing to talk about it it's part of my mission. I'm happy to do it. And so if anybody wants to talk ESOPs, just figure out how to get at me. And the LinkedIn page is probably the best way in our website are the two best ways to get a hold of me.

Chuck Mazzanti: Yeah, and the last thing I'll say is don't forget about the book either. Beyond your ownership, you could get it on Amazon. It's a great book. It'll educate you on ESOPs and it's a easy read. So Bob, thank you for coming on. This was a blast and I can't wait to get you on again.

Bob Whalen: Appreciate it. Loved it. Thank you.

Chuck Mazzanti: All right, we'll see ya. Thanks for listening to the Construction ESOP Collective. If this was useful, follow the show and share it with a colleague. Join the conversation with me, Chuck Mazzanti, on LinkedIn and find all episodes at constructionesopcollective.com. Until next time, keep building ownership one conversation at a time.

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Questions about how any of this applies to your company? Email Chuck at cmazzanti@constructionesopcollective.com and we can talk it through.