How Legacy Utility Group Reached $84M and Chose Employee Ownership

David Jaeger started Nor-Cal Pipeline Services with his father in 2007 with one truck and three employees. Eighteen years later the business runs roughly $84 million a year with 225 people, and in March 2025 it sold 49 percent of itself to its own employees rather than to any of the private equity buyers who had been knocking since 2014. In this episode of the Construction ESOP Podcast, David walks through why a partial ESOP fit a third-generation family business better than a sale, how you communicate ownership to crews scattered across a dozen locations, and what it takes to service transaction debt and still buy another company nine months later.

About Legacy Utility Group

Legacy Utility Group is the Roseville, California holding company that sits above Nor-Cal Pipeline Services, Guardian Traffic Solutions, JVAC and ECS. Nor-Cal started in 2007 as a father-and-son vacuum truck and pipeline services contractor and now runs about $84 million a year with 225 employees across California and, since the ECS acquisition, Texas. It is a third-generation construction family: David's grandfather started in the 1950s, his father bought him out in the 1980s, and David and his father founded Nor-Cal together. The group became 49 percent employee owned in March 2025.

What we covered

Why a decade of private equity approaches never felt right, and what kept getting in the way
Structuring a 49 percent ESOP so a founder can create liquidity without walking away from the business
Going from one truck and three employees to 225 people and roughly $84 million in revenue
Why the launch meeting went silent, and the two things that finally got employees talking
Drawing the line between union field crews and ESOP participants, and turning it into a career ladder
Keeping bank and surety partners out of the loop for thirteen months, then bringing them in at the end
Building a holding company so a business named Nor-Cal could expand past Northern California
Acquiring ECS in Texas nine months after the transaction, and letting the seller keep his name and team
Carrying transaction debt, CapEx discipline and an acquisition at the same time
Running EOS before, during and after the ESOP, and putting the implementer on the board
Using employee ownership in recruiting when the share price story is still being written

Key takeaways

An ESOP does not have to be all or nothing. A 49 percent sale created liquidity for the seller, left chips on the table, and preserved a second transaction ten or twelve years out.
Expect crickets at the launch. Have a few long-tenured people in the room who will ask the first question, then give everyone a private channel: an ESOP email that goes straight to the CEO and an open calendar for fifteen-minute conversations.
If collective bargaining keeps field crews out of the plan, say so plainly and turn the line into a ladder. Operators who move into management roles move into the ESOP.
Bank and surety relationships built over decades are what let you bring hard news late. Nor-Cal did not open the conversation until the final sixty days, and it held because the relationship predated the deal.
A geographic name is a ceiling. Rolling Nor-Cal, Guardian, JVAC and ECS up under Legacy Utility Group is what made a Texas acquisition possible.
Sellers who just want to ride off into the sunset are the wrong fit. The tax treatment and the succession math work, but only if the founder stays engaged enough to see it through.

Full transcript

David Jaeger: It just felt right. It was one of those things where it honestly felt like a win-win. It was an awesome opportunity for my dad to sunset, create liquidity, and still have a little bit of chips on the table, because we didn't go fully 100 percent ESOP, we did 49 percent. And then it was an opportunity for us to really put our money where our mouth is. Everybody says your business is family, or we all want people to have an owner's mentality, but we were actually able to put shares in people's hands and give them a chance to own something beyond a 401(k) and beyond their paycheck. This is an opportunity for them to be an owner and create some real wealth after retirement.

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. On today's episode I sit down with David Jaeger, CEO and visionary of Legacy Utility Group. David shares why he chose employee ownership over a private equity sale, what that transition looked like from the inside, and how it has shaped the company's culture and future. We also get into leadership, succession, and what it takes to build a company designed to last. Dave, welcome to the Construction ESOP Collective. Pumped to have you.

David Jaeger: Thanks, Chuck. Looking forward to it.

Chuck Mazzanti: Dave is the CEO of Nor-Cal Pipeline Services out in Roseville, California. Just to level set, I'd like to hear how you ended up where you are today. Tell the audience about your come-up in the construction field, how you ended up steering the ship, and then we can get into why you went ESOP.

David Jaeger: I'm a third-generation construction business owner in California. My grandfather started in the fifties, my dad bought him out in the eighties, and I started Nor-Cal in 2007 with my dad as business partners. He led the charge as the executive and I was the face of the business out in the field, understanding the equipment and the operations, getting things done, and doing the sales part of it when it was just him and me at the beginning.

Chuck Mazzanti: Was that something where, through high school in the summers and college when you were back from school, you were working in the field? What did that look like?

David Jaeger: Definitely. My unwillingness to go to work was forced on me sometimes as a kid. I was more interested in school and sports, but any downtime, my dad and my grandfather both pushed me and my siblings out into the field, learning and working with the guys. Spring break, Christmas break, there was no time off in those regards. Even if we weren't always the best workers on the team, we still had to show up and do the best we could at that point in our lives.

Chuck Mazzanti: So we can track the size of the company at that time, when you started to get into it more seriously, where were you from a revenue and employee perspective?

David Jaeger: In 2007 it's just me and my dad, and you're doing ten, twenty, thirty thousand dollars. It also happens to be right in the downturn of the economy. For people familiar with those 2007 and 2008 years, it was pretty rough for a little bit. I remember my dad looking at me and saying, are we going to make it? At that same time he was transitioning out of the construction company he had bought from my grandfather. In 2008 we started to pick up a little momentum based on relationships he and I had in Northern California. Then in 2009 I got a call from an executive at Kiewit, one of the largest contractors in the world, who I had met years before. He said, I've got a job down here in LA, I need you to come down and do it, it's about six weeks of work. I said okay. I got down there August first of 2009 and met the night superintendent, and he asked how many vacuum trucks I had. I said, how many do you need? He said four. I said no problem, I've got you. The problem was I only had one truck and three employees. I thought, I have to figure this out, and fast. That's how I got introduced to the rental industry for vacuum trucks. I started calling rental companies and covering their stickers with mine. I was in the union, so I started calling the union halls and loading up with labor. Luckily for me, because the economy was bad, there were a lot of people looking for work. I could call the hall and say I need eight people, and eight people would show up that night, and I could do new hire paperwork and get them trained. Really quickly those four trucks turned into eight, eight became sixteen, sixteen became twenty-four. Before I knew it I was managing a significant amount of work. The nice thing about that job is it started as six weeks and became six years. It was catching lightning in a bottle, being the right age in the right place at the right time. Looking back on it in reverse, the key takeaway for me is that I was a subcontractor, an important one, but they had a lot of subs on that job. I attended their foreman meetings, I attended their safety meetings, and I wanted to become a partner with them. That's something we still push on our team today. We peaked around fifty or sixty employees on that job. Now we have 225 employees. I try to impress on the team that we need to partner with our customers. It's not just a transaction, it's taking their problem and making it ours. That was a difference maker, because a lot of my competitors, once they saw me on that job, started showing up and undercutting me on price. I get it, it's business, they're trying to put their trucks to work in a down economy too. But I was lucky enough to have a lot of relationships, and because I made people's problems my problems and helped them solve them, it changed the trajectory of the company at that moment.

Chuck Mazzanti: That's awesome. So you transacted the ESOP about a year and a half ago?

David Jaeger: Yes, March of 2025.

Chuck Mazzanti: Tell me about that. What was the lead-up? You're a younger guy. When I talk to contractors, I feel like a lot of people don't understand that an ESOP is a really good avenue for people who aren't necessarily looking to call it quits in the next couple of years. I'd love to hear what got the ESOP on your radar, and then why the ESOP won out over a strategic buyer or private equity.

David Jaeger: The ESOP landed on the radar because we were trying to get creative. My dad and I are twenty years apart, so our goals are different. He's in his sixties, I'm in my forties. Going back to the COVID era, it was really his time to take off, travel, be retired, be grandpa. Then the question became how. That's where the ESOP landed on the radar, but in my head I didn't know enough about ESOPs. They're a little complex, and they're not really out there. People don't talk about them. From my perspective, I was still young and hungry, so how do we do this, and how do I create liquidity and security for my dad at the same time? Fortunately for us the company grew really fast, and within that became the problem of how you cut your dad a check and say see you later. You just can't do it. It's not feasible, and the company would be in trouble afterward. So we started looking at different avenues. Around 2014 I started getting approached for acquisition by private equity. Some of it was competitors, some of it was groups looking to enter the infrastructure and utility space. I was humbled by it. We started this company and then within seven or eight years people were knocking on the door saying let's buy it. I was honored that people even cared or realized what we had going on, because I was living in the moment, stuck in my day to day and week to week. Those offers came and went. About every six months somebody new would knock on the door. I'd always go to dinner with them, sometimes multiple dinners and meetings over months and years. It just never felt right. I always looked at it like they have their own me. They're probably not going to need me. And what does that mean for me? I started asking them, and working with accounting, what does this number look like after taxes? What happens with control? Going back to making a customer's problem my own, sometimes that wasn't the most profitable thing. Sometimes I did things at cost to move the problem along for the bigger picture. Those things aren't going to happen when you sell out, most likely. You lose the control and the ability to call up and say, I've got rental trucks, go pick them up, and fly guys all over the country to take care of a customer's problem. And the people who helped get me where I'm at, you can't do this on your own. A buyer already has a me, a COO, a safety person, somebody in the office doing payroll, a controller. It felt like they were going to come in, buy my market, and maybe keep ten percent of us. It never settled well with me. So it was, okay, how do I get creative? I kicked the tires on a feasibility study for an ESOP thinking I'm probably not going to qualify, probably not big enough. I got a call back from the Menke Group and they said, you qualify, what do you want to do? So we talked it through and started negotiating. It took about fifteen months, maybe a little less, to put the whole program together and do the negotiations. It was a lot of work, but the more I learned about the ESOP world, it just felt right. It honestly felt like a win-win. It was an awesome opportunity for my dad to sunset, create liquidity, and still have chips on the table, because we didn't go 100 percent, we did 49. And it was an opportunity to put our money where our mouth is. Everybody says the business is family, or we all want an owner's mentality, but we were actually able to put shares in people's hands and give them a chance to own something beyond a 401(k) and beyond their paycheck.

Chuck Mazzanti: Before we started recording you brought up a really good point that I hear all the time. There are so many misconceptions around who qualifies to go ESOP, from top line revenue to EBITDA, and depending on who you talk to you get ten different answers. For a point of reference, when you transacted, where was top line revenue, if you're comfortable sharing, just so the audience gets an idea.

David Jaeger: When we were looking at it, that would have been 2024. Last year we did eighty-four million. The year before that about seventy-five. The year before that we were in the sixty million range. So we've gone up about ten million a year over the last few years.

Chuck Mazzanti: That's awesome. You said you put your money where your mouth is, and now your employees who helped build the company get the benefit. In construction your labor force is your business. You built the company on their backs and you rewarded them. But again, there's so much misinformation. What was the reaction when you told them they own the company now? And what does it look like from when you transacted to now, a little over a year and a half later?

David Jaeger: You get a mixed reaction, and I had been coached to expect that. I asked the Menke Group, from your experience, you launch this thing, what happens? And they said most of the time it's crickets. That was our experience. The unique thing about Nor-Cal and Legacy Utility Group is that we don't operate like a traditional construction company. We have small franchises. You might have ten employees in LA and ten in San Diego, spread throughout California. It was really hard to get everybody together without shutting down the company, or asking everyone to come down on a Sunday and hoping they could get home by Sunday night to work Monday. So we had to do it over Teams. It's hard to connect with a hundred and fifty plus people over Teams, and there are fifty plus people in the ESOP. You explain everything and then hand it over to the implementer team, and they go over some high-level financial stuff, and it's intimidating. Everybody looks at it and asks, how does this impact me? So when I initially launched it, it was really quiet. But I had people in the group who I knew would either have experience or ask questions. It went quiet for about ten seconds, but I had guys who had been with me ten-plus years, and I could ask them how they were feeling about it without it looking like I was picking on them. They'd be honest with me. That created a little conversation. Two other things were key. We created an email address, ESOP at Nor-Cal Pipe at the time, and it went directly to me. It gave people a chance to ask their personal questions. How much does this cost? Is this costing me anything? Is the business okay? Are you retiring? All of those questions. The other thing, which we're still working through, is continuing conversations. I created an open calendar where people can plug in and get fifteen to thirty minutes with me, depending on what they need, and ask their own questions, just like you and I are talking right now. Some people took advantage of that. Every month we also push out a little bit of information. I learned that some subliminal messaging works, small stuff in a newsletter, highlighting people making decisions that positively impacted the ESOP. Fuel is a big thing for us right now because it costs so much, so we created an operational competition where people were trying to save on fuel. We highlight the individuals with the highest percentage of savings month over month, and then you say, this helps profitability, which helps the bottom line, which helps our share price. You start tying things together. The last thing we did was create committees. Right now we have the ESOP committee with about six people, a culture committee and a safety committee. They all funnel back directly or indirectly into the ESOP conversation. Just keeping the conversation active is really important.

Chuck Mazzanti: It's tough when you have people all throughout the state, and now you're branching into other parts of the country. It's quite a task to wrangle the troops. You mentioned fifty or sixty people are in the ESOP and you have a couple hundred people, so it sounds like you have a union workforce and the union employees are outside the ESOP. Is that correct?

David Jaeger: Yes. We had to figure out where to draw that line. It was complex with the multiple unions, and we felt like that was probably the spot. It was tough. I would love to include everybody, but with collective bargaining agreements and the way they change, it just didn't seem like the right place to include them, unfortunately. I'd love to include the team that's out there in the field every day, but it wasn't in the cards.

Chuck Mazzanti: It's tough. I sit in Chicago, which is a huge union contractor area, and I think the unions are coming around to it slowly but surely. How you transacted is more the norm. Can it be done with the unions inside the ESOP? Absolutely, but it's coming along slowly. Was that piece of the education tough, saying we have this team that's part of the ESOP and this team that isn't? How did you navigate that?

David Jaeger: It was hard. The cool thing about the ESOP community is that as soon as we announced, my LinkedIn got flooded with contractors. I have a pretty decent following and I'm always adding people, because I think it's important to network. That's how you and I met. A lot of ESOP companies and people within them at varying levels reached out, and some of them were local. There are a handful of local ESOP contractors here in Northern California. I connected with one of their teammates and asked him that exact question: where did you draw the line, and how was it received? He said it was tough on the guys who had been there a long time in the field. But what they used it for is they were careful how they worded things. Instead of saying we're 100 percent ESOP, because 100 percent of the employees don't own it, they'd say employee owned. It also gave them an incentive for a guy who had been a foreman for fifteen years to level up and ask what he could do to go from foreman to superintendent, or superintendent to estimator or project manager, to get into the ESOP if that's what he wants. So that's been our approach. Guys, we had to draw a line somewhere, and most of our guys are pretty understanding of that. Then we say, here are the opportunities. Some of our operators are on the ESOP team because they moved into manager roles. It gives them a sense of what happens if you move into those roles. There's nothing wrong with staying either. Those guys are well compensated in the union, sometimes a lot better than a lot of people at the company. There are a lot of perks and the union has been great to us. But there has to be a line somewhere, and that's where we drew it, and we're using it for motivation. If guys are really interested in the ESOP, level up and we'll get you into these management areas.

Chuck Mazzanti: Especially in the heavy civil and adjacent space, you always have that, because before you went ESOP you had office staff who weren't card-carrying union members, and maybe they felt left out. I'm sure you had a great 401(k), but there wasn't anything else for those employees. The ESOP is a nice piece. The union folks are taken care of, the pay scale is great, pensions are great, benefits are great. But now the other side of the house that didn't get those union benefits gets the benefit of the ESOP, and people can transition as well. It's the best of both worlds.

David Jaeger: That's what I kept telling everybody. It's a win-win, in the odd case that you don't really see very often.

Chuck Mazzanti: When you transacted, how much of your business was bonded? Was bonding a big piece or a small piece?

David Jaeger: Our lining division does about a third of the revenue of the overall business, but the work that's bonded is probably ten percent of our work.

Chuck Mazzanti: So not a big piece. Some companies I've worked with have a hundred percent of their work bonded, doing a hundred million in heavy highway work. But ten percent is not nothing. Were there any surprises when you went ESOP and the balance sheet flipped? Any heartburn with the surety? When did you get them involved?

David Jaeger: That's a great question. As you're going through this process, it is so hard for me, because I always try to be open, transparent and honest. I felt like I was keeping a secret for thirteen months, being shifty and not direct with anybody. I'd meet with the bank or the bonding company and I couldn't say anything. Everything's good, please don't ask any more questions. Luckily, this is where being partners with my dad for so long really paid dividends, because he has so much history in the business. We have a long-term relationship with the bonding company, and my CFO had a long-term relationship with the person who represents them. Because we'd done business for so long it was easier, more open and more trusting, so you could have that conversation. I didn't include anybody from a banking or bonding perspective until the last thirty to sixty days, because I wanted to make sure things went through. I didn't want to create a fire alarm where there didn't need to be one. I didn't know how long the negotiation was going to take on the final price, and I didn't want it to linger for six, seven, eight months of back and forth. So I wanted our ducks in a row, with numbers and everything we could lay out, finishing out a fiscal year, so we could be really well prepared for the conversation with bank and bonding.

Chuck Mazzanti: That makes sense. It's a long-term relationship, so as long as you have that continuity. In the surety industry over the last five to seven years, I'd say they've come around to the ESOP world a lot more. A third of all ESOPs are contractors. There are about sixty-five hundred ESOPs in the country, a third of those are contractors, and it's growing. I'm going to do a LinkedIn post this week: factoring in that some are only ten or twenty percent, there are close to seventy-five ESOP contractors on the ENR Top 400. It's not a fly-by-night structure, there's some horsepower to it. Surety is largely solved as long as it's explained and you have a service team that understands it. So now you have Legacy, you have Guardian Traffic Solutions. Can you talk about what you're doing with getting other entities under the parent company, what the plan is, and how the ESOP is helping or hindering you in that effort?

David Jaeger: You alluded to Guardian. We also have JVAC, and we have ECS, a company we purchased last year out of Texas. When we transacted the ESOP, I wanted to expand outside of California and my dad wanted to retire. I had already built Guardian, a traffic control company, on the side, and JVAC, a vacuum truck company, on the side, and I own those with a couple of other partners. Nor-Cal has such a geographic name, and to get out of California, and there's nothing wrong with California but I wanted to expand and grow the business, I had to come up with an idea and a name and a holding company. That's what we transacted as the ESOP, Legacy Utility Group. At the top of everything is Legacy, and the individual companies all feed up into the ESOP. So we're buying some of the companies I had already built, including Guardian, and we're hopefully going to transact JVAC this year. We went out and purchased ECS. We vetted the guys over there for about eighteen months to two years. The idea was we wanted to get into Texas. We knew we couldn't take the California name over to Texas, because people would say they're not using those guys. So it was, let's figure out how to bring this in and make sure they check the boxes from a core values and reputation perspective. And it was important to us that we found an owner who wanted to stay on, which we were able to do with Michael over at ECS. Basically what we're trying to do is extend what I call the smiley face, and go from Sacramento to the Carolinas. We're being strategic about finding partners who are looking for an exit strategy. What was nice for us is that because I was an operator in the field, I understand their perspective a lot of the time. Not every time, but a lot of times, because I grew up in the field. I can run the trucks. I've done the long days, the long drives, all of it. Guys like Michael at ECS are getting approached for acquisition by private equity groups they don't connect with, the same problem I had. So what we told the team at ECS is that we'd like to bring in our infrastructure, the things we've already done, whether it's daily billing on an electronic tablet, the safety program, the fleet, the banking, the bonding, the financing, the HR, all the things they maybe don't want to do so they can just build their business. We kept the name, we kept the team, and all we wanted to do was take stuff off their plate and let them run. And the nice thing with the ESOP is it creates an opportunity for people to still get a piece of ownership. So Michael is still gaining ownership even though he quote unquote sold ECS. He's now gaining ownership at this new company, and he's also gaining share price going up because there are other entities feeding it. It's not just ECS. He now owns part of Nor-Cal and part of JVAC and part of Guardian. All these different entities we have, he can be a part of all of them.

Chuck Mazzanti: That's awesome.

David Jaeger: And it's positively impacted all of them, to be honest. His team has created opportunities for Guardian and created opportunities for JVAC. It's been nice. When you start finding like-minded people, you can start bringing together resources and saying, teach me some of the things you did and I'll teach you some of the things I did, and work together. It's been really nice.

Chuck Mazzanti: You're combining forces, so you're getting all that mind sharing, plus a new market. You're bringing a perspective they didn't have otherwise. And let's be honest, going ESOP takes time and it takes capital. Some people like the idea of an ESOP but they don't have the money or the wherewithal from a timing perspective to get their ducks in a row. What you did is extend an olive branch and give them the best of both worlds. They get to be part of the ESOP without taking on the hassle you and your father did, and without the risk of hiring the wrong advisor or ending up with the wrong debt stack. How did that deal come about? Did they know anything about ESOPs, or did you educate them on it?

David Jaeger: ECS was introduced to our president, Nick, through a person we buy equipment from. I've had a relationship with this individual going back to when I was renting trucks twenty-odd years ago. He obviously knows my president, we work a lot together, and he knows some of the inner workings of what we're trying to accomplish. Being in the industry, he knew the guys at ECS didn't really have a transition plan, and they were at the point of, we've topped out, what's next, how do I get out of here. The selling component to private equity never made sense to him. Our conversations were so similar when we met and talked, in terms of why private equity just didn't make sense for either of us. He and I connected, but he and private equity, and me and private equity, didn't. He was looking for something that made sense. He did have some experience and some ideas about ESOPs, he was familiar with it, so he was able to wrap his head around it a lot quicker than somebody cold off the street. But there was a long vetting process. We spent time on the golf course, time at dinner, time getting to know each other, some of it on Teams just like this. Some of our leadership team also spent time getting to know him, to make sure the alignment was there, what his long-term goals were, and whether we could service that, whether it was going to be an exit strategy for him or a long-term landing spot for him and his team, which is ultimately what he chose.

Chuck Mazzanti: Was getting his crew up to speed pretty similar to getting your guys up to speed, letting them know they're employee owners now, or were there differences?

David Jaeger: Uniquely, Michael is the head of our ESOP committee. It's been nice, because he's been able to be the voice out there to talk to people and explain it. He really wrapped his head around it and has been able to teach the team in Texas, and not just Texas but everywhere else we operate. We've had the same approach. We've all been doing this together. We transacted the ESOP in March of 2025 and we transacted ECS in December of 2025. In reality that was a lot in a nine-month period, and they've been living it with us. Our stock price just came out, I got the report this week, so we'll have our first launch coming up. We're trying to create positive momentum and fine-tune it, because we didn't really know what to expect for the last thirteen to fifteen months of what this was going to look like. The other thing we did was bring a lot of their team into California, from all of our different companies, everybody together in one room from a management perspective, for a few days. We went over where we're at, what's going on, and where we're going. That was really important, and we got a lot of positive feedback. It was finally getting some face time with everybody in the same room, shutting the doors and talking. Let's talk through the good, the bad, and what you don't understand, and let's work and go forward together. It created a lot of confusion at first. When you transact an ESOP you have changes in leadership, and on top of that you have a new company, and we brought in Guardian two months later, and we're doing all these acquisitions in all these different locations, and then we opened an office this year in Texas. Everybody's asking what is going on, it's happening so fast. So getting people together in a room, putting out a survey ahead of time and telling people to bring their concerns and voice them, and then laying it out and going through as much as we could. Some stuff had to get tabled for another day, but we tried to get through everything we could in forty-eight hours. And the crux of it is really the follow-up. As long as you're following up and having continual conversations, it creates the trust and the positive momentum so that people believe in what we're doing.

Chuck Mazzanti: That first acquisition is pretty quick from when you transacted. And you're in a capital intensive business. So how did you manage it? You have a new debt stack you didn't have pre-ESOP, then you had to pony up money to make an acquisition, you're growing, you're still hiring people and getting new equipment. How did you manage that? Is your CFO bald now? Because that's a lot.

David Jaeger: It is a lot. You have to be intentional and you have to be smart with your decisions. We leaned on our vendors. The big thing we have right now is a really good banking relationship. It's been really helpful. We have a team of people we work with at Avid Bank who have been fantastic. They're familiar with ESOPs and they've been great to work with. They've really been helpful in helping us understand. We've been honest and open, and it's been a good team. It's really important for me, for growing the business, that we surround ourselves with the right team, and we've been lucky enough to do that with them.

Chuck Mazzanti: A hundred percent. And you're an EOS contractor. You were EOS prior to doing the ESOP, correct?

David Jaeger: Yes, we've been EOS for two years now.

Chuck Mazzanti: So you were doing EOS for roughly six months before you went ESOP. When you go, you go. Do you feel like the structure of EOS and the intentionality helped you with the ESOP transaction and transition?

David Jaeger: EOS has been super helpful. I think people who are founders or family businesses can relate. A lot of times my dad and I were working on the same things, just differently. Because I was in Southern California for ten years and he was in the north, it almost felt like two different businesses, and there was no connective tissue. We really implemented EOS after my dad retired. It wasn't by design, it just happened to be that way. But the implementation was really beneficial, because it allowed us to divide and conquer. I know that sounds silly, but it really put it in your face. First you sit down and you make these goals, and everything is on the table, don't torpedo anything, you can say whatever you want. You bring your leadership team together and you talk about the right people in the right seats, and your one, three, five and ten year goals. You start laying those out. Then you ask, how am I going to get there, and you keep bringing it in. You find that these are my one year goals, and your one year goals lead into your three year goals. It allowed us to create a lot of structure we hadn't had before. Being frank with you, it was a family-run business and my dad and I just put it together without a lot of sophistication. It was a willingness to work. Then it became, okay, now we have a hundred and something employees, we have a lot of mouths to feed, we have to make sure this thing's around. What does this look like post my dad, and how is this going to work? How do we get better structure and organization so people feel comfortable where they're working, and they know where they're going and what this business looks like? Because now there's new leadership in charge, and even though people knew me, they didn't know me from a global perspective of, he's running the business, and now everybody's accountable to me versus my old man when he was here.

Chuck Mazzanti: Did the Texas acquisition run on EOS?

David Jaeger: Everybody does now. They didn't before, I should say. All of our meetings, all the way top down, are on the same cadence. They all look similar. If you attended a leadership meeting, or a payroll meeting, or a different company's meeting at Guardian, they should all look very similar. The cadence is the same, even though the goals or the data might be different.

Chuck Mazzanti: I was curious whether the previous owner happened to be running on EOS and you just transitioned it.

David Jaeger: That would have been nice, but no, he wasn't. He's really owned it though, he and his partner have really taken it on. The whole team has, to be honest. We've got a good implementer, and our implementer happens to be on our board now, so that's been helpful for us as well. What we've done is use our implementer to add EOS training to our management team. So now when you become a manager, you go spend a day or two with our implementer in a group setting. We might bring all the directors, for example, eight or ten people sitting at the table for a full day with our implementer, going over how these Level 10 meetings should look, how they're run, the cadence, all of that. And we have refresher courses every quarter.

Chuck Mazzanti: Like we were talking about before I hit record, EOS is growing so much in the contractor space, and I'm seeing it in the ESOP world, contractor and otherwise. There's so much similarity with the structure, having the board and governance and a mission and a five, ten, fifteen year plan. I think it's a match made in heaven for the people who have the wherewithal to take it on, because it's a big lift.

David Jaeger: The nice thing EOS has created for us is that you can't really hide from it. Everything's right there. Your individual rocks, as we call them, your longer-term to-dos, are right in your face. You have to report weekly whether you're on track or off track, and your deadline's coming. There's a sense of pride when you complete your tasks. It feels good when you're sitting in a room of your peers and your stuff is done, and you're checking things off and moving on to the next thing. It's created a lot of visibility. The nice thing for me is that it created transparency and visibility, so I can see down farther if I want to get in the weeds. I try not to, but I can drill down into other people's meetings and other groups' data if I want. I usually don't, because it all ties in and bubbles up, and we have a team of people who highlight the things that need to be brought to my attention. But it really has been a transformative tool for our company.

Chuck Mazzanti: I found out about you from the Menke podcast. Those guys are great advisors and their podcast is great. Hopefully I can grow this to half as good as what they're doing. If I remember from your episode correctly, you did a ten year note and you're hoping to get it paid off in six or seven years.

David Jaeger: That's the goal. It's aggressive, we'll see. It's hopeful. It's tough, because you have all these unforeseen things, whether it's fuel prices, which have negatively impacted the bottom line for us a lot this year. It really impacts our business because we have big trucks and they burn a lot of fuel every day. Those are things you don't budget for, because you don't know the price of fuel is going to double. That's cash gone. But the goal is to aggressively pay that down and then hopefully transact again in the next ten to twelve years for the remaining fifty-one percent.

Chuck Mazzanti: Can you speak to the tax treatment? One of the biggest benefits of an ESOP is the tax-free income on the ESOP portion. I'm assuming that's helped substantially on the debt service, as well as enabling you to make those acquisitions and maybe get more creative on hiring. I'd like to drill in on what that looks like for you.

David Jaeger: The tax component was a large component even to get the ESOP deal done. The way my dad smartly viewed it was that it was basically double, because he was not having to pay taxes on a portion of the money. If they gave him five million dollars cash, that was essentially ten million dollars in value. So the tax savings has definitely been nice. It has given us some flexibility to figure things out financially. I have a really strong CFO and an accounting team that have done a really good job of managing the money and making sure we're accruing where we need to, whether it's the ESOP note or CapEx. You have to be a lot more structured. We used to buy equipment a little sporadically, my dad and I, especially when we were starting. Now you have to be more structured with CapEx. You have to plan it out, it has to run through the board, and you have to make sure you've allocated the funds correctly so you can execute it and have it make sense from a tax perspective. It's definitely different, but it's all good. It's part of it. If you really want to grow, you have to change it up. You can't do the same thing every time.

Chuck Mazzanti: On the recruiting front, has the ESOP caught its legs? Has it made a material difference in fighting the good fight in the labor market? I feel like that's always the top or second issue plaguing construction companies. Has it given you a competitive edge compared to your peers?

David Jaeger: I think so. We've had people on our team who have been approached and asked to leave, and they've said they'd like to stay because they're part owner now and they really want to see this thing through. On the flip side, we've used it to be strategic in hiring. We're still building out more material to really push it. We built some videos that are part of the new hire process, and recruiting videos. We've built out material we use for our job ads, letting people know you can be an owner where you work, and why that matters. The next thing I'd like to see is to drill that down and show the money earned. It doesn't cost them anything, they're not paying for it directly. So leaving for five dollars an hour, or leaving for an extra five thousand dollars, might sound great for a year, but the reality is this is what you're giving up. Helping people wrap their head around that. Getting our share price out and getting the committees built will start to snowball, and then we'll have that material for everybody to see. Once you do it once, it becomes easily repeatable, and you start showing people those things and it creates positive momentum.

Chuck Mazzanti: You hit the nail on the head. People, especially on the younger side, will jump ship for a couple of bucks an hour. But if you're younger, the power of the ESOP twenty-five or thirty years down the road is that you're going to have a few million bucks, probably, if not more. Divide that by thirty years and it comes out way ahead of five bucks extra an hour. The communication is hard though. When I was twenty and someone threw extra money at me, I probably wasn't thinking about what I'm going to do in retirement. But it's such a good competitive advantage, especially in the construction space. What is the board makeup, and how did you set it up to start? Has it changed a year and a half in?

David Jaeger: The board right now is me and my dad, being that we're fifty-one percent owners, and our chairman of the board is our EOS implementer, Craig Hetrick. That's the dynamic right now. We are adding a fourth board member. We have until March of 2027 to add a fourth member who is completely independent. Craig doesn't qualify, because he works with us as a consultant as well. But Craig is a former CEO, so he brings a lot of different experience. He's not a construction guy, he's got a food service background, so he has a different perspective, and he also works with a lot of businesses on leadership coaching. I appreciate his perspective. We're trying to find a fourth member with a different background. We've interviewed a handful of candidates and we're still working through it to find the right fit, because we'd really like a long-term solution there.

Chuck Mazzanti: As we wrap up, what does the next ten years look like? If you had a crystal ball, you mentioned the smiley face, what do you want the makeup to be for Legacy?

David Jaeger: In ten years I really want to build that out and get from coast to coast. I'd like to expand our footprint and expand our team. I'd love us to have a little more in terms of coaching and leadership coaching, allowing people to see what their career trajectory looks like, which we're building out. We're hiring a chief people officer right now. I'd like to see more long-term stuff built out. And I'd really love to see the ESOP note paid down or paid off in that amount of time, which would give us more financial flexibility and hopefully let us make some more acquisitions and continue to grow. Maybe that's up the East Coast, or maybe higher up in the Midwest or Northwest.

Chuck Mazzanti: I'd love to have you in Chicago. There are a lot of good contractors that fit that silver tsunami bill, so they have to figure something out in the next five or ten years. To that point, do you want to stay in your core competency for now? Or if there was a really good GC that listens to this and says, I like Dave, I like his energy, I like that he takes care of his people, he's structured, he's got a lot left in the tank, maybe I'd be interested in going ESOP but not myself, selling to someone like Dave. Is that something you'd entertain, or do you want to stay in the core competency of the companies you've created so far?

David Jaeger: We're open to all ideas. I try to be open minded and flexible and see if anything's a fit. Our biggest thing is core values. We have to align on core values and goals. So you check the box on teamwork and integrity and thinking big. I really want people to subscribe to those things, and that's where we want to find teams that are a fit. The other thing is long-term goals, finding people whose long-term goals line up with ours, who say, hey, we want to grow too. Maybe they reached a limit with capital and they don't know how to grow beyond that. Overall, if there are other products or services, as long as they're customer service focused and they really want to be a partner for their customers, you never know. I would have sat here twenty years ago and not told you I'd be sitting here twenty years later. We named the company Nor-Cal because we never thought we'd leave Northern California, and here I am talking to you about going nationwide. So I try not to be a closed door to anything.

Chuck Mazzanti: If someone's thinking about going ESOP, what's the biggest reason you'd say they should do it, and then to play devil's advocate, why shouldn't they do it, in your opinion?

David Jaeger: You should definitely do the ESOP if you're looking to transition, for a succession plan, and you have a team in place you think can carry it. The tax advantages are great. You shouldn't do it if you just want to ride off into the sunset. If you're done, and you don't want to be a part of it anymore, you don't want to help out, you don't want to be on the board, you just want to ride off, then it's probably not a fit for you.

Chuck Mazzanti: If someone wants to connect with you, what's the best way?

David Jaeger: You can get me on LinkedIn, or you can go to our website, legacyutilitygroup.com or norcalpipe.com. You can find me on either one of those.

Chuck Mazzanti: Awesome. Well, I appreciate your time. This was great.

David Jaeger: Thank you, Chuck. I appreciate your time.

Chuck Mazzanti: 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.