Loading
REVIEW SUMMARY
Company. Turbine Generator Maintenance
Industry. Heavy equipment
Key. Financial incentives for a job well done powers success.
By the numbers. Click here for information about TGM's most recent revenue performance.
When David Branton and two partners sought to buy out Turbine Generator Maintenance and save 22 jobs in Cape Coral in late 2008, local banks and economic development organizations largely ignored them.
Granted, it wasn't the most auspicious time to be searching for management-buyout financing around the time of Lehman Brothers' collapse. “No one was interested in talking to us,” he says. “We couldn't find any money at all.”
Now, after they engineered a successful seller-financed deal, lenders and others have started to take notice of Branton's team and the little-known company that generated $27 million in revenues last year. “They know who we are now,” says Branton, the company's president and CEO.
Turbine Generator Maintenance, known by its initials “TGM,” is one of those companies that keep the U.S. well fed and well powered. The company maintains and repairs steam and gas turbines for utilities, mining companies and agribusiness plants throughout the U.S. and Latin America. The company employs 44 people, including 22 in Cape Coral.
What TGM does isn't glamorous like technology or bioscience, but it's the kind of work essential to keeping industries running smoothly. It's behind-the-scenes, gritty tasks that rely on hard-to-find skilled mechanics willing to travel for good pay.
But TGM's operations in Cape Coral have been largely unnoticed because the company has no turbines to fix locally. Its headquarters are in Cape Coral because the company's original founder, Anthony Collins, was an avid boater.
The reluctance of banks to finance TGM at first wasn't solely a result of its obscurity or unfortunate timing. Branton says the company lost $1 million in 2008 in part because its overhead had ballooned under the previous ownership, a private-equity firm in Los Angeles called GFI Energy Ventures.
When Branton and two partners bought the company in January 2009, they revamped the pay structure and rewarded employees who called on customers and took good care of them. This pay structure is one reason TGM's fortunes came back so strongly, Branton says.
Rolled up and out
If it hadn't been for Branton and partners Robert Davis and Todd Feeley, TGM might have disappeared as quietly as it had established itself in Cape Coral. Davis is TGM's chief financial officer and Feeley is vice president of sales and marketing.
GFI, the California private equity firm, had established a fund to acquire TGM and its competitors five years ago to create a single firm with $100 million in annual revenues. In such “roll up” deals, private equity firms typically buy out smaller companies in a fragmented industry, trim expenses and sell the combined companies either through an initial public stock offering or in a sale to another firm.
TGM was GFI's first acquisition and it also turned out to be its last. Branton, 59, is a veteran of the power-generation industry with 37 years of experience, including 27 years at goliath Westinghouse. He was brought in by the private equity firm to fix TGM in January 2008 but soon found out the company was for sale because the roll-up proved to be unsuccessful.
Branton didn't want to be part of a sale and worried that any acquirer would likely be a competitor that wanted to put it out of business.
Without so much as a letter of credit, the management trio persuaded GFI to take a five-year note on the sale of the company to them in January 2009 in return for a speedy closing. After all, Branton, Davis and Feeley didn't need to do due diligence on TGM because they ran the company. “We couldn't have done it as outsiders,” Branton notes.
By July 2009, just seven months after acquiring the company, the management trio had paid off the five-year note from the profits they generated despite the recession and a drop in revenues. Today, the company is debt free.
Pay scale redux
One of the first things Branton and his team did when they took over was to restore a system of financial rewards that had been established by Collins, the company's founder who had sold TGM in 2005 to the private equity firm.
When the trio of managers took control of the company in 2009, they slashed pay 20% for front-line employees and 40% for management. They also laid off five sales managers who had been earning a base pay of $100,000 a year.
In exchange for these sacrifices, they promised a cut of the profits to the project managers, coordinators and foremen who made sure each job reached its financial objectives and reported no accidents or return fixes. Customer satisfaction measured by surveys was also a part of the compensation bonus. These managers are now eligible for up to 30% of the profits on a job if they meet these conditions. “No one made less in 2010 than in 2009,” Branton notes.
Because turbine maintenance and repair jobs last just two to four weeks, managers earn less when they're not working. That way, TGM encourages these managers to stay in touch with customers to ensure repeat business and a steady stream of business from its 2,400 customers. “Everybody's a salesman,” Branton explains.
This is the kind of compensation scheme that would never fly in union shops and that's part of the reason why TGM can beat the competition on price, some of which are the original union-dominated manufacturers. “You end up with a bunch of winners,” Branton says.
The poor economy and lack of jobs has also spurred employees, who see the company's financial results posted on the walls of the headquarters office. “It's amazing how employees respond,” Branton says. “It's caused people to be a little more entrepreneurial.”
TGM's non-union mechanics earn $20 to $30 an hour. “The difference between us and our competitors is those guys,” Branton says. Photos of them repairing turbines line the walls of the company's headquarters.
What attracts top mechanics are safety and high expectations for quality work, Branton says. The emphasis on safety “tells the mechanic he's the most important person in the company,” he says. “We don't want them to do substandard work,” he adds.
Twice a year, TGM convenes a meeting of mechanics and managers at a Cape Coral hotel. And Branton helped design a curriculum to train recent high school graduates in Lee County. “Mechanics are really the key to success,” Branton says.
Your free article limit has been reached this month.
Subscribe now for unlimited digital access to our award-winning business news.
Join thousands of executives who rely on us for insights spanning Tampa Bay to Naples.
