The longtime owners of a handful of Richmond-area companies, from an engineering firm to a chemical distributor and an electrical supplier, decided to sell in 2021, leading to a rush of deals to close out the year.
While the industries involved varied from deal to deal, there were similarities in what motivated the sellers, including succession planning, capitalizing on a hot market and fears of potential changes to the tax code in 2022.
Here are the stories of some of those sales. Stay tuned later this week for more:
In 1989, three local engineers working for a big engineering firm decided to make a go of it on their own.
They called their new company Alliance Engineering, and their plan was to go after the smaller jobs their previous employer wasn’t interested in.
The leap paid off.
Over the last 32 years the firm grew to 78 employees and three offices in Richmond, Baltimore and Newport News. Then on Dec. 31 of last year, the leap paid off yet again.
Kevin Kokal and Jim Burnette, the remaining two of the three original co-founders, sold Alliance to Colorado-based peer Merrick & Co. for an undisclosed sum.
The deal calls for all of Alliance’s offices and employees to become part of Merrick, including Kokal and Burnette.
Several factors led to them exploring a sale, including expected changes to the corporate tax rate. Another was manpower trends in the industry, caused by what Kokal said is a decline in interest from younger generations in engineering.
“Kids are more interested in computer science fields and it’s really taken a lot away from our industry,” Kokal said. “Trying to grow a company and hire engineers, they’re just not out there. So, growing the company is very difficult.”
Kokal, now a senior vice president with Merrick, said that’s led to a healthy M&A market.
“In the engineering world there’s a record amount of acquisitions. The best way to grow is to find the right match,” he said.
In Merrick, Alliance joins a 750-person firm focused on engineering, architecture and surveying. Alliance will become part of Merrick’s energy, manufacturing, and process team and the combined groups will focus on six industrial markets: power generation, manufacturing, food and personal care, bioprocessing, oil and gas, and chemicals.
Alliance’s focus in the Mid-Atlantic helps Merrick fill a void in its coverage in Virginia, Maryland, Pennsylvania, the Carolinas and Florida.
Kokal said the deal is structured so that the Alliance group will gradually meld in Merrick over time.
“We will be operating as-is for at least a year while we figure out the best way to integrate with them,” he said. “Engineers do not like change, so this presents a nice soft change over time.”
Part of that gradual change will eventually include the two cofounders finding the right time for their exit. Kokal, who is in his 60s, said he and Burnette, who’s in his 70s, were looking ahead toward an exit strategy while searching for a buyer.
“We have been at it for 32 years and we feel like it’s the best thing for the future of our employees because there are so many more opportunities for them with a larger company,” Kokal said. “It’s all about leaving the company in good hands.”
With that exit in mind, Kokal said the deal also helps begin a gradual final chapter to his long partnership with Burnette. The two bought their third partner out in the late ’90s and have run Alliance together since then.
“Partnerships, they don’t typically last this long without getting into all sorts of arguments and fights. Jim and I have never fought. We disagree on things but we work them out.”
From its inception in 1929, as what was then a Richmond branch of a Baltimore-based company, Atlantic Electrical Supply Corp. had always been a family-run company.
It started with I.R. Levet and his two business partners, Max and Joe Lehman.
From their first shop downtown on 8th Street, they grew the business over the years selling things like switches and wires and had a big market peddling GE brand light bulbs to all the hardware and drug stores.
Over time, newer generations from both the Levet and Lehman families came to work at the company, including Levet’s two sons and grandsons.
“In our heyday there were eight family members running this business,” said Steve Levet, a grandson of I.R. who until a sale in late December owned the company with his cousin David since the 1990s.
The sale to Washington, D.C.-based Encompass Supply, terms of which weren’t disclosed, brought an end to that run of Levet family ownership.
The reason, Steve said: “My kids and David’s kids didn’t want to get into it.”
He added, “It gets to a point where you’ve got to do something. We always joked ‘don’t get hurt over the weekend’ because it’d be very difficult for one of us to run the business by ourselves.”
While succession planning was on their minds, the sale was kickstarted in part by increased interest in Atlantic Electrical’s real estate.
The company’s longtime home at 2117 Westwood Ave. is in the pathway of increasing development in the Westwood area, in part as a spillover of nearby Scott’s Addition. Knowing that the time may be right to sell the building, Levet said they had to also figure out what to do with the business. They wanted to do right by the company’s eight employees.
“With all the activity in the area there’s been a lot of interest in the building,” Steve said. “I didn’t just want to sell the building, roll it up and put everybody out of work.”
It all came together in 2021. First, they were approached by local businessman and real estate developer Jay Nichols who wanted the Westwood property to the tune of $3.8 million.
“Then within a week or so we’d been approached by Encompass,” Levet said.
Both offers gave them what they needed: buyers for both parts of the business whom they were comfortable with. Then it all played out quickly.
“We were negotiating two deals at once for the building and the business. It all closed on the same day right before Christmas,” Steve said.
Atlantic Electrical now trades as Encompass Supply, with Richmond operating as one of its main outposts. With the real estate sold to Nichols, Encompass has leased new space at 1801 W. Marshall St. and will move in later this year.
The Levets, for now, are sticking around as employees of Encompass, still working with Atlantic’s other employees and its customers.
“David and I still here working just as hard as we ever have,” Steve said.
They’ve had plenty of mixed emotions about it all, including having to let go of some control.
“It’s a hard thing having been responsible for everything for so many years to let go of that responsibility. It takes getting used to, to pass the baton so-to-speak,” Steve said.
There are also thoughts of what their Levet predecessors would think of such a deal. Steve said he and David have pondered what those conversations might have been like.
“I think my grandfather, dad and my uncle would all three be OK with it,” he said.
great article. thanks