After its start as a family-owned business in 2005, DHE Plumbing & Mechanical now is transitioning to employee ownership.
The owners of the Grandville-based professional plumbing and mechanical contracting firm in mid-September announced to the team of 185 full-time employees that the company was being sold to them.
According to Nate Heyboer, who has co-owned DHE Plumbing along with brothers Eric and Josh Heyboer, the three of them decided to sell to employees after starting to think about a transition process for the company and exploring different avenues.
“We just decided that we’ve always kind of looked at our employees as our partners, and it was time to legally make them so,” Heyboer told Crain’s Grand Rapids. “We want to see the name grow on and we are very proud of the team we have, (so) we thought that’d be the best way for that to happen.”
Keep up with all things West Michigan business. Sign up for our free newsletters today.
The initial stock will be divvied up based on employees’ wages and years with the company, according to Heyboer. He said the announcement to employees was well-received, though the brothers received many questions about the transition.
“It’s a new concept to many people,” he said. “So, we’re still going through a lot of the educational meetings and we’re going through some of the more individual specialized questions, but overall, it’s definitely been a morale booster and we see a lot of excitement.”
Heyboer said the day-to-day operations, as well as he and his brothers’ roles with the company, are unchanged so far, though company leaders are still in the process of charting the future.
“It will be a slow process over the foreseeable future,” Heyboer said.
DHE was started and co-owned by Nate and Eric Heyboer and their father, Dale Heyboer, who had worked as a plumber for several years before launching the company as a commercial contractor. A few years ago, Josh Heyboer stepped in and took over ownership from Dale.
The staff at DHE Plumbing and Mechanical. Credit: Courtesy photo
The company has $65 million in commercial plumbing sales annually, according to Nate Heyboer.
He said the ESOP structure also became appealing after witnessing success from other employee-owned companies in the industry.
“We’ve always looked up to other ESOPs in our industry — whether that be electrical, or other mechanical — and just felt like watching them and their growth really helped push us to investigate how this works and found so many benefits that we felt it was the right choice,” Heyboer said.
DHE was advised on the deal by Grand Rapids-based Warner Norcross + Judd LLP, and the ESOP was represented by Ventura Trust. Byron Center-based Vision ESOP Valuation LLC served as the financial adviser to the trustee.
Growing trend
ESOP structures are a growing trend in West Michigan, where a study last fall ranked Grand Rapids 12th in the nation for the number of employee-owned companies in the region.
Companies that have made the transition in recent years include digital consulting firm Twisthink LLC, electronic engineering and technology firm DornerWorks Ltd., pallet racking and storage supplier Speedrack Products Group Ltd. and vegetation management company Integrity Tree Services LLC.
Justin Stemple, a partner at Warner Norcross + Judd whose practice focuses on ESOP deals, said employee ownership has a good cultural fit in West Michigan in particular.
“One benefit we have in West Michigan is we have, I think, a really good business community that likes to give back to the community and back to the employees, and ESOPs seem to be an attractive fit when they’re looking at succession planning,” Stemple said.
ESOPs can be appealing to business owners for maintaining company culture and because of tax advantages, Stemple said, though owners also have to consider a typically longer pay out period compared to other deal structures and the need for a management team to run the business when the owners transition out.
While Stemple said he has witnessed some softening nationwide with ESOP deals as well as traditional M&A recently, his practice has remained strong in 2023 and has included more local work than in the last couple years.
With ESOP deals, Stemple noted the “win-win-win” scenario for the sellers, the employees and the future of the company.
“I think it’s one of those rare situations where you go through something like this and you feel like often everybody is pretty happy at the end of the day,” he said.
More from Crain’s Grand Rapids Business:
Meijer, tech firm head to arbitration in dispute over self-checkout software
Tape manufacturer completes $40M expansion near Grand Rapids
Gordon Food Service store expansion helps Ohio city eliminate food desert
www.crainsgrandrapids.com
https://www.crainsgrandrapids.com/news/small-business/family-owned-contractor-transitions-to-employee-ownership/
