OwnersEdge gives Green Bay business owner an alternative to selling

Lisa Reardon (right), CEO of OwnersEdge, joins service technician John Donner (foreground) and service manager Scott Schoen as they check the cable connections in a secure IT hub of their operations.
Lisa Reardon (right), CEO of OwnersEdge, joins service technician John Donner (foreground) and service manager Scott Schoen as they check the cable connections in a secure IT hub of their operations. Credit: Rick Wood
June 22, 2016
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Lisa Reardon joins finance team members Becky Foat (left) and Chris Adee at OwnersEdge, a holding company that sets up ESOP plans.
Lisa Reardon joins finance team members Becky Foat (left) and Chris Adee at OwnersEdge, a holding company that sets up ESOP plans.Rick Wood

By Kathleen Gallagher of the Journal Sentinel

June 22, 2016 0

For five days, Steve Elias didn't even open the unsolicited acquisition offer.

Although he wanted to sell his three Green Bay businesses, Elias worried about how a new owner — particularly one looking to consolidate within the industry — might treat his 70 employees. So instead of responding to the sender, Elias remembered a presentation he had heard several years earlier and picked up the phone.

Six months later, Elias is still running his companies, but they've been sold to OwnersEdge Inc., a Brookfield-based employee stock ownership plan holding company that is looking to invest in and build companies in the Midwest.

The presentation Elias remembered was made by Lisa Reardon, president, chief executive officer and chairwoman of OwnersEdge. Reardon had talked about business owners' succession planning, and about how her company sought diversification through acquisitions of companies with leaders such as Elias who want to continue running their businesses.

"Quite honestly, nothing's really changed for me," said Elias, president of Baycom Inc., a provider of wireless voice, mobile data and video equipment to public safety and commercial clients.

Since the OwnersEdge acquisition in April, Elias says he has continued to run and expand Baycom, along with Baycom Cellular, which sells cellphones and other equipment from two retail stores, and Tour Guide Solutions, which sells wireless tour guide and conferencing equipment to manufacturers, museums and attractions.

But OwnersEdge now handles all of the financial and administrative responsibilities, Elias said. And because it is an ESOP, all of Elias' employees have the chance to be part-owners.

"An ESOP in a successful company can generate substantial long-term benefits for employees," said Chris Mercer, chief executive officer of Mercer Capital, a Memphis, Tenn.-based business valuation firm that has had an ESOP in place since 2006.

About 60% of people who are selling businesses start out saying they'd like to sell to their employees, said Linda Mertz, chief executive officer of Mertz Associates Inc., in Rubicon, and a 30-year veteran of the mergers and acquisitions industry. But the rules and legal work involved in forming an ESOP appear daunting, so it often "just stalls out, and they end up selling to a third-party buyer," she said.

OwnersEdge changes that picture by offering company owners an ESOP structure that's already in place. When OwnersEdge acquires their companies, they can cash out, but still continue running things — while in the process providing an upside for employees who become part of the ESOP, said Mertz, who is a strategic adviser to OwnersEdge. The model, where OwnersEdge formed a holding company to make acquisitions for the ESOP, is not a common one, she said.

"I don't know of anyone else doing this in our market," she said. "It's a wonderful, wonderful opportunity."

The idea for forming OwnersEdge grew out of Reardon's search for diversification. In 2008, when she took the helm at CC&N, Reardon says she was focused on creating a structure within which the network connectivity and communications technologies provider could grow.

In 2012, Reardon and her management team launched NEXT Electric, an electrical contractor that wires buildings for computing infrastructure and specializes in complex projects. NEXT helped CC&N to grow and had explosive growth itself, gaining 100 employees in four years, Reardon said. But that didn't satisfy her desire for more diversification.

Reardon had run CC&N through the recession, when revenue didn't budge for several years. She knew the importance of keeping an ESOP growing and worried that NEXT wasn't enough.

"I felt it didn't allow me to grow through whatever the economy throws at us in the future," Reardon said. So in 2014, she formed OwnersEdge, made CC&N and NEXT Electric subsidiaries, and went looking for more companies.

"I think that I'm at heart a problem solver and I do have a longer time span of looking ahead, trying to always be on the offensive side of the court," Reardon said.

Not all companies are suited to be ESOPs, Mertz said. It helps, for example, to have a collaborative management team like the one at OwnersEdge that works together well, she said. Also, companies that are consistently profitable with stable and preferably growing earnings work best for ESOPs, Mercer said.

Reardon says she and her management team have produced a 20% annual return over the last five years. With the addition of Elias' companies, OwnersEdge has more than $70 million of revenue and 320 employees, she said. And from her perspective, the future looks bright.

"We're expecting a very positive return for employees," she said.

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About Kathleen Gallagher

Pulitzer Prize-winning reporter Kathleen Gallagher covers technology, entrepreneurship and investments.

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