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Merger Helps Firm Compete In Changing Market; Long-Established Company Prospering After Being Acquired

December 22, 1998

Last year, Arthur M. Hungerford III found that his company, Hungerford Mechanical Corp., was at a crossroads. In formulating a three-year business plan for the company started by his father 40 years ago, he became convinced that this industry was consolidating in the Richmond area. “[Doing the] market analysis confirmed my thoughts about the changing market here,” said Hungerford, the company’s president.

He realized that, even with revenue of more than $30 million and an excellent credit and bonding history, “we were simply not capitalized to compete for some of the very large contracts associated with upcoming work.

“We had the option to continue as is, but the Richmond market is changing so dramatically the company would have been hurt in the long run,” he said. “I thought about acquiring other firms, but instead of acquiring, I was acquired.”

In January, Hungerford Mechanical merged with Group America Maintenance Corp., or GroupMac, a publicly traded company based in Houston that includes 28 mechanical firms in 21 states and has revenue of more than $400 million dollars annually.

“The merger allowed us to increase benefits for employees and provide more opportunities for advancement. It also provides economies of scale when it comes to bonding capacity and sharing of resources for things like purchasing,” Hungerford said. “It allows us to look at larger projects than in the past.” A key factor in his final decision, Hungerford said, was decentralized control.

“GroupMac picks well-managed, profitable companies with strong management that will stay. I am still company president, and on a day-to-day basis, nothing has changed,” he said. Hungerford said GroupMac member companies have many similarities, including excellent financial performance, strong, relatively young management committed to continue with the firms and “dominance in the value-driven market.” He said the ability to draw upon the resources of “sister firms” to meet special needs of Hungerford clients is also “an obvious strength.”

The Hungerford name is a visible one in Richmond. Hungerford’s grandfather started Hungerford Coal & Oil Co. in the early 1900s. His father worked there until he started Hungerford Inc. in 1957, which became Hungerford Mechanical Corp. in 1977. “Originally my father was a fuel oil distributor and did heavy boiler repair and installation, with both business and some residential customers,” Hungerford said. “He started getting into residential boilers to grow the business, and when air conditioning came along, we started installing air conditioning systems. When I came here in 1979, we were very involved in plumbing, heating, air conditioning, and design, and most of the top staff were engineers.”

Today the company specializes in industrial piping, air conditioning design and installation, fire suppression systems, building automation, and plumbing and heating system designs. More than 300 employees work at the company’s 25,000-square-foot headquarters at 3800 Deepwater Terminal Road, which includes office space and sheet metal and fabrication shops. The company’s primary customers are commercial and industrial firms.

A big recent project for Hungerford Mechanical was handling the fire suppression system in the fabricating building at the White Oak Semiconductor plant recently completed in eastern Henrico County. DPR Construction Inc., which managed the construction site, said Hungerford was “far superior to other firms we have worked with.”

“They did excellent work. In a fast-track job like White Oak, you can have problems, but they finished the job extremely strong. Art Hungerford came out on site when necessary, and it was impressive to have the president come out,” said Tom Munno, project engineer at DPR Construction. Customers include Woolfolk Construction, Philip Morris USA and Quebecor Printing Inc. Hungerford said that “relationship selling” and word-of-mouth referrals are the only ways to successfully market in his industry.

Target customer markets include companies working on special projects, those in need of fire protection and suppression systems, industrial and health care companies and “service work of any type.” Hungerford believes good employees are crucial to his company’s success. Key employees include Bruce Hayes, vice president of operations; Jim Migliarese, manager of special projects; and Craig Davis, manager of the fire protection division. “We try to hire character, not just ability, and then we train [to our way of doing things]. We like to start fresh,” Hungerford said. “We have respect for our employees and our clients. My philosophy is to listen, be genuine, and if you make a mistake, own up to it.”

Hungerford believes more consolidation will occur in his industry. He predicts the Richmond area will experience explosive growth as the semiconductor industry takes shape here with the building of a Motorola plant in addition to White Oak. “No longer can a relatively small number of firms support the awesome requirement for services necessary to meet demanding standards of quality and schedule ever attempted in our industry,” he said. “For Hungerford Mechanical, I see sustained growth in the future.”

The Resume

Name:
Arthur M. Hungerford III

Born:
May 18, 1955, in Richmond.

Education:
Bachelor’s degree in mechanical engineering from Virginia Tech

Career path:
Vice President, Hungerford Mechanical Corp., 1979-88
President, Hungerford Mechanical Corp., 1988 to the present

Family:
Married to the former Deborah Finney of Roanoke two daughters; Paige, 10 and Lauren, 6 Family lives in Richmond.

Spare-time pursuits:
Saltwater fishing, reading.

RICHMOND TIMES-DISPATCH
Trade Names is a regular feature about established Richmond-area businesses.
Metro Business Monthly profiles start-up companies that are less than 2 years old.
Copyright (c) 1998, Richmond Newspapers, Inc.


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