Succession planning, taxes led to flurry of year-end local business sales (Part 3)4 min read
In the final installment of this three-part series, we feature two additional local companies that were part of the wave of Richmond-area firms that decided to sell to new owners at the close of 2021.
In case you missed the first two parts:
Value Added HVAC Distributors
Chris Baker says he wasn’t looking to sell his family’s longtime company, Midlothian-based Value Added HVAC Distributors. But the calls kept coming.
“We got calls every day from people looking to do a deal,” Baker said. “We were not looking for a deal, but then the Canadians entered the picture.”
The Canadians he’s referring to were The Master Group, the largest HVAC distributor in Canada. And their offer was attractive enough to persuade Baker to entertain the idea.
It meant selling an HVAC supply company that his father, Ken Baker, started in 1987 as Virginia Air Distributors.
It grew over the years via acquisition, adding subsidiaries like Allied HVAC Distributors and South Carolina Air Distributors, amounting to nearly 200 employees across more than a dozen mid-Atlantic branch locations and around $200 million in annual revenue.
Value Added HVAC Distributors was created as a holding company for the subsidiaries as the company grew.
“They kept knocking and the offer got to something we couldn’t refuse. So, we ended up dancing and doing the deal,” Baker said of his talks with Master Group.
The dance culminated in a deal that closed in December. Terms were not disclosed.
Baker, 48, said a variety of factors led to him taking the idea of a sale seriously. One was taxes, a similar refrain heard from other local firms that sold in late 2021 to try to get ahead of what was feared then as a pending rise in the corporate tax rate.
Second, was the fact that business was booming.
“The demand for residential HVAC has soared during the pandemic,” Baker said. “As a business owner you look to maximize the valuation for your business. The decision was, even if we continue to grow and perform well, in the future will valuations be as strong and even if they are, if you do a deal and the tax laws have changed, you might not see any benefit.”
So, with the help of local investment banking firm Boxwood Partners, Baker struck the deal. It allows for all of Baker’s employees to remain and the company will continue to operate out of its headquarters at 2501 Waterford Lake Drive in Midlothian.
Baker also stays on to run the local operations and retains a stake in the new venture with Master Group.
Baker joined the family business after college in the early ’90s and became CEO seven years ago. His dad remained chairman until the Master Group deal.
Baker said the fact that Master Group has the bulk of its operations in Canada leaves the need for the U.S. faction to run things mostly as they always have.
“I’m still a vested owner and I’m not going anywhere for a while,” Baker said. “What’s remarkable about this transaction is how remarkably little will change. Since they’re Canadian a lot of stuff doesn’t translate,” in the U.S., such as payroll, benefits and other back office operations.
Collin Granger, Greg Samuels and Jyot Singh were in need of a new business adventure.
Granger was fresh off the sale of his family’s company Mapcom Systems. And Samuels, who’s CEO and owner of IT firm Solvaria, and Singh, CEO and founder of software firm RTS Labs, were looking for a side business to take on and grow.
The three were connected, hit it off and decided to pool their resources. They formed a partnership called GS2 Ventures and set out to find a company to acquire.
They stumbled upon EDI Partners, a Henrico-based company specializing in consulting and outsourcing of electronic data interchange services. It’s a method of transferring data between two businesses and is mainly used by manufacturers and distributors.
The company was founded in 1994 by Kent Benton and Bruce Sandkam. Granger said the deal came about as Benton was thinking about a succession plan, as Sandkam had retired about 10 years prior.
“He was just kind of looking to the future and he’s thinking about what he wants to do next,” Granger said of Benton.
GS2 liked what they saw and the deal was struck at 11:59 p.m. on Dec. 31 for an undisclosed sum.
“I think we just saw a company that was mature, had some great employees, was profitable and had some growth prospects,” Granger said.
EDI’s seven employees stayed on as part of the deal, as will Benton for at least a year, Granger said. They’ll continue to use the EDI name.
The group named Granger, who’s 33 and the youngest of the GS2 trio, as CEO of EDI. Granger said Singh and Samuels, who continue to run their respective businesses, will help him operate and grow EDI.
“They’re two guys who have been at it for a long time, have a lot to share with me and I can learn a lot from them,” Granger said.
Succession planning, taxes led to flurry of year-end local business sales (Part 3)