Finding The Right Formula for Growth

From joint ventures to divestitures, the BE INDUSTRIAL/SERVICE 100 used a mix of strategies to beat the competition

after its supermarket retail operation suffered major financial setbacks. And bidding farewell to black ownership completely and exiting the BE 100S this year are Gilreath Manufacturing Inc. and Total Premier Services Inc. Injectronics, a Tier 1 auto supplier, acquired Gilreath Manufacturing, which joined the BE INDUSTRIAL/SERVICE 100 list in 1997. Gilreath specialized in custom injection molding for the auto industry and was headed by CEO Leon Tupper since 1991. Total Premier Services, the Houston-based oil and drill business that debuted on the BE INDUSTRIAL/SERVICE 100 list in 2002 with $242 million in revenues, was sold to a majority firm.

WAR AND PROFITS
Companies like Dimensions International (No. 35 on the list with $98.6 million in sales), however, expanded by acquiring SENTEL Corp. in 2004. “We kind of broke new ground as two 8(a) graduates coming together,” says CEO Russell Wright. “It’s different when smaller companies get acquired by larger companies. At that point you just get consumed and go away.” Both Alexandria, Virginia-based DI and SENTEL were similar-sized firms servicing the same client—the government—and the CEOs of both companies thought they would gain more market share as a unit. Former SENTEL CEO James Garrett now serves as president of the SENTEL division. (See “Critical Mass,” in this issue.)

Up 42% is Huntsville, Alabama-based LESCO (No. 49 on the list with $73.9 million in gross sales), which also provides technology and facility support to the government. “Ninety-nine percent of our business is from the government,” says CEO Anita Williams. Williams says 2004 was a particularly good year because LESCO stepped into a different arena and didn’t rely solely on its 8(a) connections. “We started bidding on A-76 contracts,” says Williams, referring to the program that allows commercial businesses to bid on work usually performed by government employees. “Not many businesses wanted to try to bid against the government, but we tried it and we started winning.” LESCO has employees in Korea, Afghanistan, and Kuwait providing IT support as well as building and managing supply warehouses, which would ordinarily be managed by government personnel.

Because of this procurement trend by corporations and government agencies, BE 100S companies such as Bridgewater Interiors, LESCO, and Dimensions International have seen double-digit growth since last year. But that isn’t necessarily the case for all black businesses.

“I wouldn’t let the success of the BE 100S be the bellwether of how they are all doing,” says Michel, whose organization consists mostly of companies that generate less than $15 million a year. She reasons, “Since the theory behind procurement is to work with fewer suppliers, if anyone is seeing growth it should be the BE 100S.”

SELLING PIECES FOR PROFIT
Peebles Atlantic Development Corp. (PADC), BE’s 2004 Company of the Year (No. 18 on the list with $202.9 million in gross sales), cashed out on his landmark investment. With a $10 million incentive from the city of Miami to black business owners, Peebles acquired the Royal Palm Crowne Plaza Resort in Miami Beach for $82 million. The 417-room oceanfront luxury hotel opened in 2002

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