AD­MAN ELEC­TRIC GROWS AS EM­PLOYEE OWNED FIRM

Chattanooga Times Free Press - - BUSINESS - BY DAVE FLESSNER STAFF WRITER

Todd More­land says he wanted to be an elec­tri­cian since he was 16 years old at Oolte­wah High School, fol­low­ing in the foot­steps of both his fa­ther and grand­fa­ther.

Start­ing 40 years ago as a teenager at Ad­man Elec­tric, More­land started mak­ing cof­fee, get­ting dough­nuts, work­ing in a ware­house and driv­ing a truck be­fore get­ting his elec­tri­cians li­cense through the IBEW union and later be­com­ing an es­ti­ma­tor and pro­ject

man­ager.

More­land also knew early he wanted to run the com­pany and af­ter the tragic death of his fa­ther, the younger More­land ne­go­ti­ated to buy the com­pany in 1996 with bor­rowed money when he was only 33 years old.

At the time, Ad­man Elec­tric had about 18 to 20 em­ploy­ees and $2.8 mil­lion in rev­enues. But un­der More­land’s lead­er­ship over the past three decades, the Chat­tanooga elec­tri­cal con­trac­tor has grown to more than $50 mil­lion in an­nual rev­enues with about 300 em­ploy­ees.

By de­vel­op­ing re­la­tion­ships with many gen­eral con­trac­tors — of­ten on the the Hon­ors golf course in Oolte­wah where More­land is an fre­quent player — More­land built Ad­man into one of Chat­tanooga’s big­gest elec­tri­cal ser­vice busi­nesses, op­er­at­ing in five South­east­ern states.

“We are known for de­liv­er­ing qual­ity projects on time – we’ve never missed a sched­ule – and on bud­get,” More­land said, cit­ing the com­pany motto that “rep­u­ta­tion is ev­ery­thing.”

“We have suc­cess­fully com­pleted hun­dreds of com­mer­cial, in­dus­trial and large res­i­den­tial projects,” he said.

But af­ter spend­ing his ca­reer build­ing up Ad­man Elec­tric, then 55-year-old More­land said a cou­ple of years ago he be­gan think­ing of how he could re­al­ize the value of the com­pany while still pro­tect­ing and help­ing what he af­fec­tion­ately calls “my guys” — the em­ploy­ees who More­land cred­its with most of the suc­cess of Ad­man.

“The last time I checked they were do­ing all the work on a daily ba­sis,” More­land said.

So rather than sell Ad­man Elec­tric to an­other ri­val busi­ness likely to cut staff or po­ten­tially un­der­mine the com­pany’s record of suc­cess, More­land looked for an­other way.

More­land had ob­served other build­ing and con­tract­ing firms sold to ri­val com­pa­nies or out­side in­vestors and in­vari­ably the sell­ing com­pa­nies soon ended up with new man­age­ment teams, dis­plac­ing those pre­vi­ously with the com­pany, or they were un­able to sus­tain the busi­ness and cut staff and op­er­a­tion.

“I didn’t want that to hap­pen at Ad­man, and I’m cer­tainly not look­ing to re­tire or have my guys hurt,” he said.

While con­sid­er­ing his al­ter­na­tives, More­land said he saw a suc­cess­ful em­ployee-owned model while work­ing at Er­langer hos­pi­tal on a pro­ject with Mc­Carthy Build­ing Com­pany, the St. Louis-based con­struc­tion firm that has been owned un­der an Em­ployee Stock Own­er­ship Plan (ESOP) since 1996.

More­land, a self-taught busi­ness­man, be­gan read­ing about ESOPs, in­clud­ing the best-sell­ing book by Upen­dra Chivukula, a New Jer­sey assem­bly­man and Demo­crat, and Veny Musum, a Repub­li­can busi­ness­man. In their book The 3rd Way, Chivukula and Musum con­tend that a so­lu­tion to Amer­ica’s grow­ing in­come in­equal­ity is to make the econ­omy more in­clu­sive by ex­pand­ing the pri­vate own­er­ship of busi­nesses, in­clud­ing more em­ployee stock own­er­ship plans.

The book helped shape More­land’s think­ing.

“The crux of the book is that cap­i­tal­ism works, but it isn’t fair and so­cial­ism is fair, but it just doesn’t work,” More­land. “So what about a third way?”

More­land sees the ESOP as a fairer and bet­ter way to share own­er­ship in a com­pany, es­pe­cially a suc­cess­ful busi­ness like Ad­man which has en­joyed an in­crease in value over time.

More­land likens the cre­ation of the ESOP to a very valu­able 401(k) plan in dis­tribut­ing the eq­uity in the com­pany to em­ploy­ees over time based upon a worker’s com­pen­sa­tion. The vest­ing rights at Ad­man oc­cur over a 6-year pe­riod of em­ploy­ment for new work­ers, al­though most of work­ers at the time of the ESOP sale in Au­gust 2017 were fully vested based upon their prior work. The com­pany bor­rowed a third of the cal­cu­lated value of the busi­ness last year for an ini­tial pay­ment to More­land , who will re­ceive the rest over the next 10 years.

More­land re­mains as CEO, but he is an em­ployee and only a par­tial owner, just like the other work­ers in the busi­ness.

“It keeps the em­ploy­ees en­gaged and want­ing to stay with the com­pany and helps us to grow and suc­ceed,” said Ricky Ether­ton, the com­pany’s chief fi­nan­cial of­fi­cer for Ad­man. “We are all own­ers of this com­pany.”

Ad­man Elec­tric is dif­fer­ent from most ESOPs in that the union­ized elec­tri­cians are not in­cluded be­cause they are work­ing un­der their own pay and ben­e­fits con­tract ne­go­ti­ated by the IBEW for elec­tri­cal work­ers in Chat­tanooga.

Ad­man Elec­tric is now owned by about 30 em­ploy­ees, rang­ing from ex­ec­u­tives to sec­re­taries and jan­i­tors.

More­land is still run­ning Ad­man Elec­tric along with the same man­age­ment staff and he says he has no plans to re­tire any­time soon. A 5-mem­ber board of both em­ploy­ees and out­side di­rec­tors gov­erns the busi­ness.

“It’s sig­nif­i­cantly eas­ier to sell to an out­side party be­cause they hand you a check all at once and you turn over the busi­ness to them,” More­land said. “But I didn’t want to take the peo­ple who had built this busi­ness and hang them out to dry. You are ei­ther a fam­ily and a team or you are not.”

STAFF PHOTO BY TIM BAR­BER

Ad­man Elec­tric CEO Todd S. More­land talks about con­vert­ing the elec­tri­cal busi­ness to an ESOP plan that will ben­e­fit com­pany em­ploy­ees dur­ing an in­ter­view at the East 28th Street of­fices.

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