One of the biggest names in wholesale distribution in the Southwest — and certainly one of the most diversified — is Morrison Supply Co., which ranks #17 on this year’s Wholesaling 100. And another of the industry’s biggest names — Chip Hornsby — joined them last November as their new CEO. Hornsby, a former president and CEO of Ferguson Enterprises and later its parent Wolseley, is now an operating partner of Advent International, which acquired Morrison from longtime owner Scott Sangalli last fall. An East Coast native, he has since relocated to the Lone Star State, and is based at Morrison’s headquarters in Fort Worth.

Morrison Supply Co. has built a diversified business distributing products including residential and commercial plumbing; pipe, valves and fittings; hardware; HVAC; waterworks; gas and oilfield supplies; and appliances. The company operates 88 locations throughout Texas, New Mexico, Oklahoma, Kansas and Louisiana, along with 30 well-appointed showrooms.

After almost three decades with the Ferguson/Wolseley organization, Hornsby stepped down from his London-based position as CEO of Wolseley in 2009 and was contacted almost immediately by private equity firm Advent International. Due to the terms of Hornsby’s departure from Wolseley, however, he had to wait 12 months before he could pursue any discussion.

“I had to sit on the sidelines, but Advent stayed in touch and I did a lot of research into how private equity worked,” Hornsby noted. “Over a period of time, I had an opportunity to be in front of two dozen different firms. When my non-compete expired at the end of June, I explored where my opportunities were. I wanted the chance to establish a business in the format I envisioned going forward, and Advent seemed to be the best match for me. After initially planning to raise between $250 and $400 million to invest in a distribution business, Advent came back and said they were willing to invest up to a billion.”

Hornsby became an operating partner at Advent in November 2010, and 12 months later, they closed the acquisition of Morrison Supply. Sangalli continues to sit on the board of directors.

Fine-tuning their focus

“During these early months following the acquisition, we have focused our efforts on understanding the opportunities for Morrison and markets in the Southwest,” said Hornsby. “We hired Bain Consulting to help us understand how the company is positioned, and they surveyed hundreds of customers. What we found was an organization very focused on customer service and identifying customers’ specific needs in all markets. We want to expand and build on that success, and part of that is adding some new individuals to the team. We’re building up the team to expand beyond our current footprint. We are fortunate that three of our key leaders — President Darrell Hawkins, CFO Charlie Allen and SVP Mike Roberts —are still with us and have personally invested back into new business. We’ve added some key personnel, including Dan Filler, a former Bain Consulting executive, to work on M&A; Stan Allen, formerly of Ferguson, to manage operations; and Joe Lasik, who had been with Aviall, a Boeing company, to handle our IT efforts.

“We’re also looking at additional associate development and engagement; training them from a customer standpoint. Our mission is to look at ways to expand our business and enhance the service we provide our customers. Ultimately, people buy from people they like and can rely on. Our contractors really only do business within a 25-mile radius, and they want to do business with people where they have a relationship. So the more we can enhance the training and empowerment of our people, the better. Our training efforts have been limited in the past but our renewed involvement with ASA and their Education Foundation will be a key component going forward. We’re getting involved at the grassroots levels — showroom, inside sales, outside sales, warehouse. I have a simple philosophy that you take care of your people and they’ll take care of your customers.”

VP of HVAC operations Kevin Moore concurred, describing some of the positive changes he has already seen: “The biggest changes have come in the form of new and exciting resources we have been provided. One of the new resources was an immediate investment into technology providing our associates with new tools and quicker access to critical information. This has already had an impact on assisting our associates in streamlining their jobs, providing them with better data from which to make informed business decisions, and allowing them to focus their energy on servicing our customers. Only through this ability to effectively and efficiently service our customers will we be able to meet our aggressive growth goals.”

Making a smooth transition

As with any transition, communication is key, and marketing director Jennifer Williams said the leadership was particularly proactive in their efforts: “When you have a new regime come in, it’s natural for people to be nervous with the uncertainty of how that might affect them. But since Day 1 when the transaction was finalized, Chip has really put forth a personal effort to reach out to our associates, make everyone feel comfortable, and enthusiastic about what’s ahead.”

According to Moore, that effort has paid dividends when it comes to employee relations. “The response from our associates has been very positive,” he said. “Scott, Chip and Darrell did a great job early in the transition period of traveling to all of our regions to meet with our people, explain the need for new investment partners, and provide a clear understanding of the company’s goals for the future. Any anxiety was quickly replaced with a new and exciting energy focused on meeting goals and creating future opportunities for all our associates.”

Hornsby noted that he has really concentrated on helping associates understand who Advent is, what private equity is, and the impact it would have on them individually. “I try to send out brief email communications to associates every few weeks to keep them in the loop,” he said. “Our success is hinged upon our 1,100 associates’ success and development. In April, we held our first-ever company-wide meeting for managers and their spouses. Part of the focus was to roll out the initiatives and send a message of what we’re doing and where we’re headed. But it was also to set the tone of being social, having a good time and getting to know one another on a more personal level.

“From a supplier-based standpoint we met with all of our key suppliers within the first 30 days and made them aware of objectives and financial position. We want to have open dialogue with everyone, because this is going to provide new opportunities that will benefit our employees, our customers and our vendors.”

Realigning and redefining

One of the first things that Hornsby and Team set in motion was realigning Morrison’s business and establishing leaders by customer type. There is now a dedicated person heading up each of the product groups, and regional managers have been repositioned to focus solely on their region.

“With this new financial backing, we’ve been able to build our bench and add key employees,” said Hawkins. “For years, we’ve all worn lots of hats. But now that growth is eminent and we’ve got financial backing behind us, we’re able to specialize a little more. That will help us get closer to our customers and better understand their specific needs. It’s a real trickle-down effect that will pay off for us — and benefit our customers – in the long run.”

HVAC has long been a staple of Morrison’s business and continues to grow. Moore described the company’s approach to the HVAC market as a dealer-based focus.

“We have been fortunate to have established a strong network of professional HVAC dealers throughout our markets,” he said. “Our dealers require additional resources of knowledgeable people, technical support and marketing. Investment of these resources contributes to their growth and success and through our dealers will come our growth opportunities.

“Many of our branches are blended branches that distribute both HVAC and plumbing products. Our approach within these branches to segment and create a business within a business starts with our HVAC associates. We have within these branches an experienced team of HVAC specific managers, salesmen and TSAs to support HVAC contractors.

“Many of our rural markets contain customers that service both the HVAC and Plumbing sectors. Our associates in these branches are cross trained and able to easily service the customer in both product categories. In many of the markets where our customers are HVAC service specific and our branches service multiple industries, we have been able to acquire additional facilities and provide HVAC specific staff and counters. In the other locations our managers have done a good job of segmenting their counters with inventories and providing designated HVAC associates. This model has allowed us to operate two separate businesses under one P&L, sharing operational/support staff, and keeping our operating expenses low without reducing our service levels.”

Hawkins described how Morrison’s diversity into so many different product categories really helped the company through the challenging economic conditions in recent years. “Obviously the cycles used to be that when one product segment was up, another might be down. But after this latest financial crisis, everything was clobbered, however we are seeing some signs of improvements. Our commercial plumbing business has helped us and we are very well positioned on the HVAC side. We also see a lot of potential when it comes to the commercial PVF arena.”

Moore added, “We have been fortunate to be operating in markets that have not been as impacted by the housing markets and unemployment. The states in which we operate are business friendly environments and continue to attract new businesses, creating new jobs, and providing for continued growth.”

Morrison is also well-known for its beautiful showrooms, including spectacular destination showrooms in Fort Worth and Houston. Altogether there are 30 showrooms, with 17 functioning as standalone operations.

“About nine years ago, we dove heavily into showrooms and got serious about it because we saw the potential of what that business could bring us,” Williams described. “Many of our showrooms have a similar feel and layout, with like groups of products in separate rooms and a meandering street down the center with vignettes and rooms of product on display. It’s a look that is very unique to Morrison.

“We continue to formulate plans to drive more attention and traffic through our showrooms. The days of building McMansions are gone, and the financial crisis has had impact on the American psyche. Getting large mortgages is difficult. So we’re emphasizing repair, remodel and improvement. We’re finding that new homes are smaller, but with good quality. We believe that the repair and remodeling end of businesses has substantial potential. We’ve also been successful adding products in our showrooms, such as lighting, appliances and hardware.”
What’s next?

One of the key areas that Hornsby said Morrison would be investing in is technology. He noted that the current website is just a teaser that gets people interested in visiting their showrooms. “For us and all wholesalers, we need to determine the value we want to add going forward,” Hornsby noted. “We have to understand what products customers want in the future. Many manufacturers are trying to determine ways to keep sales through showrooms and not through ridiculously low margins on line. They want to see their wholesaler showrooms succeed.”

Everyone at Morrison is looking forward to their new, highly interactive, content-rich website that will be launched this summer. Williams was kind enough to give us a preview of what customers can expect.

“We are involved with so many industries and it’s important to really get that message out,” she said. Our customers are also diverse and our website will specifically address each of their needs. Our home page will be split with an option for customers to select and click on the commercial business or the residential side to dig in deeper. There will be virtual tours of seven of our showrooms and customers will be able to click on highlights of the videos to see more specific products. Each location will have its own page. Customers will be able to find and select a store, see their current promotions and specials, and get directions along with contact information.

“Company-wide promotions will be featured on the home page. Customers will be able to search by product type and vendor, and see the product lines available from each location. We’ll also tie in our social media efforts, with a prominent link to our Facebook page on our website. We currently update our Facebook page several times a week with promotions, events, job openings and more news.”

She went on to note that the leadership has set a very ambitious near-term goal that they are optimistic they will be able to achieve. “By 2017, when Morrison will celebrate its 100th anniversary, we have a goal of hitting the billion-dollars in sales mark. That’s double our current numbers. But since January we have already opened four new locations — new showrooms in Abilene and Shreveport, and new HVAC stores in San Antonio and Bastrop. And have a team that is very focused on acquisitions and will be aggressively looking at new opportunities.”

Hornsby is very bullish on the future of Morrison — and opportunities for the company to continue growing. “We have differentiated ourselves through our local operations that have built strong relationships, and the level of autonomy our branch managers are afforded,” he said. “Even though we have so many associates, there is still a real sense of community when you go into our stores. We also have a wide selection and excellent service through our showrooms, with very specialized salespeople who spend time with customers.

“Growing our team will allow us to focus in on our customers and their needs going forward, no matter what the product category. It’s all about doing what you say you’re going to do and following through. If mistakes are made, we want to correct them as soon as possible and move forward. Ultimately, we want to make it easy for customers to do business with us, and have the solutions to make their headaches go away.”