Change is never easy. It makes people feel anxious. But sometimes change can open doors and offer new options. This is what Parnell-Martin, a Charlotte, NC-based wholesaler, has learned from its acquisition by Wolseley plc, Reading, England, in December 2004. Since that time, Parnell-Martin has hired additional sales staff. Conversion to the Wolseley system has enabled the company to reduce health insurance premiums for many of its employees and to offer a 401K plan, plus expanded training and career advancement opportunities.
A key benefit from the acquisition is access to the more extensive inventory in Ferguson's distribution centers.
“Ferguson can buy anything from anyone; Parnell-Martin did not have that kind of access,” says Steady Cash, former chairman of Parnell-Martin, who has served as a consultant during the transition period. “With Ferguson we are able to have products in stock at a good price in a week at most. That was huge. We thought that would add 5% to our sales, and I bet it has.”
John George, who became president of Parnell-Martin following the acquisition, adds, “Now we are able to offer products that in our old life we would not have stocked - typically high-end products - and we can get them quickly.”
Another benefit is Ferguson's Branch Process Review (BPR), which provides vital information on operations and processes.
“We are more in control of our business,” George says. “BPR is going extremely well. Now we have something to benchmark against. We did so much better than we gave ourselves credit for.”
Conversion into the Wolseley/Ferguson system has simplified life in some ways, George points out. “We don't have to search for insurance coverage - medical, life, property and casualty. We don't have to deal with tax returns any more.”
Now Parnell-Martin is getting support with workmen's compensation, DOT safety requirements, operations, purchasing, vendor relations and accounting, says Brad Overcash, operations manager.
The company's employees have gained access to greater career opportunities, says Laurie Hinds, controller. She transferred from Ferguson to Parnell-Martin; more people are looking at transfers to and from the other company.
Another benefit of the acquisition: accelerated growth. Parnell-Martin plans to open two locations before the end of the year.
“We are trying to focus more on growth and grow faster with new locations,” George notes. “We are actively working on acquisitions. We are getting help from Ferguson/Wolseley, but Parnell-Martin is initiating them.”
In addition, the company's sales and profits have grown substantially since the acquisition, Cash says. Profits, already extremely high relative to sales, have significantly increased since Dec. 31, 2004.
A PEOPLE Business
John George remembers what drew him to the company when he first joined it in April 1974. He worked for an accounting firm and Parnell-Martin was one of his clients.“I was attracted to the personality of the company - open, friendly, down-to-earth, caring,” he recalls.
Steady Cash joined Parnell-Martin right out of school in 1964, married the boss' daughter, and by the end of 1971, he had become chairman of the company, which he remained until the acquisition.
One of his proudest accomplishments was the introduction of a profit-sharing plan to benefit employees. “It used to be that 10% of the company's profits was paid in cash to employees each year,” he recalls. “Most of the rank-and-file employees had spent the money before they got it. It was scheduled to be paid March 15 but people would ask to borrow against it before Christmas.”
One of the secrets behind the company's continued success has been the quarterly branch manager meetings, which Cash started in 1982. “We wanted to build a family and develop esprit de corps,” he says. “That was achieved and it is still here. We continue to hold those meetings.”
Over time, the branch managers learned to trust each other and started sharing numbers. About 10 years ago, the company took it a step further, creating charts and graphs to let each branch know where it stands relative to the others.
Any suggestions for improvement were offered in private. “People began to feel more a part of the company, but they also became more competitive,” Cash asserts.
Overcash, who joined Parnell-Martin eight years ago as a purchasing agent in its Charlotte branch, said the branch manager meeting held this August was the best he had ever attended.
“We are through the conversion and physical inventory,” he says. “All of us are pretty optimistic about 2007 and beyond. There is a lot of positivity in our organization right now.”
“When I attended my first managers' meeting, everyone was anxious to hear what I thought about it, having come from Ferguson,” she notes. “If I closed my eyes, I would have thought I was at a Ferguson meeting. We have the same passions, the same day-to-day concerns. It is all about wanting to do a good job and caring about our customers.”
George says his No. 1 objective when he became president was to keep all of the key people at Parnell-Martin, and he succeeded.
“I believe the success of Parnell-Martin was based on its people,” he says. “To maintain that high level of success, the most important thing was to keep these people as part of the organization. I wanted to keep every single branch manager. I visited their branches as much as I could.”
Donna Stilwell joined Parnell-Martin in August 2004 and assumed her current position as general credit manager the day that it was acquired by Wolseley at the end of 2004. She had previously worked for an HVAC wholesaler, then spent five years working for Hughes Supply in the Charlotte area. She says she was drawn to Parnell-Martin because she “wanted to get into another family-owned company.”
Comparing her experience at Parnell-Martin with the time she spent at Hughes, Stilwell says, “At Hughes we were a division and stayed within that division. In this office and in our branches, we operate basically the same. We make sound decisions. We don't need anyone to babysit us.”
Comparing her experience at Parnell-Martin with the time she spent at Hughes, Stilwell says, “At Hughes we were a division and stayed within that division. In this office and in our branches, we operate basically the same. We make sound decisions. We don't need anyone to babysit us.”
It is easier to make comparisons when you become part of another organization, George notes. “I felt we had good people at Parnell-Martin, but now I know we have fantastic people.”
The people at Ferguson and Wolseley have helped Parnell-Martin and its employees through the transition, according to Cash and George.
“It was a great decision to put this entity under Larry Stoddard,” George says. “He spent a lot of personal time with our people, getting to know our managers and raising the comfort level. In his role as senior vice president of business development for Wolseley, Larry Stoddard was a strong advocate of maintaining Parnell-Martin as a separate entity and different business model.”
Also, Bob Brantley, regional operations manager for Ferguson, was at the focal point of the whole conversion process, he adds. “He was an advocate for Parnell-Martin. At times, he defended the company and its business model within the Ferguson/Wolseley organization. He marshaled the Wolseley resources to the benefit of Parnell-Martin and encouraged our people. On the whole, our people related to Bob Brantley extremely well. He greatly reduced the pain level of the transition from what it could have been.”
During the transition period, Cash has had a number of conversations with Chip Hornsby, who recently succeeded Charlie Banks as group chief executive of Wolseley. Cash told Hornsby of his concern regarding the comfort level of John George, as the new leader of the company, during the transition. Chip Hornsby came to Charlotte to spend time with George and encourage him.
“We are a gnat compared to Ferguson, but the fact that he took the time to do that spoke volumes,” Cash says.
Others who visited branches to meet with managers and staff after the acquisition and provide support included Vice Presidents Doug Strup, Jim Cross, Steve Petock and Dan Parr.
“Their whole team was easy to work with,” Cash says. “They did a nice job of handling the whole process.”
Overcash says Parnell-Martin had expected a certain amount of arrogance from the Ferguson staffers, but “they are people just like us, willing to go the extra mile to help us be successful.”
“This is a people business at every level,” Cash asserts. “I will support Parnell-Martin until I die. They are in my blood.”
Transitioning EFFORTS
Initially the plan was to leave Parnell-Martin with its name and operating style for an extended period, Cash recalls.On March 1, 2005, Parnell-Martin started using Ferguson's distribution centers. “We were able to get into the process more quickly than anyone anticipated,” George says. The goal - to have every branch able to enter an order through Ferguson's distribution center - was achieved by the end of the first day.
A significant part of the company's purchasing has been transitioned into Ferguson's distribution center network.
“We made it work faster than Ferguson anticipated,” George says.
The next process or conversion was to transfer Parnell-Martin to Ferguson's benefits and payroll system. It had retained its own system for the first year after the acquisition.
“We had good benefits for a company our size,” George comments. With the transition, most of the company's employees are receiving moderately better medical insurance coverage for less cost. Ferguson introduced additional benefits to Parnell-Martin employees, including an employee stock purchase plan and a medical reimbursement plan.
The company was not able to participate in Ferguson's 401K program until Jan. 1, 2006, when it changed over to the Ferguson payroll system.
“That was a more time-consuming process than I expected,” George says.
Ferguson and Parnell-Martin executives visited every location to explain the new benefits. A meeting was scheduled after working hours and food was served. “This also created some good will and improved morale,” George notes.
The company phased in Ferguson's computer system to handle accounting and purchasing Feb. 1, 2006. “That was the biggest change,” George says.
Parnell-Martin took its first physical inventory post-acquisition in May 2006. Now the company is working on getting its inventory levels in line with Wolseley's inventory directives. “We need to continue to refine our process to fully integrate into Ferguson/Wolseley,” George says.
“We were an extremely positive company, very organized,” George says. “We paid attention to details, did not grow rapidly and controlled our overhead. We were recognized in our market for providing extremely high service levels. We were big enough in residential plumbing products that we were important to our vendors and we did a good job of negotiating rebates.
“How do you maintain the differences that made you valuable to customers in the first place?” George asks. “We are trying to make that play out within this business model and we have done a pretty good job so far. The secret is having a narrow range of product so you can stock a little more of it.”
COMPANY HISTORY
Ed Martin and Roy Parnell founded Plumbing Specialty Co. in 1942 as a partnership to sell products to plumbing contractors in the southeastern United States. Parnell-Martin Supply Co. was incorporated on Jan. 1, 1947.Over the next few years, the company opened branches in Asheville, NC, and Jacksonville, FL.
Martin purchased Parnell's stock in the company in 1954 and became the sole owner.
When Martin died unexpectedly in November 1971, control of the company passed to his two daughters and their families. Steady Cash, Martin's son-in-law, became chairman of the company in December 1971 and served in that capacity until the company was acquired.
Parnell-Martin opened 15 more branches in the southeastern United States over the next 30 years.
John George joined the company in April 1974 as controller. He was named treasurer that December. Over the years' he was promoted to senior vice president, then executive vice president.
Parnell-Martin Cos. was acquired by Wolseley, parent company of Ferguson, on Dec. 31, 2004. It operates as a separate label under the Wolseley banner. John George was named president of Parnell-Martin after the acquisition.
The Acquisition
“Ferguson had been talking to us about 10 years on and off,” Steady Cash recalls. “I even had talks with David Peebles (one of Ferguson's founders, who retired as president and CEO in 1994). We were not ready to entertain the idea.”
In June 2004, Cash was diagnosed with a terminal illness and was told that he had only a few months to live. A miracle happened, he says, and he is still alive today and looking to get back into business, but in a different industry. Cash says he had selected John George as the logical candidate to succeed him at Parnell-Martin. When Ferguson/Wolseley approached again in September 2005, Cash met with George and other executives and then scheduled meetings with people from Ferguson. They decided to accept the acquisition offer in October 2005.
“I considered Ferguson to be the best company in the business,” Cash says. “Several of our people worked for Ferguson prior to joining us. We thought it was in the best interests of the 250 families associated with Parnell-Martin to be acquired.”
Despite concerns that some of the branch managers might leave in response to the different operating model employed by Ferguson vs. Parnell-Martin, everyone stayed.
“That speaks well for John George,” Cash says. “He stays in touch with the managers. We have great people who are highly committed. They have integrity, good character and they are willing to stick it out long enough to see what is going on.”
The challenge for Parnell-Martin is maintaining its business model that worked so well for the company for many years while in the midst of process changes, George says.
“Going way back, we had a business philosophy that helped us grow at a compounded rate of 10% to 11% per year,” Cash notes. “We did not really have any debt for 25 years. We financed everything internally.”
While Parnell-Martin's system was not overly sophisticated, it put the right numbers in front of people, such as sales and gross profit dollars relative to the actual budget, collections and inventory turnover. Steady Cash introduced two more sources of information: a slow-moving inventory report and a sales report of the company's top 25 customers.
“We had an extremely accurate profit-and-loss statement by branch,” George says. “We knew how much expenses were as a percent of sales and we could make comparisons to control expenses.”
Prior to its acquisition, the company was a member of the Embassy Group, a buying group. John George served on its vendor committee, and at one time was chairman of that committee.
