January 2016, Vol. 243, No. 1
Q&A
EN Engineering President on Acquisitions, Growth and the Future
EN Engineering has been on an acquisition mode, both acquiring and being acquired, in recent years. On July 1, the company welcomed General Atlantic, a leading growth equity investment firm, as a partner and majority investor in the firm. In 2011, Thomas C. Ziegenfuss became president of EN Engineering after having served as the firm’s COO for three years. In this interview Ziegenfuss details the pipeline engineering company’s growth trajectory and future plans.
P&GJ: What is the significance of the partnership with General Atlantic?
Ziegenfuss: EN Engineering is an engineering and consulting firm serving the energy industry. General Atlantic has a strong track record of success partnering with energy service companies and expertise in the broader business service sector, so we are a good fit with their portfolio. They bring to the table expertise working with business process outsource companies and approximately $20 billion of capital under management. Their resources and expertise will be a tremendous value as we continue to expand offerings and capabilities to meet our customers’ evolving needs.
P&GJ: What makes this arrangement attractive to both parties?
Ziegenfuss: EN Engineering brings an expertise in gas and pipeline engineering services, furthering General Atlantic’s position in the business service sector. The partnership also gives EN Engineering access to their support team and to capital to further our acquisition strategy.
P&GJ: Will there be any changes in EN Engineering’s management team or its business strategy?
Ziegenfuss: The strength and experience of EN Engineering’s management team is what drew General Atlantic to our firm. We anticipate that this partnership will present significant opportunities, like enhancing leadership development programs for our existing team members. Our partnership with General Atlantic will also afford more opportunities for us to seek out great leaders in areas where we don’t currently have the requisite experience within our ranks. One thing that will remain the same is our business strategy of providing excellence in customer service through organic growth and acquisitions – a strategy that General Atlantic fully supports.
P&GJ: What new services will EN Engineering be able to provide that it had not been able to offer previously, and what current services are you looking to expand?
Ziegenfuss: As a service provider, we are focused on offering the capabilities that our customers are seeking. EN Engineering is structured to mirror the same skills and capabilities of our clients. Integrity Services, Automation, Liquids, Inspection Services, and Process Safety Management are all potential high-growth areas for us. These areas all complement our core in pipeline design. We are adding personnel to provide these services in geographic areas where our customers are located. One area we are also looking to expand significantly is in the electrical area.
This is a complementary component of the distribution and transmission design work that we provide our pipeline customers and an area that offers tremendous growth opportunities. Beyond electrical services, we could potentially add – through acquisitions – other complementary capabilities like surveying and environmental, but only if it makes sense for our customers. Growth through acquisition accounts for about one-third of the company today. So it is possible that we will expand services through thoughtful acquisitions to further enhance our offering to customers.
P&GJ: Will you increase to your professional staff and grow beyond your 13 nationwide offices, adding Mexico or other international locations?
Ziegenfuss: We have been on a growth trajectory since 2006 when we had just over 100 employees and two locations. Today, we have 13 locations and more than 800 employees – and we are adding new professionals every week. An expanding staff and service footprint are necessary to support the organic growth needs of our customers. Under General Atlantic, I anticipate that we will expand our overseas presence, simply by virtue of their international footprint. But our geographic growth will be driven primarily by the needs of our customers. For example, Canada is a logical expansion to support our customers.
P&GJ: With so much uncertainty in the economy and particularly the energy industry, is this a good time for expansion?
Ziegenfuss: Our business is not heavily impacted by oil prices. Maintenance capital – aging infrastructure replacements – is where we live. In the United States, this need will continue to grow, despite economic uncertainty. Every day the infrastructures in our cities get one day older, and no one is going to stop the hands of time. So the need to replace this infrastructure will continue to drive organic growth at EN Engineering. So yes, this is a good time for expansion, organically, because our customers are demanding it.
This is also a good time for expansion through acquisition. Even with low oil prices now, I believe in the long-term outlook of the energy industry. I don’t think oil prices will remain down permanently. But what economic uncertainly does offer is potential acquisition opportunities. We are mindful of opportunities that make sense for our customers and our portfolio.
P&GJ: EN Engineering built its reputation in large part upon its work for the utility sector including natural gas transmission/distribution and oil pipelines. Will this sector remain a core piece of the portfolio, and are you looking to expand here as well?
Ziegenfuss: Absolutely. Our core focus is, and will continue to be, energy. We have looked at ways to expand our expertise beyond transmission and distribution, while still supporting our core focus of energy. One example is our merger with Eta Engineering Consultants. They had a foothold in a segment, refineries, which we wanted to expand into for several years. It took 12 years to find the right fit. But now we are supporting engineering and consulting needs for refineries, a logical expansion and complement to our transmission and distribution business. I mentioned electrical services earlier. This is another area that we are expanding into that supports our core business.
P&GJ: What and where are the best opportunities for companies such as EN Engineering in today’s business climate?
Ziegenfuss: The utility industry’s focus on safety and reliability, and the changing regulatory climate in the Unites States, offers considerable opportunity. As more regulations come on line, customers don’t have enough employees to keep up with the market changes that are driving the need for engineering. These companies turn to firms like EN Engineering. While we are mindful of changes in the business climate, we strongly believe that good service leads to more opportunities and long-term relationships. This philosophy transcends any modulations in the business climate.
P&GJ: How do you manage the ebb and flow of customer demands and market cycles?
Ziegenfuss: As I mentioned earlier, our capabilities mirror the skills of our customers. We are fortunate to service a large number of clients in many sectors and regions. With 800-plus employees and 13 locations, we are able to effectively support our customers during their peak times. When workload slows down in one area, we can easily shift our people to other clients to meet demand. This also allows us to provide our employees with some diversity in engineering assignments to keep them challenged and developing professionally.
P&GJ: In recent years, which of your business segments have shown the most promise, and where would you like to see improvement?
Ziegenfuss: We have grown EN Engineering over the years intentionally with diversity of services in mind. As a result, we don’t really have a large dependency on any one business unit or market sector. For the most part, our business units have been consistently successful. But even when one may not meet a growth target, the other business units balance things out. I see a lot of promise and opportunity on the horizon for all our business segments. Our biggest challenge will be to manage this growth so that we continue to do the best work we can for our customers, regardless of business unit or market sector.
P&GJ: To the extent that you are involved through the total lifecycle of a project, is this unique among service providers such as EN Engineering?
Ziegenfuss: Since 2006, we have been expanding our portfolio of services for pipeline customers. Today our services include more steps along the project lifecycle like construction management, inspection services, automation, GIS services, and assistance with commissioning. What makes EN Engineering unique to our pipeline customers is the integrity services aspect of our portfolio. Not only are we offering these services, they are being performed by some of the brightest and most accomplished experts in the fields of integrity management, corrosion control and metallurgy. Having these services integrated into the fabric of our firm gives customers a real benefit and value.
P&GJ: Your background includes operations as well as services. Is the relationship different since you started your career?
Ziegenfuss: It is totally different. The work is similar, in that it’s engineering and design services. But on the operator side, the business is based on moving a commodity. On the service provider side, our revenue is derived from the design and engineering work that our people perform. Operators are looking for ways to do more with less people. At EN Engineering, having more of the best people is key. So “people” become the real difference. The other difference is focus: as a service provider, we have to keep a continuous focus on customer satisfaction. Building relationships with our customers is the cornerstone of EN Engineering.
P&GJ: During your career, are there any particularly challenging projects that come to mind?
Ziegenfuss: I have spent most of my career in management, so the challenges that I face are mostly related to people – hiring, training, retaining, mentoring and challenging the best people in the industry. Talent management is the biggest challenge that we face. It is also the most rewarding part of my job. I have said many times, “I am the least talented engineer on our team.” It is humbling to be surrounded by so many experts and truly talented individuals. Creating the culture, providing the tools, and establishing processes to keep our employees motivated and growing in their careers is what drives me.
P&GJ: Where are you from originally, and what circumstances led you into the energy industry?
Ziegenfuss: I was born in Philadelphia and moved to Chicago at age 9. I got my engineering degree, with a minor in business, from the University of Illinois. I didn’t have a desire to do design, I was much more interested in field operations and management. I was offered a job with Peoples Energy in 1982, fresh out of college. During the job interview they warned me that very little of the work I would be doing would be engineering. Their plan was to move me into management after a few years. It sounded like a perfect fit for me.
I received an MBA from DePaul in 1995 and joined EN Engineering in 2004. Like a lot of people, I fell into a job in the energy industry. I am thankful that I did! It has presented me with considerable opportunity and challenges. I have loved every minute of it and enjoy working with some of the brightest, most dedicated people anywhere!
P&GJ: Overall, what is your outlook for the energy business over the next couple of years, and how might that affect construction?
Ziegenfuss: I expect the E&P sector, which is not where a lot of our work is, will be down for a while. In the meantime, regulations will continue to drive a certain amount of engineering and construction, which is our core business. There is more work to do than there are people to perform the work. That’s what makes this such an exciting and challenging time for our industry. And as long as people keep heating their homes, using their computers, watching their big-screen TVs and driving their cars, I expect there will be opportunities ahead for firms like EN Engineering.
Editor’s Note: After this article was prepared, EN Engineering announced the acquisition of Caldwell, OH-based Total Control Solutions, effective Nov. 18. Total Control Solutions provides automation solutions and engineering services to natural gas customers:
“They are a great fit with the services offered by our Automation Services Group,” Ziegenfuss said in the news release announcing the acquisition. “Geographically, Total Control Solutions is well-positioned to serve customers in the Marcellus and Utica shale regions.”
There are no plans to change the management team or personnel at Total Control Solutions as the Automation and Mechanical and Electrical design team is expected to expand, according to Ziegenfuss. They will remain in their office, in southeastern Ohio, marking the 15th location for EN Engineering offices in the United States.
Total Control Solutions was founded in 2004 by four partners: Alan McPeek, president; Chris Brown, vice president; Bob Kuntzman, project manager; and Dale Huntsman, project manager.
“This acquisition gives our existing customers access to a broader offering of engineering design expertise through EN Engineering’s portfolio of services. It also provides us with the opportunity to grow our overall business,” McPeek said.
Written by Jeff Share, Editor
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