A 37-year-old utility construction company has been sold to its employees, a move that could spur expansion. 

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Reisterstown-based Consolidated Construction Services recently sold to its 60 employees, ending two years of uncertainty about the company’s future. The deal came after CCS’s owner, Stephen James, almost sold the company to a firm backed by private equity. James, however, decided he wanted a deal that was good not only for him but for his employees. He decided to work with Apis & Heritage Capital Partners, a Washington, D.C.-based investment firm that specializes in creating employee stock ownership plans (ESOPs) and provided financing for the deal. 

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“About two years ago I had this thought of what am I gonna do in with this company in the future,” James said. “I had an idea of shutting the business down, but I’ve developed such a relationship with employees, there's no way I’d turn my back on them.” 

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CCS does around $25 million to $30 million in revenue, but that figure could grow as the company is finally ready to expand again. James said he was hesitant to grow CCS in the past few years because the company was “the right size” for him to manage. 

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Over the years, James has developed relationships with some of the biggest developers in the region like Beezer Homes and Elm Street Development. The company recently did the utility work for Beezer’s housing development at Sparrows Point Country Club. CCS, however, only does work for those companies in Baltimore. Jason Ollison, a partner with Apis & Heritage, said CCS could look to grow by working with these developers up and down the Interstate 95 corridor in Delaware and Virginia. 

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CCS mostly builds new infrastructure but has also dabbled in the maintenance and replacement business working with Tradepoint Atlantic. Ollison said the business could lean more into that industry, especially with Baltimore City and Baltimore County’s dated infrastructure. 

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It's not uncommon for founder-run businesses to see growth after transitioning to an ESOP since the new worker-owners often want to maximize the company's success now that they have equity, said Mike Brownrigg, a co-founder of Apis & Heritage. Brownrigg noted that his company had helped a nursery in Oregon transition to an ESOP a few years ago. That nursery consistently sold out of product, and its founder was content with that. After the ESOP transition, the employees convinced the founder to clear another field and build more greenhouses, allowing for 10% to 15% more inventory. 

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“Founders will reach a point where they’re happy with the business and the money coming in, however, there is usually an appetite for growth from the workers and management team after the transition,” Brownrigg said. 

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The decision to convert the company into an ESOP came after James realized he hadn't really created a viable succession plan. James explored all of his options including selling to a portfolio company, and was almost under contract before pulling out because he “didn’t like the direction the company would’ve been headed in.” 

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James decided to further explore the ESOP route and eventually connected with Apis & Heritage, which uses a model designed to alleviate some of the pain points of ESOPs. Converting a company to an ESOP often requires the founder to either sell the business at below-market value or agree to a deal that can take a decade to fully pay out. Apis & Heritage gets around this by lending close to the full value of the business to a corporate trust that buys the business from 

James. Those shares then get dealt out to employees on an annual basis. Employees then accumulate shares over the years and can sell the shares back to the trust when they leave the company or retire. Apis & Heritage will also get a seat on the company's board as part of the deal. 

 

Apis & Heritage describes this model as an "employee-led buyout" and particularly looks to work with companies that have large workforces of color and/or low- and moderate-income workers as part of its goal of helping close the racial wealth gap.

 

CCS is far from the only local company that has turned to ESOPs in recent years. Jessup-based Alliance Material Handling Inc. has created dozens of millionaires through the company's ESOP. A local Ace Hardware franchise owner also turned the business over to its employees through an ESOP in 2021.