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Paul Gentile, president and long-time co-owner of Miami-based Lion Plumbing Supply, recently announced that the company transitioned into an ESOP. Gentile describes it as an ideal plan to ensure a smooth succession into the future, reward the company’s employees for their dedication, and maintain the tremendous service levels Lion is known for among its customers.
He shares this exclusive look inside the plan and process with plumbing industry media professional Mary Jo Martin. You can also read more about Lion, its people, and how they transitioned from a plumbing contracting firm into a successful South Florida wholesale distributor in the adjoining article, “How Leo Became a Lion.”
Mary Jo Martin: When did you first consider the possibility of doing an ESOP?
Paul Gentile: We started discussing succession planning with our advisors approximately two years ago. Last year, we determined the best alternative was the use of an Employee Stock Ownership Plan. Soon thereafter, we interviewed the professionals needed to implement our plan.
MJM: What were some of the biggest factors behind your decision to form an ESOP?
PG: Preserving our team and continuity for our customers. Lion is known for having very dedicated, long-term employees and we wanted to keep our employee family together. It was important to continue the legacy we built at Lion.
Although we were approached and considered opportunities to sell to other wholesalers, it didn’t feel right to abandon Lion’s staff. Therefore, the ESOP concept was the best way to mitigate the impact of a change in ownership.
MJM: What does your ESOP look like and what can you share about how is it structured?
PG: Every employee of Lion is now a beneficial owner of the company. Beyond that, our existing profit-sharing and 401k programs will remain in place.
Our ESOP meets or exceeds DOL guidelines with limited restrictions in regard to eligibility and length of service. Virtually all employees will receive the benefits from this ownership. Ultimately, most of our employees will become 100-percent vested in less time should they reach retirement age (65) before the end of the six-year period.
MJM: Stats show that the newer generation of employees aren’t staying in one place very long. Do you think being an ESOP company will incentivize more of them to make a career at Lion?
PG: Yes, and it was one of the key factors supporting our decision to go with an ESOP. The actions of an individual employee will now impact the benefits received by all the other employees through their ownership in the company.
MJM: Will the ESOP structure lead to any changes within your working environment and day-to-day leadership?
PG: No changes are planned. Our current leadership team does an outstanding job and they will remain intact. The ESOP has an independent trustee who will help guide long-term initiatives and direction at Lion.
The company’s performance will be evaluated yearly. Its value will be up to what the employees do to make it profitable. There will be an open flow of key data and financial information and each employee will be able to go online to view it through their own account.
MJM: What was the reaction you received as you rolled this out to your team?
PG: Everyone was extremely excited, happy and I think very surprised.
MJM: Do you expect there to be any changes in the way you do business?
PG: Not from the management team. However, we do hope this makes everyone at Lion evaluate their own actions and how they interact with each other and with our customers. We are optimistic that each employee will “step up” their performance even more where needed to benefit themselves and the team. We want them all to be lifetime owners who are dedicated to our customers and each other.
Beyond that, we don’t expect to make any changes. IMARK and our vendor partners are a big part of our company. We plan to continue to build on those relationships.
MJM: Have you gotten any feedback yet from customers and vendors?
PG: Not yet. Speaking with you is the first time we are releasing the great news!
MJM: Overall, how would you describe the process?
PG: It was more time-consuming than we originally anticipated. But the COVID-19 pandemic was a big part of that delay. We are very fortunate all our employees are healthy and have remained virus-free.
We’ve been able to keep our business open throughout this pandemic. Although revenues are down, we are confident this will be a prosperous year.
MJM: Paul, you have been an owner of Lion, along with Chuck Steele, for decades now and it’s evident how much the business means to you. What do you see for the future?
PG: The ESOP is our succession plan. We have a young crew and they will be taking over the company in the next seven to 10 years. I’m confident Lion will remain in good hands.
This is a solid plan for the future of Lion — and for every employee. As Lion continues to grow, the value of each employee’s account will grow, fostering improved resources for a better retirement for them.
MJM: One last question. If companies such as yours want to investigate ESOP opportunities, where should they start?
PG: Call me!
Lion Plumbing Supply was originally founded as Leo’s Plumbing Service by Leo Ouellette and Charles R. Steele Jr. in 1956. The Miami-based business was initially a plumbing contracting firm focused on service and new residential construction projects. The partners established a solid business reputation, and a decade later added a retail counter that offered repair parts and irrigation sales.
As construction in Miami slowed during the 1970s, many plumbers decided to stop making such a big investment in keeping inventory on hand and, instead, began buying products from Leo’s as needed for their jobs. To serve that increased demand, Leo’s moved into a 15-foot by 84-foot storefront so they could significantly expand their inventory.
Paul Gentile, now Lion’s president, was instrumental in developing a strong contractor customer base. Gentile received a plumbing contractor license while still in high school and his father, who worked for another wholesaler in the area, suggested he approach Lion’s owners about a job. He was hired to work on the counter in 1972 and never left.
In 1982, company leaders decided the time was right to end their contracting and service business and focus solely on the wholesale side. They rolled out a new name — Lion Plumbing Supply Inc. — and unveiled a new logo, which became immediately recognizable and is still in use today. Gentile bought into the business in 1990, becoming a partner with Steele.
Lion’s wholesale supply business became a staple in the South Florida market and has consistently grown in part because of the service and dedication of their very loyal and veteran team. The company culture emphasizes one main goal — to do the best job they can every day as efficiently as possible.
The distribution firm benefits tremendously from being a member of the IMARK (formerly Omni) buying group, which has given them a platform to build solid relationships with vendors and their peers throughout the country. And the leadership’s emphasis on profitable transactions has kept the company on very solid financial footing.
Today, Lion’s 39 employee-owners — many of whom have been with the company for two decades or more— are committed to continuing those traditions.
Office manager Joyce Birth has held that role for more than 40 years. Her daughter, Sheri Newman, started her career at Lion pricing tickets when she was just 17 years old and is now vice president. She learned the business from the ground up. She and Gentile have been very active representing Lion with industry organizations and being hands-on with their vendors and customers.
Their operations sit on a four-acre lot in Miami that includes a 40,000-square-foot warehouse and office, a pipeyard and a luxury showroom. Lion’s fleet of five trucks provide quick delivery — twice a day — throughout South Florida, including Key West. Its counter also does a huge business with six full-time counter people serving customers who are often four-deep in line.
Lion maintains a fill rate between 95 percent and 98 percent. Customers include service plumbers, residential and commercial new construction plumbers, underground contractors, pipefitters, industrial mechanics, schools, and apartment complex and manufacturing installers.
Roughly 50 percent of the company’s business is in the commercial market — shopping centers, restaurants, schools, hospitals, condos — while the remainder is split between service and repair plumbing, exports, superintendents, industrial and track or multi-family residential.
Learn more about Lion Plumbing Supply, its team, products and services at www.lionplumbing.com.