After more than three decades under the sole ownership of founder David Cohen — who started the business out of his basement at the young age of 27— United Pipe & Steel took on an equity partner last year in a move designed to ensure a bright future for the company.
President & CEO Greg Leidner quickly pointed out that customers and vendors who wonder what the impact of the investment will be pleasantly surprised.
“It’s important to note that the private equity investors who purchased the business are exactly that — investors,” Leidner commented. “Our senior management team continues to run the company. The impact of this investment will be overwhelmingly positive for our customers and supplier partners.”
United Pipe is a master distributor of commodity pipe and related products based in Ipswich, Mass., with 10 locations around the U.S. The management team at United Pipe & Steel believed that Morgenthaler Private Equity was just the right partner for United Pipe because of its history of focusing on middle market family- and founder-owned businesses in two sectors — high-value manufacturing and business services.
“They target companies where a sustainable competitive advantage, combined with strong management, will enable the company to achieve substantial and sustainable improvements in growth rates,” Leidner noted. “Master Distribution is an area of interest for them — and other private equity companies — because they believe that more and more purchasing will go through the master distribution channel in years to come as the benefits of buying smaller quantities more frequently have indisputable economic advantages for wholesalers. Their estimate is that the amount of business going through the master distribution channel has doubled over the past five to seven years, and is likely to double again by 2020.”
Since the acquisition, several key internal changes have been made:
• They created a Business Development team focusing exclusively on new channels, new products and new geographies. This team is headed up by Noah Heller and supported by industry veteran Gerald Slattery.
• With his promotion to Vice President of Sales, Corey Lowsky is singularly focused on providing the best customer experience possible, by ensuring United’s salespeople are the most knowledgeable and accessible in the industry. Lowsky is supported by Michael Blair, the company’s long-tenured Director of National Accounts.
• They hired operations specialist Jon Renko as Vice President of Operations to focus on making sure all of United’s facilities are safe, efficient and productive. “His job is to make sure we have high fill rates, and accurate, dependable deliveries,” Leidner commented. “That’s our customer commitment.”
United Pipe has a broad inventory offering, which has become even more complete with the new financial investment. They currently stock:
• Domestic Steel Pipe
• Import Steel Pipe
• SH40 PVC, SH80 PVC, FG CPVC, SH80 CPVC, Foam Core, ABS Foam Core
• SDR, Sewer & Drain, C900
• Copper tube, copper coils
• Linesets (including mini-splits)
• Threaded Rod
• Metal Conduit
• PVC Conduit.
I recently had a chance to talk with some of the key members of the United Pipe management team, who shared more insight into the future direction as well as their tried-and-true traditions. Following are some excerpts from our conversation.
MJM: As a master distributor, it’s all about having the stock in inventory and being able to service wholesalers’ needs. So I would guess partnering with the right vendors would have to be critical to you?
Leidner: Our suppliers partner with us for several reasons. First, we provide them with sizable volume, which creates efficiencies across the entire manufacturing process, and ultimately lets them focus on manufacturing high-quality product — which they are excellent at — instead of distribution.
Second, we offer suppliers access to meaningful portions of a very fragmented market that they are not set up to service. Ultimately, we allow manufacturers to reduce their costs associated with selling and servicing thousands of customers.
We only partner with best-in-class manufacturers, who:
• Make high-quality products that we are willing to stand behind, and
• Are service-oriented, like we are.
We constantly work with our supplier partners to improve service levels, while taking cost out of the system, which ultimately benefits wholesalers.
MJM: United Pipe has achieved such tremendous growth. Talk about the facilities you’ve added in recent years, and how they have helped the company expand?
Blair: Since 2006, we’ve opened eight facilities, bringing our current footprint to over 1 million square feet of warehouse space in 10 distribution centers, servicing 42 states across the country. Within the next two years, we will have full coverage over the continental United States.
We are fortunate to have “warm leads” whenever we open a new distribution center, thanks to our strong relationships with Buying Groups and national accounts. There’s nothing more fulfilling than opening up a facility somewhere new in the country, calling prospective customers to say “We’re finally able to service your account,” and having them say “It’s about time!” The reception we get in our new facilities is an amazing — and humbling — experience. It is a testament to the strong reputation we’ve built as the industry leader in pipe products distribution.
MJM: Do you still handle all deliveries with your own trucks and drivers? Why is that important to you?
Renko: We do, and we think it’s critical. We handle about 98% of all deliveries on our own fleet of flatbed tractor trailers. The reason is simple – this is what we do, and part of our “special sauce.” Our relationship with customers is trust-oriented. And when we say the pipe is going to be there, it needs to be there on-time and damage-free. When it’s on our own truck, we can control that experience. Also, our drivers are tops in the business, and make sure to continuously exceed customer expectations
MJM: How do you believe United Pipe is perceived in the marketplace?
Lowsky: The feedback I get most often from customers is that:
• Our people are amazing
• We work hard to earn each and every opportunity.
Every single person who customers interact with are United Pipe & Steel employees – from the salesperson to the driver. And the passion our employees have for the industry and for our company manifests itself in exceptional and unparalleled service. We are also known to have the deepest and broadest pipe inventory of anyone in the country. The ability to mix and match all flavors of pipe products gives wholesalers the ability to always have product in stock, but never to have too much in stock at any given time.
MJM: Tell me a little bit more about that – what are the financial benefits for wholesalers?
Leidner: Ultimately, it comes down to cash flow. Simply, they have less money tied up in inventory at any given time. And why is that important? A customer who only purchases from a mill typically carries considerable more inventory at any given time for the simple reason that nobody can ever perfectly predict demand. So what happens is that wholesalers end up getting wiped out on one or two sizes of product, and have to buy more than they need to get a mill-direct order, leaving them in an overstocked position.
Because we deal with commodity products, prices go up and down. So if a wholesaler has excess stock and prices go down, they are under water. By buying smaller quantities more frequently from a master distributer, wholesalers can cost-average their inventory and always have competitively priced product on the shelf. This is why master distribution is one of the biggest trends in our industry right now.
MJM: So give us a little sneak peek at what we might expect down the road from United Pipe & Steel?
Leidner: While we believe that we will continue to grow organically, we are interested in speaking with other best-in-class master distributors about merger and acquisition (M&A) opportunities to accelerate that growth, while providing customers with an even better experience. If there are any companies out there who want to talk, I welcome their calls!