Lancaster County business owner turns to employees for succession plan

In fall 2018, Dan Laird was crouching in a duck blind on Maryland’s Eastern Shore when a banker friend asked him about his plans for Commonwealth Fire Protection Co.

Laird had taken over the Lancaster County company in 2017 after the death of his business partner and longtime friend, Paul Hoffnagle, in a chain-saw accident. Hoffnagle was 52.

 The two men graduated together from Central York High School together and, after stints elsewhere, ended up at Commonwealth Fire in the 1990s. Laird joined first, in 1991, followed by Hoffnagle seven years later. They ascended to the leadership team in 2004 and became part-owners in 2012 alongside majority owner Stephen Scott, a son of company founder John W. Scott. Stephen Scott died unexpectedly in 2014, putting the company in the hands of Laird and Hoffnagle.

Laird, 56, said he had no desire to sell the business but he was trying to figure out how to fill the hole left behind by Hoffnagle.

Laird’s friend, M&T Bank executive Kelly Matthews, threw out the idea of an employee stock ownership plan, under which a business is sold to its employees, usually through debt financing.

Dan Laird, president of Commonwealth Fire Protection in Lancaster County, announces the company’s conversion to employee ownership at a holiday party in December 2019. (PHOTO/Baird E. Thompson – BET Creative Media)

“I just started making some phone calls and talking to different people,” said Laird, the company’s presidents. The more he learned, he said, the more the idea appealed to him. 

The idea hatched in a duck blind became a reality at the end of 2019, when Commonwealth Fire converted to an employee stock ownership plan, or ESOP. 

 Laird announced the ESOP in a speech at the company’s annual Christmas party, held Dec 13 at Clipper Magazine Stadium in Lancaster. The company, which has about 90 employees, installs, services and repairs sprinkler systems for commercial, industrial, institutional and residential users

“I did not expect that at all,” said Jonathan Offord, 36, a service technician who has worked at Commonwealth Fire since 2015. 

In fact, it was a closely held secret. The firm’s bankers, lawyers and accountants knew. But internally, controller Charmaine Zercher was the only person aware that an ESOP was in the works. 

Laird had come to Zercher in July 2019 because he needed financial data to evaluate the option and to pay the outside advisers. But as keeper of the company’s books, Charmaine Zercher said she was used to being discreet.

Before the announcement, when employees were asking her what company owner Dan Laird was all excited about, she told them she didn’t know. “It was difficult, but it was also fun to be in on it, too,” said Zercher, 56

Gathered for a holiday party at Clipper Magazine stadium in Lancaster, Commonwealth Fire employees greet the news that they will own their company. (PHOTO/Baird E. Thompson – BET Creative Media)

It’s unclear how the pandemic will affect ESOP formation, or mergers and acquisitions more broadly. Most businesses were in survival mode this spring. But by late May, the outlook was no longer so dire for the kinds of companies that typically contemplate ESOPs, such as manufacturers, distributors, construction companies and engineering firms, said Ed Renenger, president and CEO of SES ESOP Strategies, a subsidiary of law firm Stevens & Lee. He was a consultant on the Commonwealth Fire transaction.

“Maybe they weren’t incurring profits as budgeted, but they were at least breaking even,” he said. By early June, he said, business owners were again thinking of the longer term

At Commonwealth Fire, 2020 got off to a strong start, Laird said. Sales faltered slightly in April during the widespread lock-down but they eventually rebounded. Laird expects sales to drop off at the end of the year, though, as the company’s customers in lodging, hospitality and entertainment delay or cancel projects.

“That concerns me because that has been a pretty big part of the business,” he said.

But it is not a concern he has to bear alone. The ESOP gives every employee a bigger stake in the company’s performance. Offord said he has always taken pride in his work but he now looks more closely at ways to improve what he and the company as a whole are doing.

“With the ESOP, I feel part of the bigger picture,” said Offord, who aspires to eventually take on leadership roles at Commonwealth Fire.

Laird, meanwhile, has no regrets about his decision. “This was just a perfect method of making my succession plan … but also giving the future back to the people who got us where we are,” said Laird. “It was a no-brainer.”

— By Joel Berg, editor of BizNewsPA

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