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A Video Conversation with Terry Neimeyer, CEO and Chairman of the Board of KCI Technologies- Part 3- On Their Future

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A 100% employee owned firm providing engineering solutions for all kinds of development projects

terryTerry Neimeyer is the CEO and chairman of the board of KCI Technologies. Founded in 1955, KCI Technologies is a leading architectural, engineering, consulting, and construction firm that serves state and local governmental agencies, as well as institutions and private companies, across the United States. The company is completely owned and operated by its employees, who number over 1000 personnel. In recognizing KCI’s revenues and quality of service, Engineering News-Record Magazine has ranked the company 77th among the country’s top engineering firms.

Can you share some insight into your growth strategy?

 

TERRY NEIMEYER: We grow organically, and then we grow a little bit through acquisitions. I’d say 10–15% of our growth is due to acquisitions. The majority of it is old. I call it organic growth, where we’re coming up there.

 

We’ve learned that we can go into a market—we learned this in North Carolina—with a cold start. We bought a small, four-person firm. It took us 10 years to establish a presence in North Carolina. We’re now at 100, but boy, it was a slow start. We learned that, hey, if you buy a larger firm, you instantly have market credibility, you instantly have backlog, you have talented people that you can work with and sell their services to their customer base.

 

As for our recent acquisition history, we did two in Texas. Both of them were anywhere from 50 to 100 people strong. In doing so, we entered the civil engineering market and the mechanical electrical engineering market in a more rapid time frame. We had instant credibility and instant backlog, so that the buildup took a lot less time. Now, there’s a cost of that because you’re paying a lot more money when you do an acquisition versus a slow start, but we found that the combination of the two can be successful.

 

In Florida, we did that from a cold start, and it took us around five to 10 years to build up, but we ultimately built up a big book of business where we have over 100 people there. And then recently, in South Carolina, we purchased a firm and tried that.

 

We’ve done ‘em both ways—cold starts and M&A starts—and they can be successful or unsuccessful in either way. It all depends on the quality of the people that you’re either hiring and/or buying.

 

Where do you envision KCI five years from now?

In five years I’d say you’d see us as a top 60 engineering firm in the country. Right now we’re ranked number 77. The rankings are going to come out tomorrow. We’ll see where we end up tomorrow. I’m not sure. Every year it changes. You don’t know. We had an increase in our revenues, so we shouldn’t drop back, but you never know who could jump ahead of you. And, so, in five years, I could see us being somewhere between 50 and 75. We’d be doing anywhere from $250 to $300 million of revenue.

 

But, more importantly is where we’re going to be doing that, and so, in five years, KCI will have some level of an international portfolio. It’ll be small. We’re already working in Brazil right now—it’ll be a small piece, but we’ll have that.

 

We’re currently in a startup mode in Texas. We view Texas could quadruple in size in the next five years. In all likelihood, we’ll be in the next geographic growth area that we foresee. We see that either being in Arizona, where people are moving to, or in California, and so we would take our footprint further west from Texas, and then take advantage of some opportunities in the Great Lakes region.

 

The Great Lakes are under the same type of duress the Chesapeake Bay was 20 years ago, and they’re just coming to the forefront of trying to deal with how do they save their Great Lakes and using best management practices, storm water management, phosphorus and nitrogen control. The runoff control are things that are recurring, so you could see us having a presence in the Great Lakes.

 

So, international, Arizona, California, and the Great Lakes: that’s where we’ll be in five years, probably twice the size as we are now pending that we don’t have another cataclysmic event.

 

We all know that every 10 years something happens. In 1987 was the S&L crisis. In 1999, it was the dot-com crisis. In 2008, it was the financial crisis. I don’t know what it’s gonna be, but there, in all likelihood, will be a crisis that occurs in the next five years. We’re not sure what it is. I mean, it could be a black swan event. It could be the North Koreans. It could be oil. It could be something. Not sure what it is, but that might slow down those plans I just elaborated on.

 

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