The Branch Group, Inc. Business Information, Profile, and History

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History of The Branch Group, Inc.

The Branch Group, Inc., is a Roanoke, Virginia-based regional building construction company offering general contracting, design-build, and construction management services to the Mid-Atlantic region of the United States. The firm also maintains offices in Winston-Salem, North Carolina, and Virginia Beach, Virginia. Branch is comprised of four wholly owned subsidiary operating companies. Branch & Associates, Inc. is a general contractor for both public and private buildings, including hotels and resorts; institutional, educational, industrial, and health care facilities; and multi-family housing. The subsidiary operates out of Roanoke and Winston-Salem. Branch Highways, Inc., based in Roanoke and serving the Mid-Atlantic region, handles both public and private clients, offering a full range of highway, bridge, airport, infrastructure, and site development capabilities. E.V. Williams, Inc., based in Virginia Beach, Virginia, is also a paving specialist, doing public highway work as well as private site development projects. Finally, G.J. Hopkins, Inc. offers complete mechanical and electrical construction services, including design capabilities, for both public and private clients, primarily in the healthcare, higher education, and industrial construction areas. Also based in Roanoke, Hopkins serves the western Virginia market. Since 1982, the Branch Group has been owned by its employees through an Employee Stock Ownership Plan, an arrangement that has motivated the work force and been a key factor in the company's strong growth over the last 20 years.

Establishing a Construction Company: 1950s-80s

The Branch Group bears the name of its founder, Billy H. Branch. He was born in 1928 in Bells, Tennessee, the son of a railroad worker. He attended David Lipscomb College in Nashville for one year before transferring to Georgia Tech University, where he graduated in 1950 with a degree in electrical engineering. He took a job with Southeast Underwriters, putting his engineering training to use for an insurance company. He was then transferred to Roanoke, Virginia, and first became familiar with the area, but his time there was cut short by the Korean War and a call to service. He was assigned to the Army Ordinance Corp and stationed in Washington, D.C., from 1951 to 1952. It was during this time that he met his wife, Betty McAlister, who also came from Roanoke. After the war, the couple moved to Georgia, where Branch went to work for South Wire Company, maker of electrical wiring and related products. Because it was a young company, he took on a wide range of operational roles, including office manager, purchasing agent, and production manager. After about two and a half years, he was asked to help set up a subsidiary for South Wire, but he elected instead to go into business with his father-in-law, Claude W. McAlister, who had been involved in the construction industry in Roanoke and had recently lost his partner. At this point, McAlister had some equipment but no business. Although close to retirement age, he had no interest in giving up working. His tales about building the West Virginia Turnpike had always intrigued Branch, who was also attracted to the idea of entering a risky yet challenging business, one that was very much a boom-or-bust proposition. Moreover, the experience and skills the two men possessed complemented each other. McAlister's background was in the field, while Branch possessed both the necessary engineering knowledge as well as the operational experience he picked up at South Wire to run a construction business. Thus, in 1955, McAlister and Branch formed a partnership called McAlister Construction Company.

McAlister Construction started out doing work for home builders and general contractors in the Roanoke area, digging basements and building roads for housing subdivisions. It was the road building that quickly became the company's focus. In the second year of doing business, McAlister Construction landed its first highway contract, paving a six-mile stretch in Buchanan County, Virginia. Construction turned out to be a profitable enterprise for the company's two partners, as the company grew about 20 percent each year from 1955 to 1963. At this point, McAlister was ready to retire and Branch, eager to stand entirely on his own, bought him out. In 1963, the business was reorganized and incorporated as Branch & Associates, Inc.

Initially, little changed after McAlister's departure. The company was primarily a highway builder and remained so until the 1970s, when Billy Branch became involved in real estate. As he described it, he was buying "holes and hills." He would fill in the holes, level off the hills, and on the level ground construct buildings that he could then turn around and sell. He tried to line up buyers before he began construction on a project, but he found it difficult to accurately estimate the costs to maximize his profits. As a result, he changed his strategy so that he leased the buildings rather than sold them. Using this approach, Branch & Associates built a number of structures that became fast food restaurants, finer restaurants, and office buildings. However, it did not take long before the company turned its attention to larger jobs, becoming interested in whatever projects could be found on the bid market for both public and private clients. As a result, the company began building schools and taking on various construction projects for Virginia Tech University and the University of Virginia. Other major building projects over the ensuing years included the Roanoke Airport Marriott Hotel, the Snowshoe and Silver Creek ski resorts in West Virginia, a Buckingham County prison, and an addition to the Roanoke Memorial Hospital. What began as a sideline to highway construction became large enough in the 1970s to become a separate division. Thus, Branch & Associates was now comprised of a highway division and a building division.

A third division would also grow out of the building business: mechanical contracting. A major factor in construction was the cost of plumbing, heating, air conditioning, and electrical, so it made sense to bring that work in house rather than rely on subcontractors. The Branch Group's current chief executive officer, James C. Harrison, who had started out as a surveyor for the highway division, approached Billy Branch about starting the mechanical unit in the late 1970s and was given permission to proceed. The unit was intended to work on Branch projects but in short order it began taking on outside work. In 1984, this business was expanded through the acquisition of G.J. Hopkins, Inc., a Roanoke mechanical and electrical contractor. It was founded in 1958 by Garland Hopkins as a mechanical contractor and added electrical capabilities in 1963. The company further added a sheet metal shop. According to Billy Branch, when Garland Hopkins approached him about buying the business, he said it was losing about $50,000 a month. Branch also speculated that Hopkins might have had some health concerns that prompted him to seek a buyer. Despite the problems at G.J. Hopkins, Branch agreed to buy the business and folded his smaller operation into it. Hopkins stayed on to run the unit, but his health soon failed and he passed away.

Restructuring for the Future: 1980s and 1990s

The Branch Group was formed as a holding company in 1985, and Branch Associates and the other units now became subsidiaries. The company, which at this stage was doing about $40 million worth of work each year, was also in the process of changing its ownership structure. In 1982, Branch launched a profit-sharing plan, which allowed the company to contribute pre-tax dollars into a fund that the employees would share. Billy Branch then elected to use the profit-sharing fund as a mechanism to create an Employee Stock Ownership Plan (ESOP), so that the employees would eventually become the owners of the business. Billy Branch cited three reasons why he decided to pursue an ESOP. It served as an incentive for employees, helping to make a more productive company. It allowed him, as he was nearing retirement age, to withdraw from the business while saving on taxes. Finally, as he said in a 2004 interview, "It was a nice thing to do for the employees." Aside from growing a successful construction business, Billy Branch had also gained a reputation for philanthropy. He raised considerable sums of money for Young Life and its network of Christian youth camps, and he would also serve as chairman for the Habitat for Humanity home-construction program. Unlike many ESOPs, Branch employees took on no debt. Instead, profit sharing money was put into a trust fund, which gradually bought up Billy Branch's stock in the company.

By 1993, the employees had bought about 80 percent of Billy Branch's stock and were well on the way to gaining a 100 percent stake. Also during this time, Branch began turning over many of the day-to-day responsibilities to his management team, while he oversaw the business as chairman of the board. In April 1993, at age 65, he decided to retire as chairman as well, telling the Roanoke Times & World News, "I've delegated myself out of a job." Nevertheless, he stayed on as a board member for another 11 years and, far from devoting himself to a life of leisure, he continued his interest in real estate development, running Branch Management. This business grew and took up so much of his time that in the spring of 2004 he resigned from the Branch Group board to focus on his new endeavors. His successor as chairman of Branch Group was Ralph Shivers, a longtime executive of the firm, who along with chief financial officer Kelly Speas was a key player in the growth of the Branch Group, which by 1993 was generating approximately $100 million in annual revenues, a far cry from the $1.3 million in annual business the company was generating in 1972.

Internal and External Growth: 1990s and Beyond

Branch looked to consolidate its operations in the early 1990s. The Hopkins unit had outgrown its 11,000-square-foot facility, as did Branch Highways with its 6,000-square-foot building. In 1993, the company paid $800,000 for a 19,000-square-foot building in Roanoke, the former manufacturing plant for Clarke-America Checks Inc. After a year of remodeling, which took place even as the Branch operations were moving in, the facility was enlarged to 26,000 square feet, offering office space as well as a modern shop.

Branch took another major step in its growth in February 1997 with the acquisition of E.V. Williams Inc., a Tidewater area contractor that specialized in road building. It was founded in 1941 by Elmer Virginius Williams to operate as a local road grading company. After acquiring a paving company in 1945, it took advantage of a highway building boom that occurred in the United States in the Cold War years after World War II, a time when the construction of a national highway system was a vital defense initiative. In 1948, Williams paved a 45-mile section of the Pennsylvania Turnpike. The business expanded in 1952 with the acquisition of Portsmouth Paving Company, which operated a pair of asphalt plants in Portsmouth and Chesapeake, Virginia. With its increased capabilities, Williams completed paving projects throughout the Mid-Atlantic States. In addition to highways, it did work on airports, military bases, and deepwater ports. The company also began operating borrow pits in the Tidewater area as well as a major public landfill.

Branch Group also grew internally during the late 1990s. In 1998, Hopkins added design and build capabilities. A year later, Hopkins launched two subdivisions, offering industrial automation and data communications cabling design and installation services. When Branch Group celebrated its 40th anniversary in 2003, it was a $250 million business and well positioned for ongoing growth.

Principal Subsidiaries: Branch & Associates, Inc.; Branch Highways Inc.; G.J. Hopkins, Inc.; E.V. Williams Inc.

Principal Competitors: Bechtel Group, Inc.; Fluor Corporation; The Turner Corporation.

Chronology

• Key Dates:
• 1955: McAlister Construction Company is founded by Claude McAlister and Billy Branch.
• 1963: Branch buys out McAlister to form Branch & Associates.
• 1984: G.J. Hopkins, Inc. is acquired.
• 1985: The Branch Group is formed as a holding company.
• 1993: Billy Branch retires.
• 1997: E.V. Williams Inc. is acquired.
• 2003: The company celebrates its 40th anniversary and is now generating $250 million a year in revenue.