Asheville’s ISG sees big upside in infrastructure repair
By Mark Tosczak
A water main breaks somewhere in the United States every two minutes, according to the U.S. Water Alliance, a nonprofit advocacy group for managing water resources. That’s because in many places, America’s water and sewer infrastructure is in dire need of repair or replacement — in some large northeastern cities, some pipes, manholes and other structures date to before World War II.
“In the United States, there [are] 1.6 million miles of buried water and wastewater pipelines and associated manholes,” says Tom Barr, chief executive officer of the newly formed Asheville-based Infrastructure Services Group. “The infrastructure is old, it’s aged and it requires constant repair.”
In March, ISG announced it had bought two companies, Vermont-based Green Mountain Pipeline Services and Pennsylvania’s Mr. Rehab Sewer System Rehabilitation, that do that kind of repair work. Combined, the two firms have about $32 million in annual revenue.
They are the first of a series of planned acquisitions of water and sewer service companies. ISG is backed by Dallas-based Juniper Capital Management and ORIX Mezzanine & Private Equity and Barr’s own LionsWing Capital Partners.
Barr, who has decades of experience in the water infrastructure and environmental lab industries, has done this before. From 1996 to 2007, he was CEO of TestAmerica Laboratories, an environmental-testing company he grew from $250,000 to $350 million in revenue through acquisitions and mergers.
His investment thesis hinges in part on the notion that climate change is leading to more frequent, violent weather, which creates overflowing storm sewers and further degrades aging municipal lines.
“I think with climate change, there will be more and more work that’s required,” he says.
To that end, Barr has a list of 25 to 30 additional potential acquisitions. His goal is two acquisitions a year, mostly east of the Mississippi and north of North Carolina, and about $100 million in revenue.
“Below [$100 million] you won’t maximize the value opportunity,” he says. “I expect we’ll go beyond that.” Margins in the industry, he says, tend to be in the midteens.
The goal is to help existing companies grow within their markets by providing capital and sharing best practices between them. There may be some savings in insurance costs and purchasing power as ISG grows, but Barr expects existing owners and managers of the acquired companies to continue to operate them. In fact, owners keep at least a 20% stake even after ISG steps in.
ISG is now the largest company headquartered at Asheville’s Collider, a coworking space and entrepreneurial hub focused on businesses related to climate change.
ASHEVILLE — Modern Healthcare named Jill Hoggard Green, chief operating officer at Mission Health, among the top 25 COO’s in health care. Green also serves as president of the 730-bed Mission Hospital. Mission Health is in merger talks with Tennessee-based HCA Healthcare.
ASHEVILLE — UNC Asheville will rename Overlook Hall, a dorm that opened in 2012 and houses 300 students, in honor of former Chancellor Anne Ponder. The Asheville native, who was the university’s sixth chancellor, retired in 2014 after nine years in the post.
ASHEVILLE — Sears Holdings plans to close its local store in July. The department store was an original tenant of Asheville Mall when it opened in the early 1970s.
FOREST CITY — Jerry Gross, a local podiatrist and owner of Foot & Ankle Center of the Carolinas, and his son, Jason Lee Gross, were charged with wire fraud after placing workers on unemployment insurance benefits while they continued to work at the practice. The two could face 20 years in prison and a $1 million fine.
BLOWING ROCK — About 100 businesses joined a fundraising effort for the Middle Fork Greenway, a proposed 6.5-mile paved trail connecting Blowing Rock and Boone. A 1-mile section of the trail near Tweetsie Railroad has been completed.