Carving Out AMECO

Jan. 16, 2022
After 75 years as part of Fluor Corp., AMECO starts on a new path as an independent equipment rental and site services provider. CEO Gary Bernardez talks about a new beginning and refreshed vision.

By Michael Roth; Photos by AMECO

RER: How did the new ownership of AMECO come about?

Bernardez: About 35 months ago or so I took a thesis to the private equity folks who are the sponsors of this transaction, One Equity Partners, about re-engaging with AMECO. We said, “If at some point Fluor is interesting in divesting the business, which had been talked about many times over the years, here is a plan for that.” Thirty-five months later we finally got there and finished the transaction May 28.

Private equity is always interested in a good thesis, a good understandable opportunity. I always thought about, even when I was president of AMECO as a subsidiary of Fluor, the potential for AMECO to be unleashed into the market with the knowledge of all the good things we learned from being part of a large contractor, which does give you quite interesting and valuable experience. What could we do as a stand-alone organization with a laser beam focus on our business? Sometimes that gets a bit lost when you are part of a larger corporation.

When it comes to private equity, some specialize in carve-outs. One Equity has done their fair share of those over the years, and they listened to my understanding of what I thought AMECO’s potential was as a stand-alone organization. Then, a couple of years ago Fluor announced publicly that they were interested in divesting the business. We used that as the opportunity to get in and work with Fluor through their process, and were the last one standing. We signed at the end of April and closed at the end of May -- a quick 30-day close upon signing. That just shows you that both sides were motivated to get a deal done.

So now your relationship with Fluor is quite different!

Yes, Fluor is a very large customer now instead of being a parent organization. We will definitely stay close to them. We have the opportunity to treat Fluor differently now that AMECO is a stand-alone organization, rather than a subsidiary of them.

In the past, when AMECO was part of Fluor, you were the primary provider for Fluor on a lot of its projects, but Fluor had other suppliers as well, correct?

Yes, in all the years when it was Daniel Construction, Fluor Daniel, and then just Fluor Corp., AMECO was always inside the Fluor organization -- for almost 75 years, so we’ve got a lot of history there. Even when inside the Fluor organization AMECO had to earn the business, make sure it made sense for Fluor, and make sure it made sense for Fluor’s customers.

Since we were co-located in certain offices, we could see what and how they were pursuing work, and what was going to turn into a construction project. All those years really helped AMECO understand about the complexities of construction and maintenance, either on a capital construction project or in an ongoing plant environment, and really understand how contractors think so we can apply that knowledge to bring value to our clients.

Most people aren’t aware though that during our heyday under Fluor, they were only about 9 percent of our business. So, when AMECO was at its largest size we were doing a lot of work outside the parent organization. Our mentality now is to help Fluor see how we can do things in an even more value-producing way that is focused on all the things a contractor wants to have, while also having the opportunity to expand our customer base. Our newly independent company is North America-based. In the old days we had far-flung operations in some far-away places if you remember. Now our focus is to take that expertise and apply it to the North American maintenance and construction markets.

So if Fluor projects made up only around 10 percent of AMECO’s business, it certainly has a wide range of customers and relationships.

Correct. What our plans are now, and what our focus is every day, is identifying where those relationships and opportunities are, and then positioning AMECO to really be a contractor’s partner when and where they’re executing a project. One of the things we’re seeing is that the environment for the contracting world is in somewhat of an upheaval now, with a lot of people coming out post-COVID trying to figure out how fast they can ramp their business back up with their customers, and we understand that pain. We think we can help them move towards accomplishing their future work in a more productive, efficient, and cost-certain way.

What is the business model now? I suppose some differences from the old AMECO?

If you’re in business for 75 years, you’re doing something right. A lot of companies don’t make it past 100 years, and we’re hoping to do that and more. But I think one of the differences going forward is we’re focused on specific construction and plant operations opportunities in North America where we can provide indirect support services, what we call Site Services® – everything from a 250-ton crane down to general contractor tools, supplies and consumables. We also have a very integrated scaffolding capability and services. Where we apply technology, we make sure it’s not just to apply technology for technology’s sake. We utilize technology where it enhances AMECO’s ability to analyze the data and then provide value-added services to clients onsite.

At a project site or inside of an ongoing plant, that’s where AMECO has lived most of its life for 75 years. I think you’ll see us make investments in some of those areas differently than we did under Fluor, because our focus has shifted now that we’re an independent company. When you’re inside a large parent organization there sometimes are different priorities. Now we know what the priority is, and that’s to grow this business that we’ve been doing for a long time without the blinders of being part of a large corporation. So that makes us more agile and nimble.

The other piece of the business model that is being enhanced is simplifying how we execute work and conduct business. Contractors’ lives are already so incredibly chaotic. Understanding all the history that we have working with contractors from the time we engage, to executing in the field and closing that job out, and getting on to the next one, we want to be the easiest people to do business with. Understanding the challenges that come, heading those problems off at the pass, being the quickest to resolve those issues, and maybe being the best and smartest and most flexible commercially with them as well, is important because we know how contractors work and think. We’ve got a good array of services to take to those contractors. Our job is to mix and match our solutions and services in a way that puts us in the best position to help them do their work. It’s a blend of things that we know we want to do better while also building off of what AMECO has done well for a long time.

In the past AMECO was very much focused on site services and fleet management, more than just equipment rental. Is that still the emphasis?

The site services piece is the heart and soul of AMECO. People’s understanding of what we do is usually based on some kind of history around construction projects. We have some very large projects that we’re working on now that are in the existing base load of the company, such as a natural gas job in western Canada, where we are providing a custom mix of site services. These kinds of projects are trying to come back and come out of the ground, and now we have the opportunity to expand business with our targeted customers. Some of these contractors were not exactly thrilled to be doing business with a subsidiary of their competitor, so our job is to make sure they understand we’re not a competitor anymore. We’re a provider of site services throughout North America, serving capital construction contractors and owners of operating facilities.

In the past, I imagine you lost a certain amount of business just because you were owned by Fluor?

Yes. There were a handful of companies for certain, but we actually did penetrate the government support business outside of Fluor. We were in the Middle East after 9/11, and the only way you could do business inside that pool was to prove that you were a market-based, stand-alone organization providing services to the industry. That was the only way we were able to really crack that code. We had enough examples from history to be able to do that.

But still, when you come down to mostly North American contractors, Gulf Coast, Western Canada, if we called and they were a tough competitor of Fluor, we certainly didn’t have a great start. They just didn’t feel comfortable that it was the right thing for them to do. Now we’re finding we definitely have the opportunity to re-open some of those doors.

We also are very close to a number of people who used to be in the Fluor fold and now are working somewhere else in leadership positions in construction. They’re obviously very good customers, and we’ve been working with and taking care of them for a number of years. There are some people who are willing to start fresh and say to AMECO as a stand-alone organization, “Let’s see what you’ve got to offer.”

What are your primary services, how would you describe your offerings?

We have to look at both sides of the coin. On the one side, we serve the traditional, if there is anything traditional anymore, EPC (engineering, procurement and construction) projects. One thing we’re seeing is the lump sum turnkey world is going through a fairly big upheaval in the construction industry. Certain companies aren’t willing to do lump sum work anymore. I think the risk-reward ratio got mixed up in the past handful of years. We’re able to bring some certainty around a large portion of the project – equipment, scaffolding, tool supply, we do a lot of ice and water distribution, welding, rods and gases, extending the outsourced management beyond rental equipment. We’re simply extending that to capture a larger array of the types of things that contractors don’t really have the resources and systems to manage and moderate. If we can do that in a very coordinated way, we can leverage our contracting strategy to do a lot of services under one box. That’s strike zone stuff, that’s the heart of the matter for AMECO.

Then, when we have the opportunity to stay in a facility, when it’s been built and we can stay, we’re looking at supporting both contractors and owners. Actually, we’re having as many conversations with owners these days as contractors. We’re starting to look at their programs over multiple projects and help them make different decisions around assets and how they deploy them. We’re very good at that, it’s a good strike zone for us.

We also have the ability to do shutdowns and turnarounds, with all the tool trappings that you need to perform inside an ongoing plant operation. There are targeted opportunities where we’re going to follow a planned operation, with multiple plants in a certain geography, where we can serve those customers best. But I’d say our bread and butter is more the construction side, especially for real contractors who are trying to understand, “OK AMECO, you’re standing alone now, so show us your value proposition of how you can perform a broader array of services for an overall better cost with certainty over time.” That’s what we’re going to do.

You also do fleet management where you’re managing the customer’s own fleet as well as what they rent from you, so you’re managing the whole project in terms of tools and equipment, is that right?

Yes, and if you look back at the timeline of AMECO’s history, we have had very defined larger programs where that has been the play, and that has been what our customer wanted. I think over the last handful of years AMECO has gone through its own transformation because its parent had it up for sale for almost two years. You have to work your way through that. In some cases, we’re finding owners who are waking up and understanding that, “This is not a business that I want to be in, and I want to sit back and look at asset management for multiple projects over the next couple of years.” We can give them a good purview on what the right asset base is to own by performing a thorough lease/buy analysis over the whole program, and then helping them manage that so they can be more involved in making sure their projects come out on time and on budget.

In some cases, if it’s lump sum, the owners won’t have as much involvement in execution. Our job then is to help the contractor understand how we can manage the site services scope better than anybody else, and we’ll do it in a cost-certain, productive way, optimizing the proper activity, and making sure they only have assets on the job when they’re needed. And when the job is over, we leave it the cleanest, pick up, and then start the next job. That’s what we’re really good at.

You were pretty involved in the oil sands in Alberta, is that right?

Western Canada is a long-term Fluor stronghold relative to doing construction in the oil sands. AMECO obviously continues to be well connected with Fluor, and we’re doing a large LNG project out in the western side of the country. The project is just coming out of the ground after COVID and the civil work. It’s starting to go vertical. That’s a big project for us, and we have established operations in Alberta and British Columbia.

Where are your physical branches now?

Brick and mortar for AMECO in the United States is in Greenville, South Carolina; Houston and Tyler, Texas. We just secured an opportunity to be in the Baton Rouge, Louisiana, area, so we’re bracketing the Gulf Coast between Houston and there. In western Canada we have operations in Leduc, Alberta, and Terrace, British Columbia. Our projects really are mini-operating centers. When we’re doing our job, we are actually working on sizable enough projects where our infrastructure there enables us to execute like a mini-operating center. We’re looking at, and will look at in a more robust way, how we leverage our supply chain partners to extend our reach. That’s getting a real hard look internally. There is a new level of support required to be a supply chain partner for AMECO going forward, so we are working hard on that as well.

You set up mini mobile branches anywhere there’s a project?

There are certain parameters around brick and mortar when it comes to what kind of projects you can serve from a geographical region. In Canada we have very little brick and mortar infrastructure. We have warehousing and operations centers in western Canada, and we’re serving the largest project in the world right now in that region. We also recently renewed work with the largest refinery located on the eastern corridor of Canada. So, in a country as broad as Canada, we’re able to work both sides of the equation with very little fixed infrastructure.

So you are focusing in North America now but will you still be involved in other countries if a project arises that a customer may want your services in?

We’re sifting through that. Probably the place that has the best chance is Mexico because AMECO has a long history there. We were the largest project site services organization in the entire country at one time. The only people who have more capability on the ground would be if you consolidated all the Caterpillar dealers there, that was it. It was AMECO after that. We have a heck of a history there. We can definitely deploy a project solution there. I would say our priority is to prove out what we’ve committed to with our new owners, which is focus on Canada and the U.S., knowing we can execute and deploy a project solution in Mexico if it makes sense.

What type of equipment are you providing?

We have our core fleet, which is our bread and butter. We just finished performing a 200-piece civil-oriented fleet program on a large project, so we have the ability to mobilize that type of equipment as well. But you would mostly think of us as 150- to 400-ton cranes, down through the typical aerial, welders, dozers, backhoes, that kind of equipment down through tool supply, consumables, and smaller items. We have the ability to model out an integrated scaffolding solution, so we definitely include scaffolding as a core product now.

Going forward any particular plans to expand the company or is that down the road?

That’s a great question. We’re focusing now towards organically expanding the business. Obviously, being owned by a new owner that’s completely focused on us and this business, if we find the right opportunity to add to AMECO’s ability to serve clients, we’d give it a hard look.

Any other things you want to share?

I would say three things about AMECO as we reintroduce AMECO to the marketplace. One is we’re still industry-leading when it comes to safety performance. That’s an area that we take very seriously. I think a lot of people talk about it, and a lot of people are doing fairly well to be honest. You have to these days, it’s a requirement you should be focused on, but it’s also about how you carry it through every day and how you incorporate it into your work practices and your conversations with customers. So that’s still a high priority. We take nothing for granted, and we’re re-examining the way we incorporate safety into not only our daily work but also our expectations with customers. This is because now we’re working with a variety of different contractors, and everybody puts a different level of importance on it. We’re extremely focused on continuing AMECO’s safety performance.

Secondly, we are laser focused on the way we manage our relationships with customers, and in the contracting construction world it’s an interesting dynamic. So, if we can be more effective and efficient in how we engage with them, how we monitor performance over time, then commercially we’re going to be much more flexible and quicker in terms of how we contract with our customers.

Lastly, we are aggressively expanding the business and 100 percent focused on this business. We are not distracted by a variety of things that can sidetrack you when you are part of a large, multinational, global organization. As our new owner says, we’re in charge of the business 100 percent. We know what business we’re in, so that focus allows us to muscle the resources together to be ready to support contractors in a way they haven’t seen before.

You had years without recordable incidents?

Yes, we did, and in this year, we have zero recordables. We continue to be very focused on safety. The commitment is heightened. I give a lot of the credit to the existing AMECO team. All through the transaction they never lost focus on HSE, and we’re just carrying that forward.

I remember years ago you had an ice-making trailer on various projects, is that still part of AMECO?

Yes, we have some significant ice-making trailers, in Houston especially. As you can imagine, the need is great due to the heat and the conditions that people work in there. I was recently engaging with some customers where just the ice solution alone is going to save an amazing amount of time and money for them. We’re in the process of incorporating that service in a much larger way because it’s being provided in various ways all over the board in the industry. For us to bring structure to services like that, and also with fueling equipment on a site, the kinds of additional services where the contractors don’t have systems in place, we can bring great value there.

I always thought that was a brilliant idea, especially in remote areas. Any other services AMECO offers that you think are really unique?

Our business model goes beyond providing equipment and other products. We’re upfront and say, “We analyzed the data from the last three projects that we’ve done with you, and this is what it looks like. So, let’s build the appropriate fit-for-purpose equipment schedule, tool schedule, and other indirect services into this next project to improve the way you can execute it, such as implementing an integrated scaffolding solution on the front end.” We’ve had examples where we’ve saved contractors 40 percent of their labor costs. The value is in the knowledge of the prior project experience, not just rapid response, and the breadth of what we’ve done historically. We’re making sure that’s refined and that our IT capabilities bring those insights to the surface to us at the right time, so we can bring actionable recommendations to the contractor or owner.

The company is going through an assessment of the best way to have work processes and systems deployed in a logical environment. Then, with the capabilities we have, what is the best way to deploy them in the field? The ability to put that all together for a customer on the front end is critical.

The other thing we’re taking a hard look at is our tool management system, which was recently enhanced. First, we’re making sure that we’re deploying those enhancements and improvements in the field. We have an advisory council that is formally taking feedback from the field construction customers and flowing it back to us so we can understand pain points better. This way our solutions aren’t just solutions because they sound good on paper. We’re continually aligning that site feedback with program enhancements.

We’re committed to taking our 75-years of expertise and focusing it on a market that is coming back.

The business environment you’re in, does it seem to be pretty close to pre-COVID levels?

It’s a bit chaotic in terms of COVID and which jobs are moving, and which jobs aren’t. My sense is some of the middle range work is easier to get back into the swing, we see those jobs moving. If it’s a larger program where there’s still uncertainty on a final investment decision, then I think those jobs are still moving but at a slower pace, making their way through any final investment decisions or confirmations on if they’re going to go. We can tell by the fact that our customers are harder to reach now. They’re out, whereas before you could reach them easily because they were at their houses.

So that’s a good problem to have, it means they’re out trying to solve the construction problems that their customers are giving to them. We see that as moving towards a level of activity that existed before. Not all the way back yet but moving in that direction.

What about supply chain issues, getting equipment and supplies, is that still a problem?

I think from a standpoint of knowing costs, that’s a big issue. Inflation is something we may have to worry about that we haven’t worried about in 10 years. When it comes to commercialization of your opportunities, we’re seeing some areas that are tighter than normal. Lead times and availability can be challenges. Our job is to expand the supply chain to help us answer the bell. There are some areas that are a little concerning. But we’ll have answers for them.