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What happens to propane industry employees after an acquisition?

May 1, 2009 By and    

In this recession, it is not uncommon to hear of companies that suddenly close up shop, forcing employees out of work. Qualified personnel, who have contributed blood, sweat and tears for their companies, are relegated to unemployment lines, or forced to take jobs for which they are overqualified or that pay far less than they earned previously. If they are lucky, these once-loyal employees get a severance package and benefits to help tide them over until they find work.

And yet, that doesn’t happen – or at least not as often – in the propane industry. Unlike many businesses, propane companies are often tight-knit, family-owned operations run by a small number of employees. These employees become like family to the owner, and when it comes time to sell, the future of those employees becomes a prime concern.

“These people were my family,” says Bob Vaughan, who owned Vaughan Gas & Appliance in Decatur, Ala. “I told them, ‘I spend more time with you than I spend with my wife.’ They are what made this business successful.”

It isn’t easy to say goodbye to such loyal employees. When it is time to sell the business, however, propane marketers must understandably put their own interests – or those of their actual family members – first. After all, the sale represents – for most owners – a lifetime or even generations of work, and proceeds from the sale translate to retirement income or inheritance for the owner and the owner’s family.

But without question, owners are also keenly interested in the welfare of their employees and customers. And without exception, what will become of them is a primary topic of conversation with prospective buyers.

“A lot of sellers see their employees as family,” says Daniel Dixon, a consultant with Propane Resources in Mission, Kan. “They have a long-tenured staff, and they want not only the business to be taken care of, but the employees and customers to be taken care of. And they look for a buyer who meets those needs. They take care of them.”

That interest in the employees isn’t entirely selfless. For one thing, propane marketers make an investment in their employees. Training isn’t free, and it takes time.

Secondly, an experienced staff is invaluable to an out-of-town marketer who may be unfamiliar with a region. Staff members who know customers, wholesalers and patterns of business can quickly assess how to handle a given situation. Experienced employees become an asset in the sale of the business.

“The full-time staff personnel we had were definitely necessary to run the business, and frankly the full-timers … had a great deal of training to do their job, even prior to the sale,” says Vaughan, who sold his business in February to Paladin Energy of Kansas City. “My feeling is that because of that and because of their abilities, they made the transition smoother than it could have been. I don’t care what type of sale it is, you’ve got years and years of expertise in an existing business. They’ve got knowledge of the history of why you do some things and don’t do others, they know what to change and if it needs to be changed.”

Buyers interviewed for this article say that in most circumstances, if the business is to continue – rather than fold in to an existing location nearby – most employees are asked to stay. Employees who have worked many years for the seller, though, often decide to retire as well. Others give it a try with the new owner, and some stay for years.

Kent A. Misemer, president and chief executive officer of Liberty Propane in Overland, Kan., and John Armentano, vice president of acquisitions and business development for Paraco Gas in Rye Brook, N.Y., say they don’t guarantee a place within their companies for all employees – but they try.

“We don’t want to lose good employees,” Armentano says. “We’ll find something productive for them to do. Nine-point-nine times out of 10, it works its way out.”

Keeping employees allows the company to maintain the look and feel it always has, with little, if any, disruption to customers – something that Misemer feels is important in the 29 acquisitions Liberty Propane has made since 2003. All of the acquired businesses retained their original name, for example.

“They’re still serviced by the same people they were before. When they call, the same people answer the phone,” Misemer says. “In the majority of cases, there are customers who have continued to get gas for years and never knew the company was sold.”

Those who opt to stay are often greeted with better benefits than the smaller owner was able to provide. For example, larger companies often offer health, dental, disability and life insurance, a 401(k) match, and opportunities for advancement. Misemer and Armentano both say their companies honor the employees’ years of service, and they come into the new firm with those years intact – an important feature for such things as vacation time and seniority.

The larger firm also might bring more technology that makes the employees’ jobs easier. Vaughan says his former employees are pleased that, with the sale, the company now can accept payments on a credit card – which makes collections easier – and the firm is on the Internet. Knowing that he would eventually sell his company, Vaughan decided not to invest in such technology.

“The impression that I’ve gotten is that everyone here is very, very pleased with the way everything has gone down,” says Vaughan.

When Lisa Shelley and her husband sold the 500,000-gallon business they had run for 22 years, she made a point to determine what would happen to her employees. Shelley Fuel and Propane in Brewster, N.Y. had 13 employees; four of them worked on the propane side of the business, which was acquired five years ago by Paraco Gas.

The location was being closed, and three of the four employees were offered jobs – an hour away – with Paraco. One – a service technician who had been with Shelley Fuel and Propane for 19 years – decided to open his own business. Paraco hired a second service technician and an office employee, and offered severance for the one who was not retained. Three years later, Shelley also joined Paraco as an office manager.

“I would have been disappointed if they didn’t take anybody,” Shelley says. “They were important to us, they had been with us many years, and I felt that was the least I could do for them.”

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