Industrial Specialty Services
NexTec Group Helps Oil and Gas Startup ISS Launch in 6 Months
On January 31, 2020, a private equity (PE) group acquired a carved-out business unit in the energy services industry and set goals of at least tripling the company’s size by year 5. The CEO, James Craig, faced an aggressive deadline to stand up the newly formed company, Industrial Specialty Services (ISS), from scratch while generating $40 million in annual revenue and supporting more than 200 employees. He needed to form his management team, hire personnel, and establish the entire back office while also setting up the network infrastructure. Craig brought on a veteran team consisting of NexTec Group, BDO Digital, and Acumatica Inc. to set up mature internal systems all while working through the COVID-19 pandemic and Hurricane Hanna beating its deadline.
Deer Park, TX
On January 31, 2020, a private equity (PE) group acquired a carved-out business unit in the energy services industry and set goals of at least tripling the company’s size by year 5. The PE group faced an aggressive deadline to stand up the newly formed company, Industrial Specialty Services (ISS), from scratch while generating $40 million in annual revenue and supporting more than 200 employees. Operating out of Deer Park, Texas, and now with six locations, ISS was created to provide technical maintenance and repair services and solutions to the refining, petrochemical, gas, power, pulp & paper, offshore and subsea markets throughout North America.
The CEO, James Craig, needed to form his management team, hire personnel and establish new company departments for Operations, Sales, Marketing, HR, Engineering, Safety, Accounting and IT. Additionally, Craig needed to establish data and voice networks and related infrastructure and enterprise systems for office locations in the USA and Canada.
Craig knew carving out an asset entangled with its parent company posed a different level of complexity than merely acquiring a company outright. (A carve-out is the divestiture of a business unit that the parent company sells, partially or wholly). As he moved through the due diligence process, he already had a team and technology platform in mind to help him with the process. Craig had previously worked with BDO Digital during an IT Due Diligence engagement conducted for the Equity Group’s purchase of ISS and he decided to ask BDO Digital for their recommendations for this transition.
Start-ups or carve-out companies usually do not have the negotiating power, knowledge, or even credit standing to negotiate favorable terms with vendors, and they frequently miss strategic opportunities to optimize contracts and pricing. BDO Digital was able to help solve this problem.
BDO Digital architected and implemented ISS’ IT network infrastructure and IT department support services by securing Microsoft licenses, brokering deals with IT vendors, and negotiating to optimize costs while ensuring continuity of services. BDO also leveraged its enterprise level relationships and procured all necessary office and employee hardware, such as laptops, cell phones, copiers, scanners and other office equipment for all ISS locations and employees.
“Next, we had to put an ERP platform in place,” Callegari says.
The ISS, BDO and the NexTec team did not evaluate ERP systems. “We did a full-blown evaluation at Guardian SealTech and rated each ERP with a large panel where Acumatica was selected,” Craig says. “Since ISS was a complete stand up, we didn’t see any need to go and do that research again.”
Craig has experience with at least seven ERP implementations throughout his career, including those of Microsoft Dynamics, Sage, and Oracle NetSuite, as well as homegrown systems. This was his second Acumatica deployment. “The ease with which Acumatica works and how it looks and feels compared to Microsoft Dynamics, Sage, and Oracle NetSuite, there’s not a whole lot of comparison. Acumatica leads the pack,” Craig says.
He liked Acumatica’s ease of use, unique pricing model, scalability, open APIs, and ability to integrate with third-party applications easily. “It’s a fully integrated package that doesn’t need a lot of customization.”
ISS has long-term, ongoing relationships with customers, who issue projects daily. Projects can range from two days to 20 days or more, occur on site at customer locations, and are governed by rate agreements. “In the field service environment, these can be very high-volume, short-term projects, and we need to track profitability by location, site level or customer. The ability to capture that in real time is critical for us,” Craig explains.
With Acumatica, ISS executives see billable hours in real time. “On Sunday we have everything in and processed by Monday at noon,” Craig says. “We can see how successful we were in the previous week.”
ISS can do that because Romero and his NexTec team used Acumatica’s flexible software to configure dashboards that allow ISS to automate quotes, update invoices with double time and holiday rates, and change and recalculate margins on projects if needed. None of those items are out-of-them box with Acumatica, but easy to configure for clients, Romero says.
Additional dashboards allow ISS to track critical KPIs such as employee utilization and employee revenue levels on a project, division, or consolidated basis. These dashboards easily allow ISS managers to drill down and quickly view the underlying data.
“Our dashboards are critical and NexTec has done a great job,” ISS’ Craig says. “I anticipate as we settle down and operate more, we’ll be making some additional modifications to things we might want to see a bit differently.”
Acumatica’s ability to provide real-time access to data is a great management enabler, Craig says. “Seeing billable time and how much we pay our field services team is one of the largest management tools we have, and we knew we would be able to get that level of detail from Acumatica.”
“We can issue or create 20 to 30 brand new projects every morning,” he adds, “and we can limit who gets assigned to what job. Acumatica is not only a management tool, but we can also use the data for post analysis and profit analysis and see those in real-time, which are critical for us.”
Before the carve-out, the old business unit used multiple, cobbled together systems designed for a different industry and it took a significant amount of time and effort to obtain a past view of their operations. BDO Digital, along with NexTec, architected the data process flow and controls in Acumatica for ISS to manage their business in real time. During the first full month in business, ISS accrued revenue for the month and invoiced two months of billings for its first closing. Previously, the business unit carried a month’s worth of unbilled revenue.
“Putting two months’ worth of AR on the books in the first month helped our liquidity and BDO Digital and Acumatica provided that for us,” Craig explained.