BUSINESSWEEK ONLINE : MAY 29, 2000 ISSUE
COVER STORY U.S. Concrete: Breaking the Cement Mold U.S. Concrete Inc., Houston PRODUCT Ready-mix concrete SALES $167.9 million WHAT'S HOT Small, independent concrete companies--many of them family-owned-- face rising costs and regulations and are ripe for consolidation With high-flying dot-coms and high-tech ventures all the rage, U.S. Concrete Inc. CEO Eugene P. Martineau admits he used to feel outclassed when the cocktail-party chatter turned to people's occupations. ''We would cough and stutter and say, 'Oh, we're in the concrete business,' as though we were embarrassed about it,'' Martineau says. ''But now I say we're in the ready-mix business and you bet your life on us every day.'' Martineau, 60, has reason to be proud. Fueled by the building boom sweeping America, from new homes to warehouses to highways, Houston-based U.S. Concrete (RMIX) has been on a fast-growth tear since Martineau and his partner, Vincent D. Foster, 43, founded the company in 1998. What they sell might not be sexy, but it's a key component of any building project. Ready mix comes in 1,000 varieties. Add water to the powder and voila--cement. Martineau, a 34-year-veteran of the business, readily admits that he hasn't invented a better ready mix. Instead, he and Foster recognized that his industry was ripe for consolidation. U.S. Concrete, No. 9 on the Hot Growth list, was formed when Martineau and Foster bought six concrete companies based in New Jersey, California, and Washington. It has since acquired 11 additional companies in the highly fragmented industry, says Foster, who expects that pace to continue. Sales have grown 58% a year over the past three years, to $168 million, and profits by 146%, to $8.2 million. ''There were an awful lot of good companies making good margins, and the potential was there for consolidation,'' says Martineau. But he will have to fight a handful of larger, multinational concrete companies as he vies to acquire his share of the 3,500 independent ready-mix companies left in the U.S. His goal is to make U.S. Concrete No. 1 or No. 2 in the industry, up from sixth place now. The Martineau-Foster team would seem to be an ideal fit for such a strategy. While Martineau has his extensive background in the concrete industry, Foster worked for years at accounting firm Arthur Andersen in mergers and acquisitions. ''They've done a very good job of pinpointing the areas they want to be in and then doing the backfilling once in those regions,'' says Gary F. Prestopino, an analyst with Tucker Anthony Sutro, a Denver-based brokerage firm. DEJA VU. Foster has already executed this consolidation strategy once before. Besides being chairman of U.S. Concrete, he's also a managing director and founder of Main Street Merchant Partners, a Houston-based merchant-banking firm. The blueprint for U.S. Concrete is another Main Street company, Quanta Services Inc., a group of 45 electrical and telecommunications contractors the company began acquiring in 1998. When it approaches a target company, U.S. Concrete works hard to execute as seamless a merger as possible, working with the small or family-owned businesses it acquires. It may structure individualized packages to accommodate family tax needs or offer employees stock options, and it often keeps the family management team in place. Acquired companies also keep their own brand names, since many bring with them a loyal customer base and long-standing reputation. The advantage U.S. Concrete brings to the transaction is efficiencies of scale, including buying power and lower overhead. Another major plus is access to low-cost capital. In January, the company announced it would double its line of credit, to $200 million. That should help U.S. Concrete move even faster to cement its growing empire. By HILARY HYLTON _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Hot Growth Companies TABLE: The Revenge of Brick and Mortar WWF: One Rock-'Em, Sock-'Em Company Direct Focus: Flexing Its Marketing Muscle Meade Instruments: Back from a Black Hole Diamond Technology: Attack of the Killer Apps Children's Place: Hey, Good-Looking Albany Molecular Research: All R&D, All the Time SERENA Software: Keeping All Systems Go U.S. Concrete: Breaking the Cement Mold What Happened to the Class of '98? TABLE: The 1998 Winners...and the Losers TABLE: Hot Growth Companies, 2000 (.pdf) ONLINE ORIGINAL: Somera: Top-Notch Profits from Old Tech Gear INTERACT E-Mail to Business Week Online

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