Wake-Up Call

Wake-Up Call

Companies By Janet Leiser | Senior Editor

As Kathleen Shanahan transforms an environmental remediation company into a market leader, the CEO is on the hunt for acquisitions - backed by one of the nation's largest equity firms.

WRS Infrastructure & Environment's strength is its solid 23-year reputation as a get-it-done-right environmental remediation and engineering company with projects from Colorado to the Florida Everglades.

But its weakness was its marketing, and growth was stagnant at the Tampa-based company: Sales hadn't changed more than 1% during the past few years.

That's why billionaire Samuel Zell's equity group, which bought the firm in 2003, hired Kathleen Shanahan. She had worked at the New York Stock Exchange with John Thain, at the White House as chief of staff for Vice President Dick Cheney and in Florida as chief of staff for Gov. Jeb Bush.

Equity Group Investments LLC is relying on Shanahan to remake and re-energize the company that Westinghouse Electric Corp. spun off in 1997 when Michael Jordan remade that company into CBS Corp. It's Shanahan's first job as CEO.

So far, it's looking good at WRS.

Since Shanahan joined in July 2005, revenue has grown by one-third to an estimated $85 million this year, she says. And the company expects to start 2007 with a backlog of work for the first time in years.

"I'm not going to say I want to be a billion-dollar company in five years," the CEO says. "Could we get there? Probably not in five years. But we'll be a different sized company in three years."

Word of mouth

Most of WRS's work, about 80%, has come from customers who heard about the company from others.

To change that, Shanahan spends part of her work week traveling and talking to industry leaders, including developers, about the company, she says, adding: "Our target client is anyone that has dirty land that needs to have it cleaned up."

WRS Chief Operations Officer/President Luke Frantz says: "She has the belief you have to be in front of the customer."

About 80% of the company's work is for governmental agencies, from the state Department of Transportation to the federal Environmental Protection Agency. WRS is doing about $20 million of work this year on the Florida Everglades restoration, from moving dirt to building levees to helping with water flow.

Shanahan plans to double the company's work in the private sector to 40%. One way is by targeting development companies that are sitting on land that needs to be cleaned up and sold.

And, no job is too small.

"We'll take an entry level job, whether it's an underground storage tank, to show them the quality, safety and performance of the company," she says.

Hopefully the customer will return with a larger project.

One thing that makes WRS unique among its competitors, which are many, is the company can do a job from the initial study or assessment to the clean up. So when a problem comes up in the middle of a project that requires more engineering work, the company can handle it quickly, revise the plans and continue work.

That results in savings for customers.

"Something always changes in the field," Frantz says. "It's never what you think it's going to be. We have the ability to change to keep the project on schedule instead of calling in another company. That's when the dollars are going fast, when work is going on in the field."

In April, something came up that was a first for WRS. The firm unearthed the remains of a giant ground sloth that could date back 25,000 years while working on a stormwater treatment area related to the Everglades restoration. Work stopped while scientists from the Florida Museum of Natural History in Gainesville excavated the site.

Diversification

In addition to environmental remediation, WRS is expanding its scope to include more civil work, such as the construction of roads and other transportation projects that also includes environmental work.

"We have to broaden the platform of opportunities so it's not just environmental work," Shanahan says.

Under her direction, the firm is now working with the state's water management districts. WRS has nine offices across the nation and does work in all but three states - Washington, California and Oregon. It has done the last two cleanups in the nation for sites that were once manufacturing gas plants, one was in Tallahassee, the other in Fort Collins, Colo.

The company's focus, however, is the Southeast United States, with about 50% of its work south of Atlanta.

"What's also unique in this business," Shanahan says, "is on Monday, you'll partner with a competitor and on Tuesday you compete with them head-to-head. It's just a lot of ebb and flow in terms of partnering and competing.

"It's not like on Wall Street where Goldman Sachs competed with Merrill which competed with Lehman which competed with UBS," she adds. "There was never any partnering. It's a healthier respect here."

With about 320 employees, WRS qualifies as a small business under the federal government's guidelines.

If the company loses a bid or a project, it tries to figure out what it should do differently in the future, she says, adding, "It's a useful way to approach the business."

While most of WRS's growth has been organic, that's expected to change with Shanahan, who's on the hunt for the right acquisitions. She declined to say exactly what type of companies WRS is looking to acquire.

"We want to add other skill sets," she says. "I want to be smart about it and be sure the skill sets are not too small a slice of where the opportunity is. There's a lot of analysis that goes into that. We're talking to people."

Challenges

WRS faces an issue that is a problem for most companies: finding employees, particularly engineers. The company offers a $2,500 bonus to employees that get a friend or former schoolmate on with WRS.

In its favor, the company has a fairly impressive employee retention rate, she says. The average WRS employee has been with the company at least seven years.

Another challenge for WRS is bonding, which is required on most projects, and as the company grows, it becomes a bigger issue.

"We have to figure out how to grow that," she says. "We have to negotiate job-by-job."

Frantz, one of the three managers that helped buy the company from Westinghouse in 1996 with the assistance of River Associates LLC, says Shanahan has energized WRS.

"She's a great asset to the organization, a tremendous boost," he says. "She's raising the exposure of the company through relationships and contacts with other CEOs of major companies, Fortune 500 customers, the energy market, manufactured gas plants, government."

Shanahan says she plans to stay awhile; she has bought a home in Tampa and doesn't plan to move WRS's corporate headquarters that have been in the area for 10 years.

While politics has provided Shanahan great opportunities, she's happy to be in the private sector, she says, adding: "You learn how business decisions get made and how people get hired and people get employed and people get raises and health care costs, the reality of what government tries to solve frankly without a lot of practical experience sometimes."

And she has the backing of one of the country's most successful businessmen, Zell, who's among Forbes list of richest people.

Kathleen Shanahan

POSITION: CEO, WRS Infrastructure & Environment Inc.

EDUCATION: Bachelor's in biochemistry, University of California, San Diego; master's in business administration, New York University Stern School of Management.

BOARDS: She's a director for WCI Communities Inc., Lincoln Center Institute, National Parks Foundation and Florida Governor's Mansion Foundation.

CAREER PATH: Shanahan planned to become a doctor, but she was offered a job by then Deputy Secretary of State Bill Clark, a longtime family friend, prior to starting medical school. While she waited for security clearance, she worked as an elevator operator at the nation's Capitol for about six months. She later became Vice President Dick Cheney's chief of staff and eventually joined Jeb Bush in the same position after his election as Florida's governor.

She obtained an MBA instead of a medical degree while working in New York City. In 2004, she worked as a senior consultant to John Thain, CEO of the New York Stock Exchange. She was president of a consulting company last year when Sam Zell's equity firm tapped her to become CEO of WRS.

QUOTE: "What I tell any young person I've ever worked with is if you work hard, if you say what you're going to do and then do it and follow through, you can do anything you want."

WHO'S SAM ZELL?

WRS Infrastructure & Environment Inc. was acquired in 2003 by Chicago-based Equity Group Investments LLC, owned by billionaire Sam Zell, who has made much of his fortune through real estate investment trusts.

Zell has a net worth of $2.3 billion and controls a considerable amount of land in the United States, according to Fortune magazine. He's 112th on the 2005 Forbes 400 list of the richest people.

A graduate of the University of Michigan, the college's business school was named after him and a former fraternity partner, the late Robert Lurie.

According to Forbes, Zell's parents escaped Poland weeks before the Nazi invasion and he was born in Chicago four months after family's arrival in America. After college, he and Lurie bought cheap real estate from distressed owners and they kept buying when values recovered and boomed. He still controls 123 million square feet of office space and 198,000 apartments.

"I recognized early on that I was different. I looked at things differently than my peers," Zell was quoted as saying earlier this year at a lecture at the University of Illinois Urbana.

"My greatest enemy was conventional wisdom. I've been willing to walking right when everybody else walks left."