Clune Construction turns down buyout offer
(Crain's) — Michael Clune has turned down an offer for his corporate interiors construction firm and is now focused on unearthing business in the Middle East while also looking for opportunities to diversify by snapping up weaker rivals.
Mr. Clune says he was approached about two months ago with what he called an "above-market" offer to buy Chicago-based Clune Construction Co. The prospective suitor was a larger construction company that he wouldn't identify.
The company likely was New York-based Structure Tone Inc., according to industry sources. Structure Tone, which specializes in corporate interiors, has about $3 billion in annual revenue and is the 21st-largest U.S. construction firm, according to a May ranking by Engineering News-Record magazine.
Calls to Structure Tone executives Monday morning weren't returned.
"The offer was very attractive," says Mr. Clune, 59. "But after having built my own company for so long, I just couldn't bring myself to commit to working for somebody else."
Mr. Clune, who is Clune's chairman and CEO, told his staff last week that he had opted not to sell his firm, which dates to 1985, when he was hired by LaSalle Partners Inc., a predecessor to Jones Lang LaSalle Inc., to start an interiors-construction unit. Mr. Clune bought that business in 1997 from LaSalle and started operating as Clune Construction.
The company had its best year ever in 2008, with revenue of almost $380 million. This year, Mr. Clune expects revenue to fall more than 30% because of the recession and the freeze on lending for commercial real estate projects.
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Mr. Clune says his company has cash on hand and no debt. Because of cost-cutting measures taken this year — including salary cuts and partially paid furloughs recently announced for nine workers — Clune is on track to be profitable this year, as it has been every year since its founding, Mr. Clune says.
"We're financially strong enough to meet the challenges where there won't be a lot of growth and there will be some pain," says Mr. Clune, who expects construction could be slow for up to five years.
In addition to scouring for jobs in the Middle East and pursuing federal government work for the first time, Mr. Clune says his firm could become an acquirer. He says the recession may push rivals to sell at a discount, and that Clune is looking to diversify into medical office and retail.
Other construction executives agree that this recession could hasten the industry's long-running consolidation trend.
"A lot of businesses are getting pretty stretched," says J. Douglas Pruitt, CEO of Tempe, Ariz.-based Sundt Construction Inc. and president of the Associated General Contractors of America trade group. "It could be a good time for buyers and sellers to get together."
