John Engquist is a modern rarity, working at one place his entire life: a company started by his father nearly 60 years ago as a small-staffed, one-location crane distributor called Head & Engquist Equipment.
But the company Engquist oversees today is far from his father’s company. After some 25 years at the helm of operations, the son has completely shifted the focus of what’s now called H&E Equipment Services. He’s done that by investing in its rental component—a gradual move that has led to a billion-dollar, publicly traded company with some 2,400 employees across 95 locations.
“Like a lot of equipment distributors, we were renting as a vehicle to sell equipment,” Engquist recalls. “I saw tremendous opportunity to grow our rental business and improve our return, focusing on the right metrics that make a rental business successful.”
Before 1995, the business had several hundred machines in its rental fleet. Today, that fleet has some 40,000 machines and—with profit margins hovering around 50%—is the most profitable segment of the company.
H&E has not only broken into the rental market game; it’s the seventh-largest equipment rental business in the United States, with plans to crack the top five. No doubt, the vision for change and the subsequent growth is attributed to Engquist, yet he defers to his employees, friends and fellow local professionals.
“I’ve been blessed my whole life to be surrounded by really good people in my business,” says Engquist, a towering former LSU basketball player who measures his words and isn’t afraid of risks. “There’s a lot of good people here who do a lot of heavy lifting.”
Like the fictional King Midas, just about everything Engquist touches seems to turn to gold.
Take, for example, his decision to drop out of LSU (and simultaneously his two-season basketball career) to join Head & Engquist. He always knew he wanted to work there. Growing up, the younger Engquist frequented the office on weekends, working as a mechanic’s helper every summer since junior high.
Leaving LSU may have been a parents’ nightmare, but, in retrospect, it was a major milestone for a company that was already a well-established and respected player in the regional market. However, when Engquist bought out his father in 1995, he was prepared to put everything on the line in pursuit of massive growth.
“My dad had a solid business with a good balance sheet,” he says. “He was willing to take that risk with me.”
Needing outside help to see his vision become a reality, Engquist brought in a private equity firm just before the century’s turn that acquired a majority stake in the company. He remained, however, as the company’s CEO and largest individual shareholder.
The private equity group had recently acquired ICM, a Salt Lake City-based heavy equipment dealer, and wanted to merge the business with Head & Engquist to create a super-company. But the financing market wasn’t ready, so they ran the companies separately until the bond markets opened back up in 2002. Head & Engquist then did a bond transaction to acquire ICM.
The merger doubled its staff and allowed each company to retain a strong geographic footprint; Engquist’s along the Gulf Coast, and ICM’s in the Western United States.
“It was a situation where one plus one equalled three or four,” Engquist says. “It was more of a revenue-synergy play than a cost-synergy play.”
They hired an outside consultant to launch a rebrand, renaming the company H&E Equipment Services, highlighting the fact that it offered an array of equipment services.
By 2006, Engquist took the company public, with H&E hitting the NASDAQ stock exchange. It was all by design, viewed as a way to delever the business’ balance sheet and position it for astronomical growth.
It worked. In the years since, he’s been acquiring smaller rental companies at a rate of some two or three a year. Under Engquist’s leadership, H&E started Green Fields, a program where they have, since 2008, opened 20 new rental stores in select locations.
Engquist says they analyze the management, performance and—most critically—culture of potential acquisitions. If theirs is a culture that aligns with H&E’s—meaning it knows and cares about its people—then they bite.
The secret behind Engquist’s Midas touch?
“We don’t make emotional decisions,” Engquist says. “We like to generate good data, give that information to smart people, and let them make good decisions.”
Investing in others
The golden touch extends to real estate, which Engquist says he got into almost by accident.
It was back when homebuilders and developers were struggling from the effects of the Great Recession. At the time, Engquist’s son, Ryan, was—along with his childhood friends Todd Waguespack and Kelly Sills—working at a fledgling local homebuilding company called Level Construction.
Level, which was then building roughly 35 homes a year, needed some financial help, and Engquist obliged, working with them as a capital partner and pumping in dollars to keep the company afloat.
Engquist has essentially functioned as a land bank for them, buying property, developing lots and then selling it to Level. Today, Level Construction builds about 400 homes a year, which Engquist attributes to Ryan, Waguespack and Sills.
“More than anything, I invest in people,” says Engquist, who still invests in Level and later became a developer through Engquist-Level Development.
That philosophy is at work at H&E, as well. Engquist retired as CEO in November, stepping down from his position to serve as executive chairman of the company’s board. He still maintains an active role with the business and has no plans to retire.
As of Jan. 1, former H&E COO Bradley Barber has been the company’s chief executive. His biggest cheerleader is Engquist, who says he invested in Barber decades ago because of his extensive experience with the rental business.
“The biggest mistake I see executives make is they’ll have a very talented, capable young guy, like Brad Barber, and they don’t want to give anything up. Then, those guys leave,” he says. “Brad’s earned that position, he deserves it.”
He stops for a minute, then finishes his thought.
“Any business leader who can recognize that the business isn’t about them, but that it’s about the employees,” says Engquist, “has got a big leg up on being successful.”