Bill Roark has spent his career focused on providing equity ownership to his employees. In 2011, he was able to fulfill an important commitment to himself and his employees, “This year, Torch Technologies was fortunate enough to become 100% employee-owned.”
Bill’s career began when he moved to Huntsville, Alabama in 1984 after earning a MS in Physics at the University of Kentucky. In Huntsville, he joined government-contractor Nichols Research, where he started on the technical side and migrated across to operations and management.
When Nichols merged with CSC in 1999, Bill was serving as EVP and President of the Criminal Justice operating unit. He had managed field offices in Utah, New Mexico, Alabama and Washington D.C., and spent 15 years building shareholder value in a large company that still felt like a small community.
After the merger, the combined entity took on a new identity. Many of the former Nichols executives left the company, and Bill watched his own roles and responsibilities, and those of his colleagues, dramatically change as part of post-merger integration.
Bill left Nichols in 2000 to join Camber Corporation. There, he encountered the benefits of employee stock ownership plans (ESOPs). Employee ownership meant that Camber’s employees called the shots whether the company would ever go public or be acquired.
Soon after, Bill called Don Holder, a former Nichols colleague, to gauge his interest in founding a new engineering services company, Torch Technologies (“Torch”). The two wanted to build an employee-owned company that wouldn’t be acquired. In October of 2002, Bill and Don hit the ground running.
By aggressively recruiting a talented team of senior engineers, they quickly built a reputation for superior service and competitive pricing. One of Bill’s first calls was to Eastside’s Tina Corley. “I knew Tina well from our time together at Nichols. I have a great deal of respect for her, and when we were just getting started, I knew she could add significant value without having to commit herself full-time,” says Bill.
Tina signed on as a BOD member, part-time CFO, and Torch’s fifth employee. “Tina understood our business development strategy, and she was extremely helpful setting our billing rates early-on so that we could bid competitively for those first contracts,” says Bill. “She also setup our retirement plans, employee benefits, insurance policies, financial infrastructure and DCAA compliance programs.”
In January 2003, Torch was on a winning team of companies that picked up task orders under the AMCOM Express contract vehicle. By this time, the company had the management team, customer contracts and infrastructure in place to begin rapidly growing the business through progressive engagement within the client base.
In mid-2005, Eastside raised a fund and Tina transitioned out of her operating role with Torch. In preparation, she recruited Sue Clark, another former manager at Nichols, to take the helm as Torch’s full-time CFO. “Tina had big shoes to fill, and fortunately, she made the recommendation to hire Sue as the new CFO. Sue has done a fantastic job since taking over the position and continues to contribute to our success,” says Bill.
Around this same time, Bill approached Eastside for advice on structuring a complex transaction with his majority shareholder, who was seeking liquidity. Bill wanted to recapitalize the shareholder with proceeds that would allow Torch to become employee-owned (via an ESOP).
Over the next several months, Bill and Eastside worked out a structure where Eastside purchased the majority shareholder’s interest in the company and simultaneously executed an agreement to sell the shares back to Torch via a redemption agreement over a period of five years. The complex, yet predefined exit structure, allowed Torch, its majority shareholder, and Eastside to meet their strategic objectives in a creative way.
“Traditional bank financing wasn’t an option due to the transaction’s complexity, and since we wanted Torch to become employed-owned, we didn’t want to take on a long-term equity partner,” says Bill. “It was a three-sided transaction. We needed a partner who would sit down, take the time to assess the dynamics between the company and our investors, and propose a structure that would work for all parties. Eastside did just that.”
After the investment, Tina remained on Torch’s Board of Directors and served on the compensation committee. In 2007, she helped recruit Scott Parker, another former executive at Nichols, to serve as Torch’s Chief Administrative Officer.
“The company had grown to a level where Bill had too many managers reporting directly to him. His time was better spent focusing on customers and business development, but instead he was tied up with internal operations and infrastructure. I knew from my experience with Scott at Nichols that he was an ideal candidate for the position,” says Tina. In 2008, following the retirement of co-founder and President Don Holder, Scott was promoted to the role of COO.
That same year, Torch began bidding as a prime government contractor. With the receipt of four direct award prime task orders on AMCOM Express, the company won more contracts in two weeks in late 2008 than the previous six years of combined government work.
As a result, in early 2009 Bill called Eastside with a time-sensitive business decision. The prime contracts represented a significant revenue opportunity, but to meet the contracts’ eligibility guidelines, Torch needed to divest its subsidiary, Torch Systems (“Systems”), as soon as possible.
Systems represented only a small portion of Torch’s total business, but many of its employees had worked for Bill for more than five years, so he wanted them to be able to build equity value as Systems continued to grow. Bill was concerned that an acquirer of Systems may not make these same employee-ownership opportunities available to its employees.
Bill approached Eastside to explore the options for a management-led buyout of Systems from Torch. “Eastside understood the critical issues and had the skillset to execute the transaction within our tight timeline. Their structure allowed us to follow through on our commitment to our employees,” says Bill.
“We had a hard-stop date, so we had to move quickly. Within 90 days, we accelerated our repurchase agreement with Torch, structured the Systems’ transaction, built consensus across the management team, executed definitive agreements, instituted management incentive programs, located a new facility, hired financial and HR infrastructure, and adopted benefit plans, all while working with Systems’ management to assure customers that their work would be uninterrupted,” says Tina. “It was a very busy time.”
Since then, both Torch and Systems (renamed nLogic) have continued to grow rapidly. Torch has been named to the Inc. 5000 list of America’s fastest growing companies every year since 2007, while nLogic was named to the list in both 2010 and 2011. “The outstanding growth of these two companies and our investment returns were a result of Bill’s focus on employee ownership,” says Tina.
“Eastside has been a terrific partner to work with. They’ve added value to Torch while helping us accomplish our strategic goals. Both transactions were winning situations for all parties involved,” says Bill.