Forty-five years after introducing the cured-in-place pipe (CIPP) process to the world, Aegion Corp. continues to strengthen its presence in the trenchless technology market. This trenchless pioneering company has no plans to concede its top perch to anyone and remains committed to advancing the industry it helped to create.
In recent years, St. Louis, Mo.-based Aegion has been in the news for the moves it has made both internally and externally. From acquisitions to restructuring to leadership changes, Aegion has been busy. Its Infrastructure Solutions platform, which focuses on trenchless pipe rehabilitation, is working to expand its footprint in the pressure pipe market —and a significant recent acquisition positions it to do just that.
Underground Solutions Inc., a supplier of fusible PVC pipe technology, became part of the Aegion family following a $90 million acquisition completed in February of this year. Underground Solutions joins Insituform, the CIPP pioneer, Fyfe, Fibrwrap and MTC in Aegion’s Infrastructure Solutions platform.
“Most people in the industry know Insituform through its CIPP contracting arm, but it’s also a world class manufacturing organization,” says Frank Firsching, president of Aegion’s Infrastructure Solutions platform. “We have a significant manufacturing presence in the United States, United Kingdom and Europe and are focused on producing the CIPP liners that we and many other contractors in the industry install.”
The Infrastructure Solutions platform of Aegion is projected to generate approximately $600 million in global revenue in 2016, with over two-thirds of the platform’s revenue generated by Insituform. Aegion is confident in the short-term and long-term growth of the trenchless technology market in North America and in international markets. The company recently completed two small “tuck-in” acquisitions earlier this year with the addition of companies in Denmark and New Zealand.
“Aegion is very bullish on the trenchless market,” Firsching says. “The executive team has spent a great deal of time analyzing the pipeline industry, specifically the various segments of the trenchless market. The conclusion was that the pressure pipe market is expected to be a key growth segment over the next decade. Trenchless is growing several times the rate of the open-cut market, and pressure pipe specifically has very attractive growth dynamics. Aegion understands this market trend very well. Increasingly, many of the investments the company has made are to further position itself for growth in the trenchless marketplace.”
Aegion Corp. was created in October 2011 to serve as the parent company of Insituform, Bayou, Corrpro, CRTS (now Aegion Coating Services), Fyfe, Fibrwrap, MTC and United Pipeline Systems, replacing Insituform as the public company entity. The company later acquired Brinderson, Schultz Mechanical (now Schultz Industrial) and most recently Underground Solutions. All of these companies are direct subsidiaries of Aegion. Aegion’s common stock is traded on the Nasdaq Global Select Market under the symbol “AEGN.”
In October 2014, Aegion made two key announcements. The first was the appointment of Charles R. Gordon as President and CEO. The second announcement was the decision to restructure and realign its businesses into three business platforms: Infrastructure Solutions, Corrosion Protection and Energy Services, each with individual leadership teams. The realignment focused on streamlining the organization to improve execution and enhance growth and profitability. The Infrastructure Solutions platform includes Insituform, Fyfe, Fibrwrap, MTC and Underground Solutions.
Firsching had been with Underground Solutions since 2006 before joining Aegion through the acquisition. Shortly after arriving at Aegion, Gordon asked him to lead the Infrastructure Solutions platform. He’s not doing it alone. Key executives within the platform include: Bo Botteicher, general manager of Underground Solutions; Steve Morini, general manager of Aegion’s Fibrwrap business; Steve Gouy, vice president of U.S. CIPP Contracting; Ralph Western, senior vice president of manufacturing and engineering; Ken Foster, senior vice president of Canadian and European CIPP operations; Sim Moh Wee, managing director of Asia-Pacific; and Robert Moorhead, senior vice president of sales for Infrastructure Solutions.
The common thread that is woven through the platform is apparent when you look at the makeup of each business and the industry they serve: underground pipeline rehabilitation in the trenchless market. Firsching points to Insituform’s 45-year history with the cured-in-place pipe (CIPP) process, which is used to rehabilitate gravity sewers and pressurized water mains and sewer force mains. Fibrwrap’s composite FRP technology is used to repair large diameter water transmission mains. Underground Solutions supplies fusible PVC pipe and provides Aegion with a strong market presence in the potable water market, a segment Aegion has been working to penetrate for several years.
“Serving the water market is very different than working in the sewer market. Ten years ago we didn’t have the right technologies and focus to make a strong push into the pressure pipe market,” Firsching says. “Aegion appreciated that Underground Solutions had developed its trenchless market position predominantly on the pressure side of the market, mostly in water and higher pressure sewer force mains. The acquisition was simple: while Insituform is the leader in the gravity CIPP market, the higher growth segment of the market is in pressure pipelines for drinking water, raw water transmission and wastewater force mains. Aegion wanted to expand its offerings in the pressure pipe side of the market. In return, Underground Solutions has gained access to the resources of an industry-leading public company and a broader range of solutions to take to its customers.”
With the acquisition also comes the integration of Aegion’s core values to the entire Infrastructure Solutions platform. A commitment to safety is No. 1 on the list, with the value “Zero Incidents Are Possible.” From the top down, all Aegion employees are responsible every day for not only their own safety, but that of their customers and coworkers. Other core values include the charge for all employees to “Do What’s Right, Solve Problems,” remember “Results Matter” and “Be Better.” A focus on these values has helped bring new acquisitions into the company culture and become engaged as part of the Aegion team, Firsching says.
Firsching, who has seen more than a few mishandled acquisition integrations in his career, reports that the Underground Solutions transition into Aegion has been “seamless,” and that it’s been “business as usual.”
With its broad suite of offerings, the Infrastructure Solutions platform is able to bring its customers a wide range of technologies to address a diversity of trenchless applications from pipe relining to pipe bursting to horizontal directional drilling to close-fit sliplining.
“We have focused on developing a lot of different trenchless solutions for repair or new installation or condition assessment,” Firsching says. “It’s all about being able to offer customers the right trenchless technology to solve their problem.”
Long-term Success and Focus
Aegion is re-energizing its presence in the underground construction market with its Infrastructure Solutions platform, seeing the trenchless market as a long-term growth area. When the Insituform patents expired in the mid-1990s, the effect on the market was significant as competition entered the market and further expanded the reach of trenchless.
In recent years, Aegion expanded its footprint into the global energy market, seeing it as an opportunity to diversify its markets and grow the company. Today, Aegion remains more committed than ever to its core roots in underground construction.
“Like many companies in the energy market we’ve had to adjust to the new norm of lower oil and gas prices,” he says. “While the municipal market may not be as high growth, it is more stable and does not suffer the volatility of the energy markets, which periodically go through boom and bust cycles. As we sit here in 2016, the municipal business is very strong and we’re continuing to make investments in that market.”
Firsching notes that the projected long-term growth of the trenchless market makes for a bright future for the Infrastructure Solutions platform. “We just presented our three-year strategic plan to our board,” he says. “While we will continue to be selectively acquisitive in the trenchless space, our primary focus is on organic growth. We really like the trenchless market and it’s my personal passion as well. It’s an important part of why I enjoy serving on the board of NASTT.”
Firsching wants the Infrastructure Solutions platform to more actively participate in the trenchless industry’s various trade associations. “My view is that industry leadership is more than just being a commercial leader, it’s also about being a thought leader and taking an active role in educating the market to drive the industry forward.”
As the trenchless industry moves forward and expands, challenges come with it. Funding is always at the top of the list of challenges facing the underground infrastructure industry. “Inadequate infrastructure funding remains a huge issue across the utility industry,” Firsching says. “We all know the story of how our country has lagged in infrastructure spending, particularly in the area of drinking water pipelines. Pressure lines will continue to fail at accelerating rates as they reach the end of their engineered life. Everyone agrees it is a growing problem, but replacing and rehabilitating pipelines is not a compelling story for many politicians because pipelines are unseen and taken for granted until something goes wrong.”
From a trenchless technology standpoint, innovation grows with each passing year. The catch with innovation is that the industry needs municipalities that will serve as early adopters to take the leap of faith required to try new approaches. “Trenchless technology is evolving at a faster rate than many municipal customers are ready to adopt at,” Firsching says. “Historically, the municipal market is very conservative and is slow to embrace innovation. The reality is that someone has to go first and lead the way. The market needs those pioneering, early adopters.”
Looking down the road, Aegion likes what it sees for the future of trenchless technology, as well as for the future of Insituform, Fyfe, Fibrwrap, MTC and Underground Solutions. “You don’t have to be a visionary to see that trenchless will continue to grow. The economics, engineering and construction fundamentals are just too compelling to conclude otherwise.”