Smart Care, a former Ecolab unit, is about to become St. Paul’s next HQ company
Downtown St. Paul is about to become home to a national business that few know about, which plans to move this spring into the business-hungry loop’s emerging entrepreneurial center, Osborn370.
And city planners, ironically, can thank Ecolab, a longtime downtown corporate giant, for the addition.
Last fall, Ecolab sold its commercial kitchen appliance-repair business to Audax Group, a huge private equity firm that likes to buy corporate orphans and other businesses, invest in growth, and sell them at a big profit after several years.
What was this year renamed Smart Care, is a growing 900-employee firm that should post revenue approaching $200 million this year.
CEO Bill Emory, who ran the business for Ecolab, believes an independent Smart Care can hit $500 million in annual revenue within five years.
That’s a big enterprise compared to most St. Paul-based businesses. Not so much by Ecolab standards. And commercial appliance repair, albeit profitable, was less of a fit as Ecolab diversified in other directions.
Ecolab, partly through big acquisitions in recent years, has become a $13 billion company focused on commercial-building sanitation, water and energy businesses.
The Audax sale has freed Smart Care to find its own way as an independent business that no longer has to compete for growth capital against larger, more popular siblings within Ecolab.
“In some ways we’re analogous to a startup company,” Emory said. “And on Day 1, we didn’t have a brand, office space, banking relationships, a brand or IT systems.”
That’s what’s keeping Emory Co. busy during long days so far this year.
Smart Care is starting to build its own support, marketing and IT services as it weans itself from a “transition services agreement” with its former company and prepares to move in as the largest tenant in the Osborn370 building.
Emory is slowly adding people to a headquarters complement that should reach about 100 employees in downtown St. Paul this year.
“We’ll be fully independent by the end of this year,” Emory said.
The 1960s vintage Osborn building was, until last year, the headquarters of Ecolab. Last year, Ecolab, one of downtown’s largest employers with more than 2,000 workers, moved a few blocks away to more spacious, renovated offices formerly owned by the Travelers Group. Smart Care this spring will vacate leased space nearby that is still owned and occupied by Ecolab for Osborn370.
The 20-story Osborn370 tower was acquired last year for $3.6 million by a team of local developers from its longtime East Coast landlord for about a third of its assessed value. The deal was supported by Ecolab CEO Doug Baker and then-Mayor Chris Coleman, over a higher-buck offer from a developer who wanted to convert the building to housing.
City officials want to see more small businesses germinate and grow in a downtown better known as a home to cultural destinations and government offices.
“We considered moving to the North Loop in Minneapolis,” Emory said. “But Osborn370 has the energy and a technology focus that we sought. The rents are about the same. We get a little more ‘tenant-improvement’ dollars from the landlord in St. Paul.”
Tanya Bell, one of the developer-owners of Osborn370, said Smart Care will be the largest tenant, with about 16,000 square feet, in a building that is about 55 percent leased so far as it undergoes renovation.
Emory, 54, a 17-year Ecolab veteran, has been CEO of Smart Care since 2013. He ran Ecolab’s pest-elimination business in Europe for several years, and has spent most of his career in the food-service industry. He and 21 other Smart Care managers have invested alongside Audax in the business.
Smart Care is the biggest player in the kitchen equipment maintenance and repair business — a highly fragmented industry estimated to have about $7.5 billion in sales last year. Smart Care, with about 3 percent of the market, operates in the 40 largest U.S. urban markets.
Smart Care operates a local network of skilled technicians who operate as part of customer-care teams designed to keep kitchen equipment operating reliably and economically in a way that avoids expensive outages.
Since its founding in 1999, Audax Private Equity has focused on building midsize companies. Smart Care fits its model platform of profitable businesses of up to $300 million in revenue.
Through its “buy and build” approach, Audax helps its companies execute add-on acquisitions to grow revenue and increase earnings.
It has invested $4 billion in 108 acquisitions and 623 “add-on” companies that it acquired for holdings such as Smart Care.
Emory already is scouting regional players to buy and “bolt on” to its growing business, as the company prepares to spin out on its own.
“It’s a challenge for us,” Emory said. “We’re taking a lot from Ecolab that’s really good.
“We’re creating our own mission and values. We’re making decisions faster. And I think we’re more nimble and have a higher sense of urgency. We’re investing in digital innovation. We’ve got a local ad agency and law firm.
“We’re building a ‘startup business’ from the bottom up.”
Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at email@example.com.