Walsh brothers build a family legacy
By Micah Maidenberg February 09, 2013
In an industry increasingly dominated by global behemoths, the Walsh brothers want to keep their construction business in the family.
Walsh Group Ltd.'s annual revenue has soared five-fold in 15 years, to $3.6 billion, as the firm has moved well beyond its South Side roots and ties to the Daley family that go back three generations. Co-Chairmen Matthew Walsh III, 67, and Daniel Walsh, 65, say they have no intention of stepping down or selling a business that was founded in 1898 by their immigrant grandfather. Eight of the company's 10 senior executives are relatives, they say with pride.
From a corporate compound on the Near West Side, the group manages projects ranging from a $1.1 billion expansion of the Los Angeles International Airport to a $763 million toll bridge near Louisville, Ky.
Yet as mergers and acquisitions pick up in the construction industry, the Walshes' faith in the family likely will be put to the test. International construction giants are especially eager to tap a pipeline of public works projects in the U.S. that topped $276 billion last year, experts say, and Walsh Group could be a tempting way to do that.
“What makes them attractive to the overseas players is their footprint and having a strong reputation for building infrastructure” using the public-private model, says Chase Jacobson, a research analyst in the New York office of Chicago-based William Blair & Co. who covers Walsh's publicly traded competitors. “The U.S. needs new infrastructure.”
In November, Walsh won contracts worth $1.6 billion for two bridge projects over the Ohio River, two of the biggest deals in the company's history. In one transaction, a venture of Walsh and two European partners is financing construction of a $763 million toll bridge, which they will operate, providing a steady stream of income for 35 years. That longevity is rare in an industry where most contracts last only a few years.
A Walsh spokesman and an Indiana official in charge of the project decline to say how much the joint venture will earn altogether. The venture, which includes engineering firm Bilfinger S.E. of Germany and French construction company Vinci S.A., will invest $20 million in equity, financing the rest of the project with bonds.
See a timeline of Walsh Construction's 115-year history
Following the recession, Walsh's operating income fell 38.4 percent to $134 million in 2011, from $217.5 million in 2010, according to financial statements submitted to the state of Indiana.
According to one estimate, Walsh could be worth about $1.2 billion, based on Netherlands-based Chicago Bridge & Iron Co. N.V.'s $3 billion acquisition last year of Shaw Group Inc., a Baton Rouge, La.-based general contractor.
“We get asked all the time. We're not for sale, nor are we interested in selling,” says Matthew Walsh, who also is CEO.
Since the early 1970s when they took over the company, the Walsh brothers have formed a powerful tag team. “Incredibly aggressive and sharp” is how a former Daley administration transportation official describes them.
The style is necessary in a cutthroat industry, but it also harkens to the firm's understanding of itself and history, which remains present in small touches in their offices. Decorating a basketball gym in the building are street signs for Archer and Western avenues, a reference to the modest two-story structure at that intersection, where the firm long kept its offices.
MEET TEAM WALSH
Seated, left to right: Matthew Walsh, co-chairman, Walsh Group Ltd.; Daniel Walsh, co-chairman, Walsh Group Ltd.
Standing, left to right: Daniel Walsh Jr., vice president, heavy/civil division; Michael Gibbons, vice president, corporate equipment; Matthew Walsh IV, vice president, building division; Donald Gillis, president, heavy/civil division; Michael Whelan, president, building division; Sean Walsh, vice president, building division; Brian Walsh, vice president, building division; Dan Regan, vice president, building division.
Only Messrs. Gillis and Whelan are not family members. Photo: Erik Unger
During an interview, Matthew Walsh takes the lead, offering clipped, to-the-point answers, with Daniel playing off his older brother, filling in the blanks with a softer tone.
Both work 50- to 60-hour work weeks, traveling to the offices and job sites across the country as many as 40 weeks a year. Neither gets to visit construction projects as much as they'd like, but they try to keep tabs on employees by requiring names on all hardhats. Matthew lives in a western suburb; Daniel resides in Chicago.
It's not unusual for family construction companies to lean on those they know best, but Walsh is notable for its deep reliance on relatives. Matthew's immediate family (sons Sean and Matthew IV and son-in-law Michael Gibbons) are executives and own stakes; the same holds for Daniel's immediate family (sons Daniel Jr. and Brian and son-in-law Dan Regan). Daniel Walsh's daughter lives at Misericordia Home, which the brothers have long supported.
Currently, Daniel Jr., 35, vice president of the firm's heavy civil division, and Matthew Walsh's son Sean, 40, vice president of the building division, are slated to become the next co-chairmen, Matthew Walsh says, per a vote from a board composed of that generation. He dismisses any talk of rivalries.
As the transition looms, the Walsh brothers acknowledge that they must ramp up revenue, which is just now returning to pre-recession levels. “This business is a very organic business,” Matthew Walsh says. “If it isn't growing it begins to die.”
Based on revenue, Walsh was the 15th-largest general contracting firm in the U.S. in 2011, according to Engineering News-Record, and the 13th largest privately held company in the Chicago area, according to Crain's research.
“When you think about Chicago contractors, you can't talk about the major players without talking about Walsh,” says Michael Clune, chairman and CEO of Chicago-based Clune Construction Co.
Ties to the Daley family go back to the company's founder, Matthew Myles Walsh, and Mayor Richard J. Daley.
“More has been made of that than probably there is,” Daniel Walsh says. Projects in Illinois count for less than 10 percent of the firm's revenue, he adds.
While many of its rivals have grown by snapping up smaller companies, Walsh has made just one acquisition in its history, a public works contractor in Walnut Creek, Calif., in 2010. The brothers have kept Wash debt-free, financing expansion by reinvesting profits. That approach can limit growth, experts say.
“There's not enough profits to be reinvested,” says Ian Rusk, principal at Boston-based Rusk O'Brien Gido & Partners LLC, a consulting firm for the engineering and design industries.
After nearly 115 years in business, today's patriarchs insist, Walsh Group has enough money for at least one more generation.
Matthew Walsh, left, and Daniel Walsh, co-chairmen of Walsh Group Ltd