Structure Tone  is opening company ownership beyond members of the two families that have run the now nearly $4-billion New York City buildings and interiors contractor since its founding in 1971, firm executives confirmed to ENR on Dec. 18. Under the deal, set to close on Jan. 1, select company managers and four outside industry executives will invest in the firm, as it transitions to all-employee ownership.  

“The ownership initiative will provide growth capital that will allow Structure Tone to deepen its client offerings and pursue geographic expansion,” said the firm in a statement. It did not release the amount of the investment or other financial terms.

In an interview, executives told ENR the four new outside investors will be Richard Newman, chairman emeritus of AECOM who led its management buyout from Ashland Corp. in 1990; John Dionisio, retired AECOM executive chairman and former CEO: William Murdy, former chairman and CEO of specialty contractor rollup Comfort Systems USA; and Jeffrey M. Kissel, former president and CEO of Hawaii Gas.

Structure Tone execs said as many as 45 managers were eligible to buy in, but the exact group size was not disclosed. Executive Chairman James K. Donaghy, son of the firm’s co-founder Patrick Donaghy, said neither remaining active family members nor executives would have a controlling interest and that up to three new members representing the investors will join its board.

Robert Mullen, Structure Tone CEO since 2004 and formerly a Skanska executive, remains in his role.

"The board will be the controlling group. That wasn’t the case before. The families had the final say,” Donaghy told ENR. “The big question for us was who will do a better job to make Structure Tone a $6-billion firm?” He confirmed that “a sale had been considered, but the idea didn’t check any boxes for us. We’re builders and we want to stay in the business.”

Sources note interest by private equity buyers and firms based overseas. Mullen says "we are committed to being privately held."

According to Donaghy, firm expansion could likely target California or the U.K.

Hugh D. Rice, senior chairman at FMI Capital Advisors, the financial advisory firm that brokered the investment, ongoing since 2014, says, "to find someone willing to come in and take a minority position in a construction firm is unusual." He noted that the investors "understand the industry. Most investors can’t spell construction."

The ownership change comes two years after the firm pleaded guilty to fraud charges in a client overbilling and falsified recordkeeping arrangement, and paid a $55-million settlemtent under a three-year "conditional discharge." No company executives were named in the agreement. The firm has since hired a chief ethics and compliance officer and named three independent directors in 2014.

Mullen said the legal settlement posed "no ongoing restrictions" in the ownership change.

Structure Tone ranks at No. 17 on ENR’s list of The Top 400 Contractors, with $3.86 billion in 2015 revenue.