National Versus Independent Elevator Contractors

Pros and Cons with both options
By Ray Eleid, P.Eng.

Published in Canadian Property Management Magazine
Dec 2002

If you have not heard about the latest development in the local elevator community then you should know that ThyssenKrupp elevator is now the proud owner of York Elevator and Halton Elevator. While you may not be sure why ThyssenKrupp would be interested in such an acquisition, such an acquisition almost always makes business sense.

If we look back four years ago, the Thyssen and Dover merger was arguably very beneficial to both companies. When this occurred it made sense both for product offering and robust market coverage. Dover did not have competitive geared or escalator products and Thyssen did not have a proven hydraulic or gearless product.

But not all acquisitions are product line driven. Let's not forget that the business model is also a huge factor in the merger and acquisitions. Some companies plan to double every four years while others every seven years. Depending on the need to grow and expand, mergers like ThyssenKrupp- York/Halton make sense because these independent elevator companies become the source which feeds the huge conglomerates growth.

But is another merger or acquisition good for property managers and owners?

As long as elevators are designed to be proprietary, competition will be important to develop the tools and equipment that will overcome this. Traditionally independent elevator contractors fuelled competition. They would find a niche, start to exploit it, until an elevator company would come in and snatch them up before they could pose a threat.

National contracts come to fruition and these delicate relationships are skirted for the greater good of the organization, thus weakening the bond with the independent companies.

This presents a double-edged sword; national contracts can save money while giving property managers the upper hand. On the other hand, once large portfolios are organized, costs will eventually rise.

To better illustrate this, a property manager in Alberta was forced to make a difficult decision. After 10 years of service with a major contractor, which left its elevator in deplorable shape, the company was forced to seek an alternate maintenance provider. Making the switch was going to be painful and expensive and made budgeting irrelevant because the contractor exercised the one-month cancellation notice. The other major contractors were expensive and were seeking modernization commitments, which were neither planned nor budgeted for. If it were not for a new aggressive independent with a mandate to build a strong reputation, this property manager would have suffered greatly. The opportunities that this independent contractor offered saved the day. Consequently, the once deplorable elevators are performing well to this day.

What you may not know about this story is that this independent contractor's only goal was to be invited to bid by the commercial property manager. This begs the question: If large contracts are beyond the reach of the independents, why would any one try to be more than adequate?

Ray Eleid, P.Eng. is Director of Strategic Development with Solucore Inc.

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