Sands Wall Systems announces transition to employee ownership

Greg Sands is selling the company he has spent nearly 30 years building — to his employees.

The founder and CEO of Sands Drywall, now known as Sands Wall Systems, shared the news in an announcement tonight that surprised many of his Sioux Falls-based team.

The new structure will be 100 percent ESOP, or an employee stock ownership plan, once it’s fully transitioned from Greg and Pam Sands to the approximately 80 employees on his payroll.

“It’s literally millions that will be transferred from me to them, and it’s a process not an event,” Sands said.

He began planning his exit about a decade ago, then started slowly transitioning out of everyday operations and going out of state for months at a time to ensure his team could operate effectively on its own, he said.

“I started thinking about an ESOP probably six or seven years ago and started implementing and pulled the trigger on it a couple years ago and then started the grueling process of actually getting it done,” he said.

He could have made a different decision. Merger-and-acquisition firms approached him on a monthly basis, he said.

“And I don’t like them. I don’t like the fact that five or six years from now, if I watch what the firms do to other companies … my company will have been driven into the dirt. They’ve made the margin they expected to make, and they’re on the road,” he said. “It’s important to Pam and I that this company go on in perpetuity and continue to be a good corporate citizen.”

Sands started in the industry in Rapid City in 1975 as a drywall finisher and formed his company in 1994.

Along the way, he battled addiction, and ultimately an arrest for dealing drugs sent him to prison. He credits it with saving his life. One year into his two-year incarceration, he determined he needed to take responsibility for his actions, and 10 years after his release, he received a presidential pardon.

There are echoes of the lessons learned in a reminder he gave to his team when announcing the ESOP:

“The best investment there is, is in yourself,” he said.

For Sands, the past year has brought additional investment in his business. The company expanded into steel stud manufacturing, which is allowing it to control more of its own supply chain and significantly improve production time, he said.

“The goal today is to manufacture enough to supply us” before expanding the sales to others, he said. There are six to 10 employees supporting the operation, which is going to add a second shift.

On the drywall side, “this year has been going good,” he said. “Our backlog has been excellent; our sales are excellent this year.”

Big projects such as The Steel District and Cherapa Place downtown, multifamily developments and extensive health care work have helped keep the team busy, he said.

In sharing that many of them are now owners in the business, he said: “Remember, I’ve given this company to you, and if the guy standing next to you is laying down on the job, it’s affecting your retirement fund,” he said. “You could be working hard, but everyone needs to pull their weight here.”

Employees who work full-time in payroll positions for five years will be fully vested in the ESOP, which essentially provides a payout upon retirement based on the current value of the company. Many existing employees enter the ESOP fully vested. If an employee departs before retirement, the company has five years to pay that person the value of his or her shares in the company.

“We believe it’s going to be a great recruitment tool,” Sands said. “We have been very blessed; our retention right now is 95 percent, and in construction that’s unheard of.”

Sands Wall Systems counts about 300 team members, though many are subcontractors who are paid based upon their production and aren’t be eligible for the ESOP.

As a retirement benefit, the structure far outperforms a 401(k), Sands said.

“A foreman that works for me will have more money in his ESOP account than Greg Sands would have in his 401(k),” he said.

Sands will remain CEO and chairman of the board. Two of his longtime leaders, Ryan Rademacher and Jared Swenson, will become president of the organization and president of operations, respectively.

“One of the hardest things in transitioning a company is having a leadership change, and we’re not having one of those,” Sands said. “I have a vested interest, I’m still the majority shareholder and will be for the next seven years or something like that, but I also need to have something to do. For me, work is a blessing. We love the company and all the stuff we get to do for the community.”

To ensure that continues, his ESOP is structured to mandate a certain percentage of revenue goes to charitable giving.

“It’s a win-win-win,” he said. “It’s a win for Pam and I and a win for my execs and my guys in the field.”

 As seen in SouixFalls.Business and written by Jodi Schwan,