The story of Watsco Inc. is entrepreneurial to its core. “And it was my father who made it what it is today,” said A.J. Nahmad.
His father, Albert Nahmad, born in Panama, began working as a consultant and later for a business conglomerate after graduating from the University of New Mexico and Purdue University. At the conglomerate, W.R. Grace, he learned about buying businesses and putting them together to create scale.
He also saw the costs of not empowering the subsidiary businesses to flourish — and he believed he could do it better.
Albert Nahmad spent a year looking for a business to buy that could be a platform for acquisitions. In 1973, he bought controlling interest in Watsco, a small publicly traded manufacturing company in Hialeah founded in 1947 that was selling air-conditioning parts and other random items — including hair and roach sprays and ball-bearings units for moving shower doors back and forth — and generating about $4 million in revenues. He raised money from friends and family for the purchase.
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Three or four months after buying Watsco, fraud was discovered under the previous ownership, and the company was dragged into litigation for 11 years. “The first decade was high stress just to survive,” said Barry Logan, Watsco’s senior vice president.
But by 1988, under Albert Nahmad’s leadership as CEO and chairman, Watsco was bringing in about $25 million in annual revenues. A prospectus for Gemaire in Deerfield Beach, a distributor of air-conditioning units, piqued his interest. Albert Nahmad purchased the Gemaire distributorship in an auction. He was the only bidder.
The key to his father’s strategy was and is decentralization, said A.J. Nahmad, president of Watsco.
“That was the pivot into distribution,” said the younger Nahmad, noting that the company had by then gotten out of the manufacturing business. “Since then there have been 58 other acquisitions of HVAC distribution businesses.”
Last year Watsco generated $4.2 billion in sales.
The key to his father’s strategy was and is decentralization, said A.J. Nahmad, who is the president of Watsco. “Don’t integrate the businesses in the traditional sense … but empower the entrepreneur. Ask them, how can I help you grow? Now we have four operating units and an international group. They each have a leader and each has management, marketing and tech teams.”
Today, Watsco employs 5,000 workers across its 565 locations, including its Miami headquarters. Nearly all of them have a pay-for-performance element to compensation, he said. And like many large companies, Watsco has an equity stock incentive program. The difference: Watsco stock doesn’t vest until an employee is 62 or older.
“We want people to feel like they are on our team. We want them to think like long-term owners,” said A.J. Nahmad, who is 35 with 27 years to go until vesting.
READ RELATED STORY: The new Watsco: A techie takeover in an old school industry