Soon after E&I Engineering founder Phil O’Doherty entered talks over a possible sale of the company to Vertiv, a US-listed engineering group, his investment bank adviser suggested that he come up with a confidential code name for the project.
O’Doherty rang his astronomy-loving grandson and asked for his favourite planet. When the code was relayed back to his adviser at Rothschild, there was an awkward silence. “Would you mind, but we’ve had a lot of problems with Project Jupiters,” the investment banker said.
Last Monday Project Saturn, named after the company founder’s grandson’s second favourite planet, concluded.
Ohio-based Vertiv closed a $1.8 billion (€1.6 billion) purchase of the company that O’Doherty began in a small industrial unit in the Pennyburn industrial estate in Derry in 1987. Depending on profits next year, the price could rise to $2 billion, in cash and shares. O��Doherty, the island’s latest billionaire, owns at least 60 per cent of the company.
By any measure E&I is a phenomenal success story. It makes electrical switchgear, which is similar to the fuse box in a house but on an industrial scale and complexity. It also makes busbars, trunking that distributes electricity around large buildings more efficiently than cable.
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It is a world leader in its technology, with customers including Facebook and other builders of so-called hyperscale data centres. E&I has industry-leading profit margins and is growing at about 1.5 times the rate of the market. Its products are used in more than 30 countries.
While it has outposts in the United Arab Emirates and South Carolina in America, it is rooted firmly in the northwest. All told E&I employs 1,250 people across the Inishowen peninsula.
O’Doherty repopulated the former Unifi factory in Letterkenny and a former Fruit of the Loom factory in Campsie in Derry. Its flagship 300,000 sq ft facility at Burnfoot has tripled in size since it first opened in 2004.
E&I is expected to post sales next year of $570 million and earnings of $150 million. In the five years from 2017 to 2022, sales and earnings will have more than doubled, growing at a compound annual growth rate of 23 and 34 per cent respectively. At its centre is O’Doherty, 61, a gifted engineer with a deadpan wit and entirely unpretentious manner.
“There is no secret sauce.” he says. “The management team work hard, and that’s a culture that is driven from the top and transfers to the shop floor.
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“Nobody is getting sacked [for not working hard]. There is just a tremendous work ethic here. We are an island off an island, and we compete on quality and hitting delivery dates on time. Nobody does you any favours because you’ve got lovely scenery and are on the Wild Atlantic Way.”
The work ethic truly does come from the top. When the Irish factories close between Christmas and new year for staff holidays, if there is a burst pipe or an alarm set off then the contact mobile phone number and email is O’Doherty’s. Not many billionaires do that.
The genesis of the Vertiv deal goes back four years, when O’Doherty met Gary Niederpruem, the US corporation’s chief strategy and development officer, at a trade show. The American said that O’Doherty should give him a call if he was ever thinking of selling. He was not alone.
In the past three years, sources say, there were three serious approaches, the valuation rising dramatically each time. O’Doherty spent the summer of last year fielding queries from private equity “tyre kickers, who were probably sitting at home in the pandemic”. Yet Vertiv was a serious proposal. The corporation has real engineering heritage, once part of the 131-year-old industrial giant Emerson. Vertiv chairman Dave Cote turned around the American comglomerate Honeywell in the early 2000s.
Vertiv’s products set — power supplies and cooling systems — neatly complement those of E&I, creating a one-stop electrical shop for data centre builders.
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E&I and Vertiv commissioning teams work side by side on sites, O’Doherty says, and exhibited a similar eagerness to serve the client. “We like their people,” he adds. Sectorally and geographically, the two companies are a snug fit.
E&I is strong in Europe, serving hyperscalers such as Facebook and Google. Vertiv is strong in the Asia Pacific (Apac) region and has a solid client base in colocator data centres, or hosting hotels. It also has a robust healthcare business, while E&I is strong in commercial.
O’Doherty says his customers “are screaming at us to go to Apac”. Management felt that for E&I to become a global company, on its own, would take ten years. Vertiv has two facilities in India and one in Thailand which could be extended to accommodate E&I, and Singapore, Indonesia and Malaysia are on both companies’ radars. It would make a lot of commercial sense to enter those territories together.
Vertiv has a really good reputation in the region, O’Doherty says, and E&I can leverage the management and staff training. “This is the quickest way in,” he says.
It all seemed to click, he adds, “and in fairness they made a good offer”.
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O’Doherty was raised in the Oakfield area of the Creggan on the hills overlooking Derry city. His father was a forklift driver at the city’s port, and he went to the local Christian Brothers school and then St Columb’s College, where he excelled at maths and physics.
O’Doherty was clearly a star pupil. When he expressed an interest in studying engineering at university, the school’s president Fr James Coulter phoned the O’Doherty home to ask why he was not going to do medicine. “My mother replied, ‘Sure, our Philip would have no bedside manner,’” he says.
He studied electrical engineering at Queen’s University Belfast, taking summer jobs with the ESB in Sligo and Letterkenny. When he graduated, the US chemical giant DuPont happened to be seeking an electrical engineer at its Derry plant.
It was a formative experience, exposing O’Doherty to the discipline and integrity of working for a multinational. He worked on large projects, designing the power element of new plants. Critically, as a chemical company, it maintained the highest international standards of health and safety, something he ingrained in his own company from the start. For him, “working for an American corporate at some stage in your life is a must”.
Yet DuPont was a chemical company, and the path of progression was greatest for chemical engineers. In 1987, with the island in deep recession and the vast majority of his engineering peers emigrating to work for Siemens or Schneider — now E&I competitors — O’Doherty left his very well-paid job to set up his own business. “I figured that I could do the electrical design work I was doing for DuPont for others too.”
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He hired four staff, raised money from Bank of Ireland and got a £2,500 loan from the Derry credit union. His father helped establish the savings and loan institution, the third on the island, with future Nobel peace laureate John Hume and the carpenter and civil rights activist Paddy “Bogside” Doherty, among others. “My father said to me, ‘Whatever you do, you have to pay the credit union back,’” he says.
In its early years, DuPont was his biggest customer. Yet O’Doherty soon sensed his first big opportunity in the City of London at the end of the 1980s. The Big Bang computerisation of share trading would create a huge demand for energy, and switches. Through contacts, E&I nosed its way to tender for projects.
“We got a bit of a reputation in Canary Wharf, in particular. Word gets around, that you do a good job, deliver on time, and your workers are organised, and safety on site is good.”
E&I ended up getting work on some of the most prestigious building projects in the UK over the course of the following decade and a half, including Wembley Stadium and Heathrow’s Terminal 5.
In 2004, O’Doherty expanded its operations, shifting the headquarters from Derry to Burnfoot, where land was cheaper and taxes lower. The Burnfoot facility employs 900 staff from both sides of the border. Extremely well invested, its technical excellence and productivity are a huge source of pride and value.
He then set up Powerbar Gulf in Dubai in 2009, “just as everybody was parking their cars at Dubai airport” after the financial recession. The move was prompted by a surge in demand for its products in the region, particularly busbars, which are ideally suited to high-rise construction.
He dispatched Adrian Sheridan from Buncranna in Co Donegal to get the facility up and running, which he did in nine months. Sheridan still leads the operation, which has been profitable from the outset. It employs 600 people, with about ten Irish managers and the remainder being expats, largely from India and the Philippines. The company has its own accommodation on-site as well as “its own cricket pitch”.
If London and Dubai helped launch E&I, the boom in data centre construction provided the afterburners, taking E&I into orbit. About 80 per cent of its sales are now from the sector.
Data centre clients brought E&I to America, setting up a facility in the growing manufacturing hub of South Carolina. It employs 300 staff there, and within three years of opening has grown to $150 million in annual sales.
He is convinced, too, that Vertiv will be good for the northwest. An extra 100 jobs were announced at the time the share purchase agreement was signed, in September. For O’Doherty, regional development is all about upskilling the workforce, not grants. “There are enough good entrepreneurs in Derry and Donegal to create jobs,” he says.
E&I employs a former bouncer, who bends copper, and a former taxi driver, who punches holes in metal. “We are not academic snobs. We want people who are practically good, who have got good hands. We need a broad range of skills.”
The company took on 31 apprentices this year. It uses community groups in the more deprived parts of Derry city to “get the message out” about E&I.
He feels strongly that businesses “need to go to the people in the housing estates, where there is no great family experience of work”.
He equally believes that the country needs to produce more engineers, with too many school leavers “scared off” by maths. O’Doherty questions the focus on the subject when so many tasks can be done by software. His one indulgence is that he retains an active role in research and development. When he talks to clients and they raise issues, he gets back to the drawing board and works with the R&D team. Engineers, it seems, are lifelong problem-solvers.
Another consideration in the sale was succession. O’Doherty has turned 61, and his senior management team members, Damian McAuley, Cathal McLaughlin and Paul Connolly, have a lot of years’ service. Vertiv will offer opportunities to the next level of managers to gain experience and stake a claim over time. Yet he has no intention of retiring, and hopes to stay for at least five years. “It’s business as usual — I am not going to the beach,” he says.
Aside from attacking Apac, E&I is aggressively pursuing modular switch and cable solutions, pre-assembled systems ideal for countries without the skills base to commission.
He will spend more time with his two grandchildren, largely because he missed so much time with his own children as they grew up. O’Doherty admits his schedule was “crazy”. He remembers flying from San Francisco, after a trade show on a Friday afternoon, on a 15-hour journey to Dubai. He arrived at 7.30pm on the Saturday and arranged a car at 6.30am to begin work the next morning. “I had lost a whole weekend. I remember I watched seven movies on that flight. The stewardess said it was a record.”
He will also devote more time to Derry City football club. While the club has made some marquee signings for next season, his big focus and investment will be a new top-class academy, within walking distance of the working-class areas of the city.
Otherwise O’Doherty says he has no plans for his enormous new wealth. His focus is Vertiv, where he joins the executive team, reporting to chief executive Rob Johnson: “He is my boss — that’s something I’ve not said for 35 years.” It seems reasonable to ask how he might feel about his new status. “It’s the first day but, aye, so far, so good.”
The life of Phil O’Doherty
Vital statistics
Age: 61
Lives: Co Donegal
Family: married with two children and two grandchildren
Education: St Columb’s College and Queen’s University Belfast
Favourite film: Midnight Run
Favourite books: He enjoys reading 20th-century history, legal thrillers, and books about the world of business.
Working Day
Before Covid, he travelled three weeks in four, yet made a point of getting home for weekends. “I think I was away for three weekends a year.” Homebound during the pandemic, he says many entrepreneurs “learnt a lot about what they were missing”.
Downtime
I have been involved with Derry City twice as chairman. Once after it went bust, alongside another Derry businessman, Paul Diamond; the second time I just took it on myself. When you leave it to football people, sometimes they are not good at running clubs. They say yes to the manager too easily.