Giving them the business

From the pages of In Business magazine.

The merger-and-acquisition beat goes on in Greater Madison as prominent members of our 2019 Largest Employers list (see September 2019 print issue for complete list) added depth and capabilities to their organizations, fended off legal challenges, and otherwise managed to grow their workforces in fundamentally strong but also problematic economic conditions.

Those problematic features — tariffs and trade wars — are hardly their fault, and left to their own devices, they might grow indefinitely. From UW Health to Saris Cycling Group to Strand Associates, they put blinders on and pressed ahead amid the global headwinds.

Listed luminaries

UW Health (No. 1) hired Frederic “Ric” Ransom to fill the newly created title of president of UW Hospitals, Madison region. Ransom oversees UW Hospital, American Family Children’s Hospital, and UW Health at The American Center. The organization also announced plans to issue $350 million in bonds for debt refinancing and building projects while in the process of reducing its $3 billion operating budget by $80 million. It also plans to build a $255 million clinic at the American Center Business Park offering specialty services such as cardiology, dermatology, and oncology.

For the first time in the history of U.S. News & World Report’s “Best Hospitals” rankings, University of Wisconsin Hospitals and Clinics, a key piece of UW Health, are listed on the Honor Roll of the 20 most highly ranked hospitals in the nation and retains their No. 1 ranking in the state of Wisconsin. UW Hospitals and Clinics were highly ranked in 12 of the 16 medical and surgical specialties ranked by the publication.

Epic Systems (No. 2) is powering up after the Wisconsin Public Service Commission approved a 1.3-mile high-voltage line that will be used as a backup system in case Epic loses the primary connection that serves its 9,600 employees. With the medical software developer projecting its power usage to nearly double on its growing Verona campus by 2028, utility regulators authorized a plan for the $21 million underground power line to service the campus. Epic, which has solar panels and a wind farm that generates power, has agreed to pay $10.2 million toward the line’s construction, and the rest of the cost will be passed on to about 5 million ratepayers in eastern Wisconsin and Upper Michigan.

Perhaps the best news Epic received in the past year was the dismissal of the final pending lawsuit filed by employees. Since 2013, several class-action lawsuits were filed against Epic by employee groups who sought to take wage disputes to court, but the courts — including a U.S. Supreme Court decision — ruled that Epic workers must abide by an agreement to settle disputes individually through arbitration.

On the down side, Epic lost a $624 million contract to develop appointment software for veterans to its primary competitor, Cerner Corp., and it faces a new legal challenge. Citing a lack of accessibility to the non-public facing side of medical records software, the National Federation of the Blind has filed a civil action lawsuit against Epic. The advocacy group, which filed the suit in Massachusetts state court, claims Epic violated that state’s discrimination laws by not making software products that are compatible with screen readers that workers, including visually impaired workers, use in health systems, clinics, and hospital settings. The screen readers convey visual information through synthesized speech, sounds, and braille.

SSM Health (No. 3) is in discussions with Welton Enterprises on a possible mixed-use development south of Madison that may one day bring a large-scale hotel, a SSM Dean Medical Group clinic, retail, restaurants, office space, and multifamily housing on 95 acres of land near Epic Systems. Plans for “The Valley” are years out, but if approved the development would be located south of U.S. Highway 18/151 and west of State Highway 69.

It was another active year for American Family Insurance (No. 4), which surprised everyone by purchasing the naming rights to Miller Park, home of the Milwaukee Brewers, as part of a 15-year deal beginning in 2021. It’s the company’s second turn at naming rights — in 2017, American Family won the naming rates to the Marcus Center Amphitheater on the Summerfest Grounds.

Elsewhere, American Family’s M&A strategy proceeds apace, as the insurer announced plans to acquire Ameriprise Auto & Home of De Pere for $1.05 billion in cash and purchased the Florida-based Main Street America Group Mutual Holdings Inc. Main Street America will operate as a stand-alone brand within the American Family Insurance group, and since it uses independent agents, it offers a new sales channel to American Family companies, which sell branded products primarily through exclusive agents.

American Family also was among the local companies scoring legal victories, as a federal appeals court reversed a 2017 decision and ruled that its agents are, in fact, independent contractors. Otherwise, the company could have been on the hook for more than $1 billion in retirement benefits.

Meanwhile, chalk up another big year for the American Family Insurance Championship, which featured a field of 78 players plus a celebrity foursome consisting of Jack Nicklaus, Packer great Brett Favre, Andy North, and country-western star Toby Keith. Local favorite Jerry Kelly emerged as the winner of the 2019 PGA TOUR Champions event, besting fellow Madisonian and tournament host Steve Stricker and Retief Goosen in a sudden-death playoff.

The company also named Christian Yelich, Milwaukee Brewers outfielder and 2018 National League Most Valuable Player, to serve as a brand ambassador and community partner.

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Growing an Exact Science

Perhaps no local business makes more news than Exact Sciences (No. 5), which continues its impressive rise up the Largest 100 list. Exact Sciences has not only moved into a new, 169,000-square-foot clinical laboratory and warehouse on Madison’s near west side — and is looking for a third laboratory site to study future cancer-screening products — it has acquired Genomic Health, a global provider of genomic-based diagnostic tests based in Redwood City, California. The transaction will combine Exact Science’s Cologuard colorectal cancer screening test with Genomic Health’s Oncotype DX, a flagship product line of gene expression tests that are used to guide treatment decisions for women with breast cancer.

Exact Sciences now is targeting more than a dozen other deadly cancers and is developing a diagnostic blood test for colon cancer. In the years to come, the company, together with partners at Mayo Clinic, hope to develop one universal blood test capable of screening for a variety of cancers.

In addition, Exact Sciences got into the M&A act by acquiring San Diego-based Biomatrica, a company that develops, manufactures, and provides sample preservation technology to the biotech industry. Exact Sciences plans to use Biomatrica’s proprietary technology to support development of its own blood-based cancer detection tests.

CUNA Mutual Group (No. 7) acquired the Grand Rapids, Michigan-based Compliance Systems Inc., a privately held company specializing in compliance technology for financial services.

UnityPoint Health, which includes UnityPointHealth-Meriter (No. 8), has signed a letter of intent to explore a merger with Sanford Health that would create a combined company with more than $11 billion in operating revenue, ranking it among the 15 largest nonprofit health systems in the country. The new organization would employ more than 83,000 staff and 2,600 physicians and carry out operations in 26 states and nine countries, including hospitals, clinics, health plans and networks, post-acute care, and other lines of business.

Both organizations would continue to operate their respective medical groups and maintain longstanding relationships with independent physicians, hospitals, and other health-care partners. The merger is subject to regulatory reviews, but leaders hope to have the process completed by the end of 2019.

In a story that stunned and frightened the community, nurse Christopher M. Kaphaem, 43, was the suspended from the Meriter Newborn Intensive Care Unit and charged with abusing nine infants between March 2017 and February 2018. Kaphaem, a Meriter nurse for more than 14 years, has been charged with 19 felonies related to injuries to nine infants.

The Sub-Zero Group (No. 12) secured $5.5 million in TIF assistance dollars for the construction of a new facility on Seminole Highway that is expected to add 100 new jobs. By 2022, Sub-Zero plans to build a $60 million, 375,000-square-foot building for research and development, testing, manufacturing, and office space.

Promega Corp. (No. 15) also continues to build, adding a 150,000-square-foot manufacturing center to its Fitchburg campus. The $155 million Component Manufacturing Center will be located at 3075 Sub-Zero Parkway, and follows a separate research and development building, which broke ground last summer.

The news is much worse on the legal front. Circuit Court Judge Valerie Bailey- Rihn has informed executives at Promega Corp. and shareholders involved in a lawsuit against the Fitchburg-based biotech company that she’s leaning toward a finding that minority shareholders had been oppressed in the legal sense. Bailey-Rihn told the company and the shareholders that that they could file briefs within 60 days with their recommendations on how she could remedy the situation. The suit was filed by three longtime shareholders who claimed that Promega CEO Bill Linton used bullying and manipulative tactics to gain majority control of the company and that minority shareholders had no chance for a fair return on their investment for several decades.

Alliant Energy Corp. (No. 18) moved its stock exchange listing to Nasdaq. The company’s common stock, which has been on the New York Stock Exchange, will continue to trade under the symbol “LNT.”

As part of its Shared Solar program and its new goal to reach net-zero carbon electricity by 2050, Madison Gas & Electric (No. 20) keeps planning and building large-scale solar arrays, most recently at the Middleton Municipal Airport, also known as Morey Field. MGE’s first Shared Solar project was a 500-kilowatt array located on the roof of Middleton’s Municipal Operations Center, which began serving customers in January 2017.

At press time, the utility was still assessing the damage caused by a July 19 explosion and fire at a Main Street substation, which resulted in a power outage that left an estimated 13,000 people without power on a day when temperatures reached 90 degrees.

MG&E also celebrated a legal victory, as the U.S. Securities and Exchange Commission ruled in its favor in a shareholder dispute. Four shareholders who are part of an organization called MGE Shareholders for Clean Energy claimed that MGE took advantage of new corporate-friendly federal guidelines to avoid having to map out a path to clean energy by mid-century. They submitted a resolution directing the company to draft a plan to eliminate coal and transition to 100 percent renewable energy by 2050. Not long afterward, MG&E announced its new goal of net-zero carbon electricity by mid-century.

Hy-Vee (No. 23) and Festival Foods both are hoping to go into the Village of Waunakee’s Woodland Crest subdivision. Both grocery chains have proposed new stores near Woodland Drive and Hwy. Q. Reportedly, Iowa-based Hy-Vee is moving ahead with plans, while Festival continues to pursue a store, as well, and has signed a purchase agreement for land. Hy-Vee is requesting $2 million in tax incremental financing for public improvements.

Count Springs Window Fashions (No. 25) among the local facility upgraders with a multimillion-dollar renovation of its Middleton headquarters. The company’s 400,000-square-foot manufacturing plant will gain a new training facility and an on site fitness center as part of a redesign which should be completed in 2020.

To better meet housing demands, Oakwood Village University Woods, which is part of Oakwood Lutheran Senior Ministries (No. 26), plans to demolish its apartment complex on Mineral Point Road and build two new ones, but the project could potentially displace up to 80 residents, including 30 affordable-housing renters. The renovation work, set to begin in 2022, will include tearing down an apartment tower built in the 1970s and replacing it with two new facilities with larger apartments. Oakwood Village is working with affected residents to help them find new places to live and will pay for resident moving costs.

Shareholders are getting more litigious these days, and Spectrum Brands (No. 38) has found itself in the crosshairs. A class-action lawsuit has been filed by shareholders of Spectrum Brands Holdings charging the company’s executives, then CEO Andreas Rouvé and CFO Douglas Martin, with misleading shareholders as to the status of two distribution centers it was building in Ohio and Kansas. The shareholders claim they were told that the projects were moving along without issue, despite tumbling profits and millions of dollars of orders that could not be shipped. Spectrum, which vowed to fight what it called meritless claims, disclosed in 2018 that both facilities had “serious hitches” and shareholders charge that by not disclosing the information early on, it had artificially inflated Spectrum’s stock price. Rouvé has since resigned from his position as Spectrum’s CEO and was replaced by David Maura.

Sales for American Girl (No. 47) continue to drop, as the Middleton-based doll and book manufacturer reported a 32 percent decline for the quarter ending March 31, 2019. Mattel, its parent company, blames that performance largely on the closing of Toys R Us stores in 2018. Despite the closure of two retail stores, including one at the Mall of America, Mattel executives remain optimistic, saying the brand will be bolstered by a live-action, American Girl feature film in the works.

Total Administrative Services Corp. (No. 51), a third-party benefits administrator, expanded its operations in Madison as part of a project that’s expected to create 80 jobs over the next three years. WEDC will support the project by authorizing up to $200,000 in state income tax credits based on job creation over the next three years.

TASC also has formed a venture capital arm called TASC Ventures and will use the fund to invest in software startups that develop technology used in human resources, insurance, and financial services.

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Zendesk’s Madison growth spurt

Starting, building, and maintaining relationships are among the keys to long-term business success, and when you’re a global company serving 145,000 customers in 150 countries, you have big customer-service ambitions. Those ambitions place demands on every national and international location, including the Madison office.

Zendesk, a San Francisco-based company known for its suite of customer relationship and engagement software, is scaling to be a multibillion-dollar revenue company, and it’s almost there. The company projects $806 million in revenue in 2019 and could hit the billion-dollar mark in 2020 despite a sluggish global economy. Locally, its growth is reflected by a surging workforce that started out, humbly enough, with five employees in 2013, when its Madison office opened, and now exceeds 400 — and counting — in newly renovated space.

To secure modern office space that suits its mission and accommodates its growth, Zendesk has moved into three floors in the Urban Land Interests Building, 25 W. Main St., replacing its previous undersized Madison office. Even though Madison has grown into its second-largest U.S. location, Zendesk is still hiring and is in the process of expanding to an additional floor in its new building — a floor that will be consistent in look and feel with the others.

Jessica Hannes, senior director of global support for Zendesk, is not sure exactly how many more people the Madison office will add, but she knows the company is trying to strengthen its local advocacy team, which is similar to a customer support or customer-care organization at other companies, as well as its sales, professional services, engineering, finance, and legal teams.

Madison, she notes, offers a great talent pool and a perfect cultural fit for an organization that believes in corporate social responsibility. “We want to be a part of our community, and also volunteer within our community,” she says, “and we find all of those things within the Madison area. So, it’s a really special place for us.”

National and international growth drivers create challenging work for employees at every Zendesk location. The company’s focus on relentless innovation has enabled it to approach that billion-dollar objective because while we usually see more news coverage about the pressure for new and more advanced versions of products such as the Apple iPhone, companies like Zendesk also face similar pressure to come up with new answers and add to existing ones.

Not only does the company focus on internal innovation, it helps business customers innovate, as well. In the past year alone, Zendesk has introduced the following: Zendesk Sunshine, billed as an open and flexible CRM platform; Zendesk Sell, its entry into sales software; and Zendesk Explore, a data analytics tool. In the second quarter, Zendesk acquired Smooch, a Montreal-based company, to expand its mobile conversational messaging capabilities, it introduced a combined offering for sales and customer service called Zendesk Duet, and it expanded Answer Bot, which uses machine learning to help answer customer questions. In the past month, Zendesk introduced a new WhatsApp Business API connector that enables businesses to more quickly respond to WhatsApp users.

Much of the impetus is the changing dynamics of today’s consumers and how they expect to interact with companies in their channel of choice in faster and more seamless ways. That was one of the findings of a Zendesk company benchmark report, and it indicates that in terms of the expectations of today’s more impatient, more empowered, and more informed customers, an exceptional experience today quickly becomes mundane tomorrow.

“A lot of businesses have the same pressures because of our changing economy and the changing demographics of the individuals in the economy,” Hannes states. “So, consumers look to have faster answers from the businesses they’re working with and have more seamless conversations with companies. Companies need to know who their customers are and provide tools to their customer-service agents so they can have richer conversations. That is really the main driver of innovation for us — to make sure we are innovating in that space now and in the future.”

The tenant improvements that were made to accommodate Zendesk in its new office space led to a 2019 Commercial Design Award for Best Renovation–Office. The 55,000-square-foot, multifloor renovation created a work environment that suits Hannes just fine. It’s not that the previous space was bad, the company simply needed more space, and now it has enough square footage to create a variety of spaces that accommodate a variety of work.

“Zendesk is focused on making sure that we have a space where we can collaborate and create a culture where people of different backgrounds can thrive,” Hannes states. “One thing that’s unique is we don’t have any [private] offices here, and that really ups our game with the ability to collaborate and where there are no boundaries within the organization here in the Madison office.”

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