Joseph Armentano describes how his company embarked on an aggressive growth plan by making smart acquisitions in a red-hot industry.

When you think of “sexy” industries, propane gas probably isn’t the first one that pops into your mind. But there are few industries in the country today that are hotter than regional propane marketing.

Just ask Joseph Armentano, CEO of Paraco Gas, a regional propane marketer headquartered in Rye Brook, NY, that services residential, commercial, and wholesale markets in large parts of New York, Pennsylvania, and Connecticut. The 230-employee company has made about 20 acquisitions during the past 20 years, including six in the past two years alone, bringing the total number of customers up to approximately 65,000 and total annual revenue up to $85 million.

“This industry is extremely hot right now,” said Armentano. “We’re competing with billion- dollar public companies to buy very small propane marketers, which are in great demand. The key to our success has been expanding intelligently and keeping our growth under control.”

Joseph Armentano

True entrepreneur
Paraco was founded in 1968 by Armentano’s father, Chairman Pat Armentano, as a distributor of welding supplies and industrial gas. It transitioned into a propane energy company through acquisitions and the divestiture of its industrial gas and welding supplies operations.

“My father is a true entrepreneur,” said Armentano, who grew up in the family business and has overseen most of the company’s acquisition growth since assuming the role of CEO in 1988. “Our entrepreneurial culture and our focus on sales and marketing come directly from him.” Although he’s now semi-retired, Pat Armentano is still involved in many aspects of the business and is a valuable resource in sharing his experience and business acumen with the management team.

Joseph Armentano explains that the propane marketing industry is extremely fragmented. There are about 8,000 regional propane marketers nationwide, but the top 10 only comprise 35% of the market. In LP Gas’ 2007 survey, Paraco Gas ranked number 14 of these marketers.

To continue its focus on expanding its regional presence, Paraco recently created an acquisition department, headed by Joseph’s brother John Armentano, with the goal of adding another 15 million gallons of retail propane through acquisitions during the next five years (the six most recent acquisitions added 6.8 million gallons). “The acquisition market in our industry is so competitive that we really have to differentiate ourselves,” said Joseph Armentano. “It’s not just about the money—we have to be proactive and offer real solutions to sellers.”

The company has put a formal acquisition plan in place that focuses on staying disciplined and making valued acquisitions, Armentano said. “We’re in a traditional banking mode—no mezzanine or private placements. Our strong balance sheet and professional management team, coupled with the challenging environment that exists today for small retail propane marketers, should continue to create new acquisition opportunities.”

In fact, it is the gradual transition of the business from the entrepreneurial “mom and pop” operation that his father founded to a middle-market business today that is the real story behind Paraco Gas’ success. “Our growth has forced us to stay ahead of the curve and make sure we have the kind of management team in place that can run a business like ours. In the past few years, we’ve added a VP of operations, an HR director, and an MIS director—positions that become necessities when you reach our size.”

Niche fuel
Propane gas is the fourth-largest energy source in the country, but Armentano said it’s still something of a niche fuel. About 80% of the company’s customers are residential, half of whom use propane gas for cooking, a quarter for heat, and the remainder primarily for hot water and swimming pool heating.

Paraco Gas is well-diversified within the propane gas industry. “We’re unique in this industry because we have operations in some non-traditional propane markets, like swimming pool heating and cooking, where heating oil tends to be predominant. We also have our own branded propane exchange tank business, and we’re the only independent propane exchange tank company in the country that services Home Depot. As a result, we’re not as dependent on winter as most companies in our industry.”

Like any business in the energy industry, Paraco Gas must deal with extreme pricing volatility. “The price of our product can fluctuate by as much as 15% to 20% in a week,” said Armentano. “The higher energy costs are, the harder it is to maintain your margins. In this environment, it’s critical for us to stay on top of collections and keep bad debt to a minimum.”

Through all of the acquisitions and growth in recent years, Armentano says he and the management team have focused heavily on staying true to the culture and core values the company was founded on and remaining a customer-focused family business. One example of this is the new profit-sharing plan the company implemented this year that allows non-managers to share in the profits. “This plan is for non-management only,” Armentano explained. “We want all of our employees to participate in the company’s success.”

The company also strongly supports its business community through its involvement in a number of charities that serve those communities, as well as youth sports organizations and local associations. Armentano has been involved in many charitable and civic organizations, including the American Red Cross and the Arthritis Foundation. “This is the only company I’ve ever worked for,” he said. “It has been a thrill to help grow Paraco Gas from what my dad started almost 40 years ago to what we are today.”

Don Sadler is a writer and editor specializing in issues of interest and relevance to businesses and executives. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .