Many of you have probably heard of FleetPride, “America's premier nationwide supplier of heavy-duty truck and trailer parts operating 248 locations in 45 states,” according to its website. Chances are good that if you operate in the transportation industry, you have probably come across FleetPride a time or two.
But many of you are probably unaware that since 2006 FleetPride has been part of an aggressive platform company expansion strategy. Six years ago Investcorp (along with Ridgemont Equity Partners) invested in FleetPride. In the ensuing years, FleetPride made more than 30 strategic acquisitions in related transportation industry companies.
This is a clear case of a company being acquired with the sole purpose of using it to bolt on additional companies with the goal of eventually packaging a much larger entity for sale or public offering.
And this is exactly what Investcorp did when last month it announced that TPG was acquiring FleetPride. This is just one more example that illustrates how equity firms like to operate. When Investcorp acquired an interest in FleetPride, it had 155 locations. Now it has 248 branches, sales in excess of $270 million, more than 3,700 employees. It’s also operating in 45 states.
Clearly the goal of helping FleetPride expand was realized. This is how Steve Puccinelli, managing director at Investcorp and head of corporate investment for North America and Europe described it:
"When Investcorp acquired FleetPride in 2006 we were keenly aware of the company's growth potential. In partnership with management, we were able to execute our strategic plan to grow the company organically, effect accretive acquisitions, as well as streamline operations to enhance FleetPride's economies of scale in spite of the 2008 global recession."
A couple of key points can be gleaned from analyzing this transaction. First, as with most private equity groups, add-ons to existing platform companies can be quite a bit smaller than the platform itself. If you do the math, Investcorp added 93 new branches via 31 add-on acquisitions. That averages three new branches per each acquisition.
Although details of these transactions were not released, it is safe to assume that if you only have three branches in your operation, you are probably fairly small. As we have discussed before, equity firms focus on lower middle-market companies (just like yours) as they expand their platforms. This is most likely happening in your industry right now and you are unaware of it because most of the transactions are not widely publicized.
Secondly, notice the wording I have highlighted in bold above: “In partnership with management.” Again, although details were not released on the formation of FleetPride post-equity firm investment in 2006, it is safe to bet that existing management was retained as these add-ons were acquired. This enables an equity firm to grow and tap into the expertise of industry players while adding professional management and financial skills in a true win-win scenario.
Ultimately, in scenarios like this, existing management retains an equity position, enabling them to enjoy a secondary liquidity event later, as was announced last month when TPG acquired the organization. I bring this transaction to your attention because it once again highlights how effective equity firms are in helping our economy grow and expand.
One final thought: Notice that the initial investment in FleetPride occurred in 2006, two years before the Great Recession. The investors did not bail out on FleetPride during a two-year period that had a devastating impact on the trucking industry. No, Investcorp and its team had a long-term perspective and remained committed to its goal: growing FleetPride into a national powerhouse in the transportation industry during a six-year period.
This is just one example of an active equity firm in action. We have lots of others that we share with business owners that attend our M&A seminars. If you would like to learn more about these types of buyers and their potential interest in your company, I invite you to attend one of our workshops. We hold them throughout North America specifically for owners of privately held companies.
We are passionate about our educational programs for entrepreneurs because from experience we know that far too many business owners have no exit strategy in place. If you fall into this same category, you owe it to yourself, your family, and your legacy to contact us and attend one of our workshops.
No matter what, remember this: FleetPride is just one example of an extremely active platform company being funded by the deep pockets of an equity firm. Chances are really good that there are roll-ups like this occurring in your space and you are unaware of it.
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