Recently Hammond, Kennedy, Whitney & Company, Inc. (HKW) announced the sale of one of its holdings, Crane Rental Corporation (CRC), based in Orlando, FL. CRC is one of the largest and most prominent crane rental, hauling, and rigging companies in the United States. CRC had been a portfolio company of HKW since 2008, and Maxim Crane Works, a portfolio company of Platinum Equity, bought the crane company.
Several things caught my attention in the press release regarding this deal. First, CRC had been in the HKW portfolio of companies since 2008. If my math is correct, that is seven years. Many folks in the general public and even in the small business community have a very negative view of private equity firms, assuming they buy and break rather than buy and build based on press coverage. In reality the latter is much more common than the former.
In fact, according to their website, HKW:
…concentrates its investment efforts on private and public, small middle-market companies with low risk of technological obsolescence. HKW focuses on management buy-outs of companies which have revenues between $20 million and $200 million, are headquartered in North America and are established leaders in their respective niche markets. Platform transaction range $20 million to $200+ million (no minimum for add-on acquisitions).
I have highlighted the tail end of that paragraph to emphasize a point: HKW is similar to other private equity firms that specialize in the lower middle-market: Add-on transactions are typically quite small, much smaller than the initial platform acquisition. I point this out because according to their press release announcing this CRC transaction:
Since 1982, HKW has sponsored 48 platform transactions of lower middle-market companies throughout North America as well as 52 add-on acquisitions.
Let that sink in for a moment: HKW has closed more add-on transactions than platforms in the past 33 years.
Although this may surprise you, it is not unique among equity firms that specialize in investing in companies in the lower middle-market. In fact, based on our experience, firms in this niche are very active once they make the platform investment in an industry. They typically then acquire a number of much smaller companies and bolt them on to the platform, eventually creating a much larger entity.
Although HKW did not disclose the details of the original acquisition or the most recent transaction, it is safe to assume that CRC was a much larger entity than it was originally when it was acquired by Platinum via Maxim. In fact, according to the 2008 press release announcing the transaction:
HKW has made multiple investments in the equipment rental sector including the recent investments in NESCO and Airworx Construction Equipment and Supply.
Reading between the lines, it is clear that HKW invested in CRC as part of a much larger strategy that culminated in the eventual sale to Maxim. Again, according to the press release from 2008:
"One of the most appealing aspects of a partnership with HKW is their reputation for assisting strong companies with their next level of growth while allowing existing leadership to continue in current roles," said Alan Ashlock, (the second generation family owner of Crane Rental). "It was important for us to be able to continue delivering the same quality service along with maintaining our exemplary safety standards."
Ashlock observed that partnering with HKW will give Crane Rental the additional financial strength to aggressively fuel its growth and maintain its inventory of state-of-the-art equipment.
I have bolded a key segment of the paragraph above because it really outlines one of the key benefits of partnering with a middle-market private equity firm like HKW: the provision of capital beyond what current ownership has available. This allows existing owners to participate in the ongoing growth of the company post acquisition and achieve revenue and profit goals that most likely would have been unachievable under prior capital constraints.
Of course not every privately owned business will benefit from a relationship with a PE group as CRC did. As you can surmise, equity firms have specific attributes that they are looking for when pursuing an ongoing add-on growth strategy. Synergies between the platform company and its targets are key. These can include new end markets, a blue chip customer base, tenured, experienced employees, new product lines, etc.
The real issue for you will be first to determine if equity firms are even a potential target for you, AND once you determine that, you will need to figure out how to locate, contact, and negotiate with professional buyers associated with these firms. Fortunately we have an answer for you: Generational Equity provides a full spectrum of M&A services and we ensure that our clients are presented to appropriate buyers based on our research and analysis of your business.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
© 2015 Generational Equity, LLC. All Rights Reserved.
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Honored to win Investment Banking Firm of the Year 2 years running.
Over 50 awards and counting.
Sign up to receive regular email updates, industry-leading insights and details on complimentary M&A executive conferences in your area from our award-winning team
Success, you have been added to our list.