Private Equity in the Environmental Services Industry. Environmental Services Industry Perspective

Transcription

1 Private Equity in the Environmental Services Industry Environmental Services Industry Perspective

2 History & Evolution Founded in 1984, HEPACO, LLC is a leading provider of emergency response, remediation, marine services, wastewater treatment and abatement services through a network of 26 offices in the Mid-Atlantic and Southeast Company believes it is top 3 provider in its core markets and has been involved in every major disaster within the Company s footprint and many outside of it over the past 2 decades Company has achieved significant organic growth, particularly in the last 5 years and successfully Strategic Milestones completed and integrated 4 acquisitions 1984 HEPACO founded 1989 Began offering rapid response services 2010 Opened new wastewater treatment facility in Atlanta BP Oil Spill 2011 Formalized MSA strategy 2013 Upgraded and relocated Atlanta wastewater facility 2015 Opened three new locations Acquisitions 1993 Acquired Ensite 2005 Acquired Industrial Marine Services Acquired ICES- Carolinas 2010 Acquired REACT Environmental Services 2011 Recapitalization by Carousel Capital and management 2016 Recapitalization by Gryphon Investors and management in August 16 and now actively pursuing multiple add-on acquisitions

3 Experienced Management Team HEPACO is led by a cohesive, highly capable management team with deep industry experience and a strong commitment to lead the Company through its next phase of growth Ron Horton, Jr. CEO Joe Opatkiewicz Director of Business Development Brett Ellis CFO 25-year industry veteran with significant hands-on and management experience Joined HEPACO in 1993 served as COO since 2006; President since 2011; CEO since 2016 BS University of North Carolina at Chapel Hill Joined HEPACO in years of experience in sales and business development Formerly worked for Heritage Environmental Services and Ensco BS SUNY Buffalo Joined HEPACO in years of financial, operational and management informational systems experience BS and Masters in Accounting University of North Carolina at Chapel Hill Joined HEPACO in year industry veteran Richard Horton Regional VP (South) 26+ years of experience in the supervision and management of environmental remediation services Completed specialty training focused on rail and waterway remediation incidents BS Barton College Bob May Regional VP (North) Joined HEPACO in 2005 through acquisition of IMS Environmental Services Licensed geologist in multiple states BS Old Dominion University 3

4 4 Introduction to Gryphon Investors 20-year old firm with singular focus on lower-end of middle market 38 platform acquisitions and over 70 add-ons Provides access to resources to support origination and execution of add-on acquisitions, allowing management to spend more time managing the business Core model since inception of building leading businesses through organic growth and add-on acquisitions in partnership with experienced management teams Support for add-on acquisitions through capital and internal M&A resources and expertise In-house team of professionals with operating backgrounds to support management teams Exclusive network of retired sector experts through Gryphon Executive Advisory Board (GEAB) which provides Board-level advice and access to valuable networks Investment strategy focused on proactive sector targeting Dedicated sector verticals (Business Services, Consumer & Retail, General Industries, and Healthcare) with ongoing Proactive Evolving Sector Initiatives (PESIs) Consistently strong investment results and returns Prequin top consistent performer (please see Appendix) Experienced team of 38 blue chip professionals including 11 partners Strong business services franchise 20 of 38 platforms have been in the business services sector with a focus on multi-site, human capital-intensive companies Willingness to hold investments for longer time periods in order to realize growth initiatives One of Gryphon s most successful investments, Intelligrated, was an 11-year build-up in the logistics sector through two recessions Significant capital available for acquisitions Investing out of $1.2 billion fund $500+mm of Gryphon equity invested over the past year

5 Gryphon s Partnership with HEPACO Transaction Overview Gryphon made a majority investment in HEPACO on August 18, 2016 CEO Ron Horton and the remainder of the Company s management team invested substantially in equity HEPACO squarely fulfills Gryphon s targeted investment criteria including a) market leadership in its core geographies; b) strong management team; c) mission-critical service offering with strong brand / reputation; and d) multiple organic and add-on growth opportunities Key part of Gryphon s investment thesis is to prioritize acquisitions by HEPACO utilizing its capital and expertise Gryphon has committed a large amount of equity capital to complement the debt available to finance acquisitions in HEPACO s new credit based facilities Gryphon has made 38 platform acquisitions and over 70 add-on acquisitions since 1997 Gryphon believes that equity-based incentives for management are critical to the success of this type of acquisition and have installed a performance-based option pool for HEPACO employees A portion of the incentive equity pool is reserved for management of acquired businesses 5

6 Business Owner Considerations Do I/We want to sell controlling interest in the business? Ownership Can Take Chips Off The Table To Diversify Interests Minority Shareholder Status Can Be A Culture Shock Many Privately Held Businesses Have Owner Perks That May Not Continue Do I/We have realistic valuation expectations? Financial Advisors/Investment Bankers May Help Can We Demonstrate That An Effective Strategic Plan Is In Place? Consistent, Sustainable Revenues and Earnings Aid Valuation Reliance on Large Episodic Projects May Be Discounted Somewhat Do I/We want to stay and continue to lead the growth or exit? If Ownership Wants To Exit/Take Reduced Role, Is A Succession Plan In Place? What Is The Age Of Ownership? Do I/We want to partner with a strategic or financial buyer? Is the business a platform/portfolio or an add-on business? What financial outcome is desired by ownership? Cash Free/Debt Free Liabilities? What will happen to the key people who helped to build it? 6

7 HEPACO s Key Acquisition Criteria Acquisitions are a key linchpin of HEPACO s growth strategy Goal to acquire Substantial Additional EBITDA over the next 5 years based on a strategy to prioritize targets that move the needle and have a high degree of strategic fit Key acquisition criteria include the following: Complementary Geographic Footprint Specialty Service Offerings Attractive End Market Exposure Midwest Southeast Northeast Mid-Atlantic Rapid response Specialized industrial services & remediation Over-water services Wastewater treatment Rail Oil & gas Chemicals Manufacturing Synergistic Customer Relationships Fortune 500 customers with multiple locations and with a wide array of service needs 7

8 Benefits To Partnering with HEPACO & Gryphon Substantial liquidity event with the opportunity for rollover equity in HEPACO platform Selling owners can have a second chance at wealth creation through ownership in HEPACO Opportunity for current owners to diversify assets, while providing a good home for management, employees, and other company stakeholders HEPACO is a market-leading firm which is growing rapidly and has a long history and strong customer relationships Partnership with leading private equity firm with a successful track record of supporting growth and creating shareholder value Access to Gryphon s capital base to support growth initiatives Expanded equity ownership opportunity for other key employees as an incentive, hiring, and retention tool Employees may selectively have opportunity for incentive equity options 8

9 Acquisition Timeline Illustrative transaction process overview and timeline shown below Every situation is unique, with process timeline and speed pending information flow HEPACO & Gryphon are prepared to work diligently to complete a transaction expeditiously Preliminary Due Diligence (~1 month pending information flow) Execute Letter of Intent & Exclusivity Period Begins (1-3 weeks) Confirmatory Due Diligence & Documentation (~1-2 months) Final Documentation & Closing (~1 month) Execute mutual nondisclosure agreement ( NDA ) and begin exchanging information HEPACO / Gryphon to provide data request list Receive due diligence information and conduct follow-up calls / meetings Execute non-binding Letter of Intent ( LOI ) which memorializes key transaction terms and includes exclusivity period Conduct confirmatory business due diligence and third-party accounting, legal, benefits, and other due diligence Post-acquisition integration planning Make progress on key transaction documentation Finalize and execute documentation including purchase agreement, employment agreements, and other documents Close transaction and wire funds to sellers 9