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Address Line 1Address Line 2City, StateZip/Post CodeUnited States
(T) +1 000 000 0000(F) +1 000 000 0000
www.intellisys.ai
Sanitary Waste Business
INTELLISYS CAPTIAL LLCProspectus Document January 2017
Introduction
[2] December
Intellisys Capital, LLC (“Intellisys”) was founded for the purpose of managing a portfolio of companies that
have high-growth opportunities through acquisition. Intellisys has identified a sanitary waste company
(“Company”) for the first purchase within the portfolio, which will become the foundation for the first series
of transactions.
The Company is a Michigan-based company that has built a solid foundation for over 20 years based on
the team of people, financial stability, strong market share, and the development of critical policies and
procedures. Over time, the Company has significantly grown its base of operations. Initially, the company
was highly focused on a single-county market, but through organic growth and acquisitions, the company
has expanded its operational territory to include seven counties. The solid foundation provides a significant
opportunity to roll new acquisitions into the company with relatively little disruption to the overall operations
of the business.
The sanitary waste industry has remained relatively untouched by larger private equity and institutional
investors, so the opportunity for consolidation is significant to the business acquisition plan. The typical
sanitary waste company is a small husband and wife business with 2-3 trucks that manage 2-3 million
gallons of waste on an annual basis. In order to grow through acquisition, the focus will be on smaller
companies that are looking for ownership transition and have key competitive advantages in the market,
which include:
1. Access/ownership of private storage tanks
2. Existing land applications for agricultural recycling
3. Strong market share
The goal for the acquisition rollup strategy is to acquire 3 – 5 companies every quarter with an overall goal
to have 25% of the market share in Michigan over the next five years. Over 20 companies have been
identified for acquisition in the next 6-9 months, with as many as five that will be eligible for closing in early
2017, which will immediately double the sales and EBITDA within the first 6 months. In addition, there
will be automatic 7.5% price increases to all services due to the consolidation that will occur as a result of
the acquisitions, which will increase cash flow after debt service by approximately 15%. As the company
reaches saturation in Michigan, the focus will shift to markets in Indiana, Ohio, Wisconsin, and Minnesota.
Company History
[3] Intellisys Prospectus
The Company began operations in the early 1980’s by the father of the current owner. Like many businesses
in the sanitary waste industry, the company started with very modest expectations and a single pumper truck in
a small single-county geographic region.
After 10 years of operation, the business was sold to the current owner, who for many years worked alongside
his father servicing waste systems. Since taking over the business, the owner has built a wildly successful
enterprise. He has lead the company to significant growth in product and service offerings. He has grown the
company in clients and geographies by employing a fleet of pumping trucks and providing ancillary services.
As with many similar companies in this industry, the owner made a strategic decision to diversify by adding
the rental of portable restrooms to supply a variety of clients. The rental of portable restrooms became a
significant compliment to the sanitary services already provided by the Company. As of today, the Company is
the largest sanitary services business in its service area and the second largest provider of portable restrooms.
It is obvious to see that the portable restroom business is a great compliment to the sanitary and drain services
that have been the mainstay source of revenue for the business.
The Company’s explosive growth in both septic pumping and portable restrooms came through organic growth
and by acquisition. The Company is positioned exceptionally well to continue growth organically, plus op-
portunistically acquiring selective companies to expand market share throughout the state. Another advantage
for the Company has been the Owner’s involvement with the industry association and significant influence in
drafting recent legislation passed in Michigan to the benefit of sanitary system companies. The Company has
another significant advantage; it owns a storage tank, which enables the Company to avoid disposal fees at
certain municipal facilities. The exemption held by the Company is an avenue that allows it to operate in other
areas in Michigan with a competitive advantage.
Growth of the pumping services is supported by construction activity in their current markets that requires
septic systems rather than hooking up to existing infrastructure. In short, most new building in the
seven-county area requires the installation of sanitary systems as a city sewer system is not widely available.
All of these new sanitary systems will require the kind of services currently provided by the Company, not to
mention the need for Portable Restrooms required for nearly every construction site or community events.
Management &Employees
[ 4 ] December
The Owner has been an active manager and leader within the Company, but has been grooming a
key of individuals to assume management responsibilities so that he can spend more time on strategic
planning for growing the company. These individuals have been making significant progress and expect
them to be prepared for their leadership positions in time for the 2016 peak season.
The following is an organizational chart of the Company:
[ 5 ] Intellisys Prospectus
The Owner is recognized as a leader in this industry, including industry associations and state regulatory
involvement. His involvement in the various trade associations was focused on improving the profes-
sionalism of the septic industry and securing passage of Michigan House Bill 4578 passed March 2012
and Michigan House Bill 4874 passed April 2015, both amendments to Part 117. This bill protects
septage haulers from government regulation related to septage disposal and forces accountability by
local municipalities.
The Company has developed a very diversified client list including residential homeowners, commercial
enterprises, resorts, restaurants, builders, excavators, home inspectors and event planners. The
company has strategically positioned its customer acquisition methods to avoid a concentration of any
one group of clients thereby creating a barrier to any significant disruption in revenue(s). In fact, the
Company’s top 30 customers only represent approximately 10% of total annual revenues. This strategy
of customer diversification continues to serve the company well while all but ensuring a stable future of
revenue growth.
The Owner has built a customer base of more than 16,500 contacts, with a majority of company’s
revenue come from repeat customers. This customer base has been developed through a very effective
branding and marketing plan, consisting of direct mail, networking, referrals, trade show participation
and advertising in business magazines and newspapers.
Industry Involvement,Affiliations & Customers
Industry Information
[ 6 ] December
The Portable Toilet Rental and Sanitary Waste industry provides services including portable toilet rental,
septic tank maintenance and various drain and sewer services such as cesspool pumping and cleaning.
Portable toilet rental comprises the largest product segment for the industry, accounting for an estimated
38.9% of industry revenue. The remainder of industry revenue is composed of septic tank maintenance
(24.2%), drain and sewer cleaning services (16.0%) and other nonhazardous waste management
services (20.9%).
Construction companies in downstream residential, commercial and industrial building markets use
the industry’s portable toilet rental to provide workers with onsite restroom facilities. During the past
five years, industry growth has been fueled by the broad economic recovery and subsequent uptick
in construction activity. As the economy recovered from the temporary downturn in building activity,
construction companies broke more ground, fueling demand for industry services. Both the value of
private nonresidential construction and residential construction returned to growth in 2011 and boomed
in 2012, fueling industry growth of 3.7% and 3.5% respectively. Consequently, industry revenue is
expected to expand significantly over the five years to 2015, rising at an annualized rate of 4.3% to $5.2
billion, including growth of 4.1% in 2015.
Additionally, industry growth has been supported by steady demand from government for waste- holding
and drain-cleaning services. Because waste-holding and drain facilities are necessary expenses for
government, there was some stability in demand from this sector, providing a stable revenue source
during the recession and throughout the current five year period. Moreover, demand from entertainment
events at large venues has been strong during the past five years as consumers selectively spent
money on activities such as concerts, despite slow disposable income growth.
Demand for industry services is expected to continue unabated during the next five years. Underpinned
by gains in the broader economy, construction activity is expected to increase substantially with the
value of private nonresidential construction and residential construction in the next five years expected
to grow at annualized rates of 5.2% and 7.3%, respectively. Consequently, IBISWorld expects industry
revenue to grow at an average annual rate of 3.6% to $6.3 billion during the five years to 2020.
[ 7 ] Intellisys Prospectus
Comparing the Company to the industry competition, mentioned previously, the Company has
capitalized on all fronts. In the market serviced by the Company, the Company is the largest septic
pumping operator and second largest portable restroom provider. In both areas, they see tremendous
opportunity to grow their business organically and through acquisition.
There are eighteen (18) identified competitors in the counties served by the Company, which are all
identified targets for acquisitions. All the competitors have been in business for 20 or more years.
During this period, there have been a couple of new businesses that attempted to break into these
markets, but failed after a couple of years of operation.
A vast majority of the competitors are very small businesses, with only one or two pumper trucks that
are quite old, as compared to the Company’s fleet of trucks; moreover, many of these businesses are
home based. The equipment used by these companies is left exposed to harsh elements in the winter
months, which attributes to more mechanical failures impacting customer service and damaging the
company’s brand.
There is one major competitor that competes directly with the Company. This firm has a larger portable
restroom business, but trails the Company in pumping operations. From a statewide perspective, The
Company is in the Top 10% of the largest firms in this industry, out of 375 companies.
Competitive Factors:
• The Company pumped 6 million gallons, whereas the closest competitors did only 2 to 3
million gallons.
• The Company has 570 portable toilets and the closest competitor has 1,400.
• The pumping business is focused on a market within a 30-mile radius.
• Portable restrooms serve a much broader area than the pumping business.
• There is very little competition in the portable restroom business.
• The septic pumping business is more competitive than the portable restroom business.
• There are 3 local competitors in the pumping business that are anticipated to be
purchased after the initial transaction, giving the Company a lock on the market.
Competitive Position