Company Sale & Recapitalization
Wilcox Investment Bankers served as M&A Advisor to RK Pump & Supply in the sale and recapitalization with Clavis Capital Partners, Stephens and Bixby Bridge Capital.
Flatland Holdings, Inc. (dba RK Pump & Supply), based in Midland, Texas, is one of the largest distributors of oilfield production supplies (pipe, valves, fittings and other general supplies) in the broader Permian Basin. From the acquisition of its first small store in 2008, RK has grown organically to operate 12 stores, a 90,000 square foot Distribution Center, a 15,200 square foot Automation & Valve Center and several pipe yards.
The owners desired to "test the market's interest" in RK to determine if a liquidity event and/or a transaction bringing in additional capital could be achieved. Like many energy services companies, RK had experienced volatile earnings, including the run-up to and the decline during the oil and gas industry downturn in 2015-16. RK successfully weathered the downturn, remained profitable throughout and subsequently experienced a rapid growth pace, which placed a strain on the owners' personal capital position. For interested buyers, this volatility posed a difficulty in determining expected future earnings and underwriting a reasonable valuation. Also, the owners recognized their investments would continue to pay off subsequent to a transaction and desired to capture a portion of this value.
The company engaged us as a merger & acquisition sell-side advisor. We ran an aggressive marketing effort to build an auction among prospective buyers. We prepared the marketing materials, solicited interest from a number of private equity groups, and selected strategic buyers and negotiated a favorable outcome with Clavis Capital Partners in conjunction with Stephens Capital and Bixby Bridge Capital.
The transaction included an earnout based on future performance and introduced a larger credit facility and a new institutional debt partner to provide capital for continued growth and to backstop the earnout payment. We overcame the Company's challenges, structured a company sale that also provided growth capital and significant liquidity to the owners, surpassing their expectations.