Reading-based Penske Truck Leasing announced Thursday it has reached an agreement to acquire Kris-Way Truck Leasing Inc.
Financial terms were not disclosed.
Founded in 1978, Kris-Way is a transportation services company offering full-service leasing, commercial truck rental, contract maintenance and dedicated contract carriage.
Penske will absorb Kris-Way’s approximately 150 associates and over 900 vehicles from seven locations throughout Maine and New Hampshire.
The transaction – anticipated to close in the second quarter of this year – is subject to regulatory approvals and other customary closing conditions.
“Kris-Way has earned a stellar reputation in the marketplace,” Art Vallely, president of Penske Truck Leasing, said in a release. “Penske and Kris-Way customers will benefit from the combined services both companies have to offer across our growing network. We look forward to working closely with Kris-Way customers and associates to integrate the business into the Penske brand.”
“We are excited to join Penske,” added Kris-Way President Tom Keefer. “We believe as part of Penske, Kris-Way is well-positioned to support our customers’ needs into the future. By expanding our network, our associates will have new opportunities for growth and development.”
Penske Truck Leasing is a Penske Transportation Solutions company that operates and maintains more than 416,000 vehicles and serves customers from more than 919 maintenance facilities and more than 2,500 rental locations across North America.
Reading-based Herbein + Co, Inc. (Herbein), a Mid Atlantic regional certified public accounting firm, announced the acquisitions, effective Jan. 1, of CPA advisory firms Cappelletti, Pinter & Company, P.C., and The LaMastra Group, P.C.
Based in Pottstown, Cappelletti, Pinter & Company, is led by Matthew Cappelletti, Jr., CPA, who will join Herbein as a senior consultant. The firm, consisting of Cappelletti and four team members, provides services in Pottstown and Greater Montgomery County.
The LaMastra Group, based in Royersford, is led by Carl A. LaMastra, CPA, who will join Herbein as a partner. The firm, consisting of LaMastra and two team members, provides services throughout Greater Montgomery County.
Herbein re-established its presence in Greater Montgomery County in 2016, with the acquisition of Pottstown-based Michael L. Cross & Co. Herbein Managing Partner David W. Stonesifer, CPA, said that the combinations reflect the firm’s commitment to continuing to invest in the region.
“Greater Montgomery County is a dynamic, prosperous area with numerous vibrant communities,” said Stonesifer. “Since our combination with Michael L. Cross & Company, we have consistently looked for opportunities to further our commitment to the area. Now, we are delighted to welcome Cappelletti, Pinter & Company and The LaMastra Group – firms that share our values and client-centric approach – into the fast-growing Herbein family. Like Herbein, Cappelletti, Pinter & Company and The LaMastra Group help a wide-ranging client base achieve their goals. We’re excited to be joining forces to help businesses across the region succeed with confidence in these uncertain times.”
In the last year, Herbein has added 2 firms – Morgantown HR consulting firm Mosteller & Associates, and Lehigh Valley CPA firm Tubiello-Harr & Associates – while continuing to look for like-minded firms and professionals who can help build on strategic plans for continued growth, a Herbein statement said.
“While we are growing quickly, we are committed to maintaining our culture and have always been very strategic about who we invite to join our team,” said Herbein CFO Joseph J. Witkowski. “We are known across our communities as one of Mid Atlantic’s most-trusted accounting, tax and business consulting firms, so we are excited to welcome two very well-respected practices into the Herbein family. Our cultures and values are well-aligned, and we share the same entrepreneurial, trusted approach to doing business.”
Both Pottstown teams will remain at their current locations. The LaMastra Group will remain at its present location in Royersford.
Growth among Pennsylvania’s home heating companies has been slow in recent years, fueled by conversions away from home heating oil to natural gas and other forms of electricity generation.
For businesses in petroleum and heating oil sales, the changing energy landscape has made it more important than ever to diversify their business with some companies offering additional energy services and others moving far out of the realm of home heating.
It has also meant that acquiring a smaller company has proven to be the best way to ensure fast, intentional growth, according to Steve Abbate, president of Kent, Connecticut-based Cetane Associates, a mergers and acquisition-based consulting firm specializing in the petroleum industry.
Cetane has worked on over 200 transactions in the heating oil and propane space across the North East, including for local companies such as Rhoads Energy in Lancaster.
“More people are looking for acquisitions. Even the smaller companies are calling us,” said Abbate. “We track our offers and we previously averaged 5.2 offers per company we list and we are now up to 5.8.”
Nearly four to five percent of oil heated homes convert to other heating sources annually according to Abbate. Despite those numbers, most acquisitions he has worked on are initiated through retiring owners, many of whom have kids that may not be interested in continuing the family business.
“You have the millennial generation who should be taking over for the baby boomers but they don’t want to do this,” said Abbate. “Hydrocarbons are an unfriendly word in the green community. It’s not …looked on [highly] by the next generation.”
Len Zvorsky, executive director of the York-based South Central Pennsylvania Energy Association, sold his wife’s family business, Newcomer Oil Corp., in the early 2000’s.
The younger generation being unwilling to take up the torch of their family’s home heating company is something that Zvorsky also saw in the M&A environment when he sold his company. However, some of his member organizations are run by leaders in their 40’s and have yet to run into that problem.
The right time to sell
Today, evaluations for home heating companies are up across the board, mostly due to low interest rates. Abbate added that buyers are also hungry for businesses to acquire thanks to the 2017 Tax Cuts and Jobs Act, which temporarily increased the bonus depreciation percentage from 50 to 100 for qualified property acquired between Sept. 27, 2017 and Sept. 28, 2023.
Until 2023, businesses that acquire a company can write off 100% of the assets, such as trucks and propane tanks, in the first year of operation.
“People are really looking for acquisitions to take advantage of that,” Abbate said.
Mergers and acquisitions differ for home heating companies compared to businesses in other industries because it isn’t worth it for a buyer to value a heating business by its revenue alone, said Abbate.
Because it is selling a commodity, a heating company may have its revenue down by 40% in one year but all of that loss could be contributed to changing prices of oil. For that reason it’s more beneficial for buyers to look at gross profit, infrastructure, trucks and offices.
“I don’t know all the commodities but it’s probably one of the most volatile in regards to its ups and downs,” Abbate said.
Not just oil tankers
Rhoads Energy, a full service home heating company offering HVAC, petroleum and heating oil, has had 18 acquisitions since 2003. The 100 year old company has acquired four companies in the last year and a half.
In the past decade, Rhoads expanded its offerings to include not only home heating oil delivery but also air conditioning and propane delivery services. While it is common for heating oil businesses to expand into services such as HVAC and propane, many of the small businesses acquired by Rhoads may only have had one or two product lines, said Michael DeBerdine, CEO of Rhoads.
“Maybe a business ran fine with the one product line but the next generation decides to ramp up their HVAC services and that’s a hard push now,” said DeBerdine. “We have worked for many years to build that year -round business model.”
Diversification is something you see more than you used to in the home heating industry, according to Abbate. While moves like adding petroleum and HVAC services are the most common, Abbate has seen some companies expand into totally different service lines such as pest control and landscaping.
“These companies show up at your house three times a year– there’s this portal into your home and smart companies have leveraged that relationship and diversified into other home products,” he said. “That is something we’ve seen over the last 10 years that has really strengthened the financial position of some companies.”
Maintaining that local relationship between a home heating company and its customers is crucial for business– so much so that Rhoads prides itself on maintaining its acquisitions’ legacy names long after the deal is finished.
E.G. Smith, Inc. in Berks County, Vincent R. Boltz in Lebanon and Atlas Oil Ltd in Pottstown are all examples of companies that Rhoads has purchased. Continuing to sell under those names can greatly impact a transition, particularly in the home heating industry, said DeBerdine.
“That regional feel definitely makes a transaction go smoother,” he said. “Our retention during an acquisition is much stronger than our competitors that switch overnight.”
Scranton-based Peoples Security Bank & Trust Co. broke into the Lehigh Valley market when it opened its first branch in Bethlehem in 2014 and now, it’s eyeing an expansion into the Doylestown market.
Craig Best, president and CEO of Peoples Security Bank & Trust, said the new branch could open in mid-May if it receives approvals from the state and the Federal Deposit Insurance Corp.
“Once that’s done, we will execute the lease,” Best said. “We have some minor renovations we want to do.”
The new branch will be a full-service branch, with two-thirds of the lenders already hired, Best said. The lenders are working out of the King of Prussia office until the Doylestown office is up and running.
The new branch will offer deposit services and have six employees, with a business model that’s heavily targeted on commercial activity, he said. The Doylestown branch will be similar to the King of Prussia office and Lebanon County office, which primarily focus on commercial activity, he said.
He said the bank chose to enter the Doylestown market for several reasons.
“The number one reason is the talent we were able to recruit,” Best said. “We always try to focus on that first. We always try to focus on areas of good growth.”
Then, Peoples Security looks for the opportunity to work in the market with people who have vast experience, he added. As an example, two of the lenders the bank hired for the Doylestown branch have 30 years of banking experience.
Peoples Security also chose Doylestown because there has been some recent disruption in the market, with some merger and acquisition activity.
“We hope that frees up some customers, particularly those who have dealt with our lenders in the past,” Best said.
With the opening of the Doylestown branch at 325 S. Main St., Peoples Security will have 29 branches.
At the end of 2019, the bank had $2.4 billion in assets, he added.
The sale, planned to go into effect in the first quarter, would mean all Penn Community Insurance customers would become customers of FIFS LLC.
“We’ve been familiar with their business for many years,” said Chad Yoder, partner at FIFS. “We are only a half-mile from the Bucks County line so our territories significantly overlap.”
Many FIFS employees have close ties to the area, he added.
While there’s no firm date for finalizing the sale, Yoder said both parties signed the agreement and it would be final sometime in the first quarter.
FIFS has 17 full-time employees and plans to add more to its workforce once the sale is complete, he said.
“It gives us the capacity to not only write the standard insurance policies but niches,” Yoder said. These included aviation, motorsports and policies for business owners.
As a full-service agency, FIFS also offers life and health benefits insurance.
Penn Community Insurance has been a good partner throughout the process, he added.
He declined to disclose the financial terms of the agreement.
“We have had this insurance subsidiary for quite some time and we are looking for an opportunity to continue this,” said Jeane Vidoni, president and CEO of Penn Community Bank. “Our intent really when we thought to do this was to find a buyer that was committed to our culture. They’re focused solely on the insurance business.”
In the search for a buyer, Penn Community said it sought a local agency that shared its values.
Penn Community Bank has nine employees in its insurance division, said Charles Field, CFO of Penn Community Bank. Franconia Insurance will be having conversations with those employees to determine who is coming over, Field said.
“The insurance was definitely an important part of our business but it was a small one,” Vidoni said.
Penn Community Bank has more than $2 billion in assets, employs more than 350 people and offers services at 24 bank branches and two administrative centers throughout Bucks and Montgomery counties.
“As part of our strategic planning we made the decision that going out to find a partner was in the best interest of our customers,” Field said.
Before selling your company, you have to ensure that the financial side of your business will be ready for analysis by prospective buyers. If you are not in a distressed situation or turnaround mode, and have time – ideally one to three years – prior to starting down the path with a buyer, a mergers and acquisitions specialist can help focus on the following key themes to get the financial side of your business ready for sale.
1. There is no requirement to obtain audited financial statements to sell your business. If you do have audited financial statements it will make the financial aspects of the transaction easier. If you are a larger company – $3 million or more of “adjusted” earnings before interest, taxes, depreciation and amortization, or EBITDA – many financial and strategic buyers may require it to complete a transaction. We often see a seller auditing the most recent completed fiscal year to satisfy the buyer. If you are contemplating a sale, it is not necessary to go back to the beginning of time and audit your historical financial statements. That is a time-consuming, unnecessary scenario, unless there was a particular issue with your financial controls that would warrant that.
2. Take a look at who is running finance and accounting in your business. If you have an outside or internal person handling your financials – bookkeeper, CFO or controller – it is very important for the person in that role to understand your numbers and be able to speak to them. When questions come up from a prospective buyer – for example, why is this expense booked in this particular way or why was it categorized in QuickBooks here? – you want someone other than you, the owner/seller, able to answer that question. If you are a small company, you may not have a choice in the matter and you will be answering the questions. If you are a larger company, making sure that person is able to not only speak to the numbers but was involved in preparing them will help to assure that the numbers you are providing to the buyer prospect are real, legitimate and vetted by someone other than yourself. This person is absolutely critical in helping to get a deal done.
3. If there are any financial “skeletons in the closet” – not necessarily compliance-related – for example, there was fraud going on in the business at some point and, as a result, you had a lot of unexpected expenses related to it. The key is to identify what those “skeletons” are and determine how they impacted your financial statements. You want to have plenty of time to clean up those issues and also be able to explain them. It will come up. You won’t be able to hide anything. You want everything out in the open, as much as possible. If you have time, you can start getting the facts, story and numbers right as to what the effects were and how you fixed the problem.
4. Figure out your “personalized adjusted” EBITDA and determine what would be accurate expenses to apply to your earnings. Many owners may run personal expenses through the company – meals, entertainment and travel – some of these expenses may not have anything to do with the business. Assess those expenses to see if they can be viewed as an adjustment to help show higher profitability. Those expenses would go away after a sale. Another example of a potential adjustment would be the extreme weather events we have been having over the years. For example, you may have been impacted by a hurricane leaving water damage. This would be something expensed through the income statement that isn’t happening every year. If those expenses ran through the income statement there could be a potential adjustment. Getting all the data and records to support those adjustments is critical. The buyer isn’t going to take it on face value that you had this expense. The buyer is going to want to see you had and paid the expenses, using AMEX or invoices showing actual expenses that ran through the business.
5. Look at “profitability by client” to assess who is driving your margins month over month, and quarter over quarter. Develop a way to track profitability by client or stream of business. This is no easy task. There is no packaged financial model you can use to pull it together. Every company has different cost structures and ways of managing how they deal with clients, specifically contingency or fee-for-services clients. Being able to have that model in place prior to sale will help to figure out any issues you may have. You may have significant concentration with one or two clients who make up a bulk of revenue and profit. You may have significant concentration with one or two clients who make up a bulk of revenue and profit. You can begin to make a plan to diversify to help lower your concentration risk for that buyer, which means the buyer may pay you a higher multiple or valuation if the concentration isn’t as significant. Working with companies to assess profitability by client not only helps determine deal structure but can help sellers determine if they want to keep, terminate or change staffing levels with a client.
How long does it take?
Some companies have all their financial controls in place. They don’t need to wait three years to go to market. But some companies have a QuickBooks file with many issues as to how they managed the numbers. As a result, being able to quickly pull together all the information needed to have a conversation with the buyer can take a long time for some companies.
You don’t want to share numbers that aren’t accurate. If you start rushing you could make errors in sending out information to the buyer. The numbers are critical to figuring out whether you can value or structure a deal that works for you and the buyer. You don’t want to have many mistakes out of the gate. The more time you have, the better off you will be.
Do you need help?
Most companies are able to assemble key information. Assembling it is one thing, but figuring out how to analyze it and go through what is there to identify issues is more complicated. This is why having an M&A adviser or anyone else who really knows the financial or accounting side of the process is important.
The preparation you take when it comes to your financials in advance of a sale will help lead to a positive outcome to you as an owner. It will also lead to a more efficient sales process.
Michael Lamm is a managing partner at Corporate Advisory Solutions, a boutique merchant bank headquartered in Philadelphia and serving Lehigh Valley businesses. He can be reached at [email protected]advisorysolutions.com or 202-904-7192.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.