While many companies were scaling back activity during the COVID-19 pandemic, New York City-based Kinderhook Industries LLC announced three major transactions that cofounder and Managing Director Rob Michalik says were already in the works before the virus curtailed operations throughout the country in mid-March.
Although Michalik says COVID-19 did complicate and delay some due diligence, overall, the acquisition of Vexor Technology LLC by Chemtron Corp., as well as Priority-1 Residential LLC by Capital Waste Services (CWS) LLC, and the recapitalization of EcoSouth Services of Mobile LLC all came together as planned.
“[Waste is] a fundamental need for a functioning society. You need water, you need food, you need garbage services,” Michalik says. While the economy was shutting down in some places, waste still had to be collected, which helped keep these deals on track.
The first of the three deals, with Columbia, South Carolina-based CWS acquiring Ridgeville, South Carolina-based Priority-1, was in the works for quite a while. “Strategically, getting into Charleston has been part of our objective at Capital Waste. It’s a relatively small business, but it had a nice set of residential contracts,” Michalik says. He notes that this deal was able to close without many obstacles.
The next acquisition, Avon, Ohio-based Chemtron taking on Medina, Ohio-based Vexor, was a deal that Michalik says just made sense due to the synchronicity between the companies. Chemtron and Vexor both take industrial and commercial waste streams to create EPA-approved fuel for use in kilns. While Michalik says this acquisition was naturally a strategic deal for both companies, there were some complications that slowed the progress of the deal. “It was a relatively challenging transaction to get done,” he says. “The COVID-19 environment made it hard for our consultants, who were sheltered in place, to go perform site visits and do environmental reports, that delayed things a bit.”
The third and most recent deal, with Kinderhook recapitalizing Axis, Alabama-based EcoSouth, represented a new platform for the company. Michalik says he got to know the business about a year ago, but thankfully, the consummation of the deal wasn’t complicated by COVID-19. “[There were] just a number of different factors and hurdles that we didn’t anticipate and the existing owner had put a municipal bond in place,” Michalik says some ongoing construction at an Axis-owned landfill also slowed things down.
Overall, Michalik says these deals were advantageous for Kinderhook because of the structure and essential nature of the companies involved.
Going forward in the second half of the year, Michalik believes a lack of willingness for industry professionals to get on an airplane and sit in a room with others may slow down deals in the near future, but says his team is slowly starting to travel again.
“At the end of the day, there really is no substitute for a face-to-face meeting when you’re trying to work with people and solve problems,” he says.
Michalik says it’s challenging to build relationships or rapport through a Zoom meeting, but his employees are doing their best.
Michalik says he isn’t sure when everything will really be, or feel, normal again, but he’s remaining cautious from an economic perspective, while still seeking out opportunities to grow.
