Executive Summary
Strategic Diversified Holdings, LLC (SDH) has been formed by two partners (below) as a holding company to execute a strategic nationwide trucking industry rollup. This rollup plan seeks to acquire 10 different trucking-related companies that, when combined, will realize efficiencies from economies of scale, technology, shared leadership and resources, and strategically-complementary business models. Eight of the targets are trucking companies, one is a truck & trailer dealership, and the last is a freight brokerage & freight forwarder. The inclusion of the dealership improves costs related to disposal of and acquisition of assets. The brokerage is a business that will help assure that all possible lanes of freight for our holdings are filled and optimized in addition to filling lanes throughout the industry for other providers. In addition to the natural economies of scale created, the partners will realize further efficiencies by implementing a green hydrogen-based fuel system that will reduce fuel costs by up to 30% and will generate large tax credits for each of the acquisition companies.
SDH is seeking to raise working capital of $1,000,000 (40 shares of preferred stock @ $25,000 per share) to help fund the up front costs associated with the projected $89,000,000 of acquisitions in Phase 1 including escrow deposits, legal fees, general administrative costs, and surety bonds. The bulk of the acquisition financing will be debt financing provided by a private investment group. Projected ROI/share found at the end of this post.
Owner Roles & Responsibilities
Sr. VP Business Development & Acquisitions – Jared Thompson (partner)
Sr. VP of Operations – John Knight (partner)
Director of Operations – Mark Thomas (29 years industry experience)
(reports to John Knight)
Board of Directors – Owners, Directors, Heads of acquired companies, Adding other former trucking company owners
Keys to Success
The initial foundation for successful acquisition and continued operations of this rollup plan includes the following key objectives:
- Complimentary Child Companies. The set of acquisitions will give us a good foothold into various types of trucking freight (dry van, refrigerated, flatbed, liquid food commodities, and dry bulk materials). Having capabilities in this diverse set of services will allow us to offer a broader range of services throughout the country to better serve customers and maximize revenue opportunities.
- Keep Existing Leadership in Place Where Possible. Most of the acquisition targets in this plan are large enough that current ownership is agreeable to stay on after the sale. Leaders will be offered a small equity share of the company so they have proper financial incentive to grow their respective business.
- Integrate Slowly and Pragmatically. This will be a 3-step process. 1) Understand the capabilities and resources of each child company, 2) The Board of Directors will plan possible integration steps to gain efficiencies, 3) Implement changes throughout the second year in operation.
- Plan for Future Capital Expenditures. We realize that the transportation industry is very asset intensive, so we are going to institute a capital reserve fund from Day 1, setting aside 25% of free cash flow for the sole purpose of continued capital expenditures to maintain and expand operations as needed.
- Expand Services. Each company we acquire has low hanging fruit that could be captured with a more aggressive ownership team with expanded resources. Most of these opportunities are simply services that cross freight categories (dry van to refrigerated, for example).
Profile of Target Acquisitions
1. Dry Van carrier in California with 700 trucks, 2500 trailers
2. Refrigerated carrier in Missouri with 280 trucks, 600 trailers
3. Liquid Food Commodities carrier in Texas with 225 trucks, 550 trailers
4. Refrigerated carrier in Ohio with 50 trucks, 50 trailers
5. Refrigerated carrier in Tennessee with 45 trucks, 65 trailers
6. Freight Broker & Freight Forwarder in Illinois
7. Refrigerated carrier in California that leases trucks and trailers
8. Used Truck & Trailer Dealership in Illinois
9. Dry Van carrier in Missouri with 27 trucks, 32 trailers
10. Dry Bulk carrier in Louisiana with $1M profit
Phase 1 Cash Flow Projections
Estimated Year 1 Phase 1 cash flow after debt service and minority partner distributions:
Projected ROI per profit sharing unit = 33% in Year 1
Profit sharing distributions are paid out for SIX YEARS based on Net Cash Flow (after minority shareholder distributions and 25% Capital Reserve Fund). SDH reserves the right to unilaterally execute a “buy-out” in year 1 by returning initial investment PLUS DOUBLING the year 1 payout, removing all future profit sharing obligations.
1 unit = $25,000 cost = 0.14% profit sharing interest in Phase 1
1 unit of 0.14% profit x $5,822,037 total projected profit = $8,151 profit sharing payout
Year 1 Profit $5,822,037 x 0.14% = $8,151 = 33% ROI
Year 2 Profit $6,324,912 x 0.14% = $8,855 = 35% ROI
Year 3 Profit $6,816,447 x 0.14% = $9,543 = 38% ROI
Year 4 Profit $7,143,528 x 0.14% = $10,001 = 40% ROI
Year 5 Profit $7,481,630 x 0.14% = $10,474 = 42% ROI
Year 6 Profit $7,835,653 x 0.14% = $10,970 = 44% ROI
6 YEAR TOTAL = $57,994 profit sharing = 232% ROI
If Year 1 buyout executed: $5,822,037 x 0.28% = $16,302
$16,302 profit sharing + $25,000 initial investment = $41,302 total payout = 166% ROI
ADDITIONAL DETAIL AVAILABLE UPON REQUEST WITH A SIGNED NDA