Executive Summary

Blue Horizon Mergers (BHM) is focused on executing a rollup strategy within the local trucking industry by acquiring and merging trucking companies. Here are the major points:

1. BHM aims to enhance operational efficiency through synergies, ancillary services, and professionalized management within the acquired organizations.

2. The local trucking industry offers a significant opportunity for consolidation, with a consistent growth rate and numerous local operations to pursue.

3. BHM plans to leverage current trends in e-commerce, global trade, and technological innovations in logistics to drive growth and capitalize on the momentum in the trucking industry.

4. The growth strategy of BHM involves acquiring local trucking companies that provide a diverse range of services and expanding their market share through consolidation and horizontal integration.

BHM has identified the flowing value adds its approach to this rollup have:

1. Streamlining Operations and Enhancing Profitability: The fragmented nature of the trucking industry offers an opportunity to consolidate and streamline operations, leading to increased efficiency and profitability for the acquired companies.

2. Synergies and Cost Efficiency Initiatives: By leveraging synergies between the acquired companies, BHM aims to implement cost efficiency initiatives, such as centralized purchasing, shared resources, and optimized routes, to drive down costs and maximize profitability.

3. Decreased Overhead and Increased Purchasing Power: Through the rollup strategy and consolidation of trucking companies, BHM can eliminate operational redundancies, reduce overhead costs, and increase purchasing power by negotiating better deals with suppliers.

4. Financing Options: The document mentions two primary financing methods for acquisitions: commercial financing and seller financing. This provides flexibility in securing funds for acquiring trucking companies and executing the growth strategy effectively.

5. Utilizing Enterprise Resource Planning (ERP) and Key Performance Indicators (KPI): BHM recognizes the importance of tracking company performance. They plan to utilize ERP systems and establish key performance indicators to monitor and measure the success of the acquired companies post-integration.

6. Maintaining Brand Identity and Compensation: The post-acquisition integration strategy emphasizes maintaining the brand identity of the acquired trucking companies. BHM aims to avoid significant changes in compensation, benefits, and fleet/vehicle management to ensure a smooth transition and employee satisfaction.

The near-term actions BHM is executing upon are:

1. Strategic Acquisitions: BHM plans to execute during 2024 strategic acquisitions in the trucking industry. The focus is on targeting mismanaged companies with limited expendable capital for growth. By acquiring these companies, BHM aims to leverage synergies and streamline operations to enhance overall efficiency.

2. Financing Approaches: The document mentions that the acquisition approach will be executed through commercial financing and seller financing. This indicates that BHM plans to secure the necessary funds to support their acquisition strategy and drive growth in the near term.

3. Targeting Market Segment: BHM intends to secure a significant share of the market segment consisting of "small" trucking companies. This suggests that they have identified a specific portion of the industry where they believe there are opportunities for consolidation and value creation.

4. Utilizing ERP and KPIs: BHM plans to use Enterprise Resource Planning (ERP) systems and Key Performance Indicators (KPIs) to track the performance of the acquired companies. This indicates their commitment to monitoring and measuring business performance to ensure effective integration and success post-acquisition.

5. Maintaining Brand Identity and Compensation: The document highlights the importance of maintaining brand identity and avoiding significant changes in compensation, benefits, and fleet/vehicles during the integration process. This suggests that BHM aims to prioritize a smooth transition and employee satisfaction during the near-term actions.

 

Details on the Business Opportunity

Our Vision

 

Our primary objective is to execute a rollup strategy within the Trucking industry that brings enhanced efficiency to the operating companies. By leveraging synergies, offering ancillary services, exploring multiple arbitrages, and professionalizing management, our aim is to create a cohesive entity that generates profits for Blue Horizon Mergers.

 

Once the portfolio of companies has been merged and transformed into a highly profitable entity, we will explore avenues such as trade sales or an IPO to further capitalize on our success. Transparency and sincerity are at the core of our approach, as we strive to understand and meet the needs of our readers while building trust and connection through an authentic voice.

 

Market Information

The trucking industry's potential for consolidation is immense, with a market value exceeding $900 billion and consistent growth in the face of market volatility. With a Compound Annual Growth Rate (CAGR) of up to 10% and notable merger and acquisition (M&A) activity indicating industry confidence, BHM is well-positioned to capitalize on this favorable environment. The industry's fragmented state, with approximately 80% of the market consisting of disparate entities, presents a unique opportunity for BHM to streamline operations, leverage synergies, and drive profitability through strategic acquisitions.

Our strategic approach aligns with current trends in e-commerce, global trade, and technological advancements in logistics, all of which contribute to the growing demand for efficient trucking solutions. By focusing on targeted acquisitions within the highly fragmented trucking vertical and leveraging the expertise of our board members in optimizing company revenues and operations, we aim to significantly enhance the valuation of our portfolio. This lays a solid foundation for future profitable exits, whether through trade sales or an Initial Public Offering (IPO).

Competitive Advantage

 

At the heart of our growth strategy lies the opportunity to swiftly tap into an established client base, resulting in reduced overhead by eliminating operational redundancies and harnessing increased purchasing power. Consolidation brings forth a host of advantages, including the ability to secure larger contracts that individual portfolio companies wouldn't have been able to pursue independently.

 

Moreover, through horizontal integration and the acquisition of complementary logistic companies, we anticipate expanding our market share. This authentic approach ensures transparency, sincerity, and a true understanding of our readers' needs, fostering trust and connection as we navigate this exciting journey together.

             

Acquisition Opportunities

 

Company valuation

 

Our valuation model is strictly based on identifying how much debt the company can service while still being able to produce attractive returns to shareholders and what the market is indicating. Deals will arise when a company can be purchased at a multiple of 1 to 5 times EBITDA – ideally with a debt service coverage ratio near 2x. Initial transactions will likely be self-financed with leverage coming from a combination of commercial lending and seller financing.

 

Our capital stack will consist of 60-90% senior debt with the remaining 10-40% being equity injections from other financing options. To allow ownership and controlling interest to be retained by board members, mezzanine financing will be given preference when raising capital. Once a track record has been built, more creative forms of financing will be available.

 

Starting point of the investment situation

 

Our goal is to swiftly grasp the nature of the business, assess the existing management structure, and identify the crucial numbers that will drive the success of the transaction. Typically, we will request financial information from the outset, enabling us to promptly formulate an ideal offer that aligns with both parties' objectives.

 

Once we have an offer that falls within the zone of agreement, we will focus on identifying key members of the management team and gaining a comprehensive understanding of the day-to-day operations.

 

 

Thorough Due Diligence

BHM will always undertake thorough rounds of due diligence to ensure that we acquire exceptional companies. Our team has established comprehensive parameters to guide our evaluation process, covering all essential aspects to consider. These include:

A. Human Resources: This entails examining employee policies, employment contracts, compensation structures, labor relations, organizational structure, employee plans, and reviewing resumes.

B. Analysis of Key Aspects: We thoroughly assess the company's competitors, sales cycle, backlog, potential for growth, customer complaints, suppliers, and competitive advantage to gain a comprehensive understanding.

C. Financial Performance: We delve into various financial indicators, including revenue trends, profit margins, debt levels, fleet condition and maintenance records, compliance with regulatory requirements (such as licensing, safety standards, and environmental regulations), customer base quality and stability, operational system efficacy, employment practices, and driver retention rates.

D. Review of Assets and Property: We carefully examine asset and property ownership, loans, securities, adherence to regulations, legal structure, as well as any ongoing disputes or pending litigation involving customers and suppliers.

By conducting this thorough due diligence process, we can ensure that the companies we acquire meet our stringent standards and align with our long-term goals.

The extent of due diligence required can be streamlined under specific circumstances:

• If the Target demonstrates a strong financial position, such as being creditworthy, boasting robust cash reserves, maintaining low levels of debt, and enjoying high net margins. Additionally, the presence of customer contracts that ensure certainty over future revenue can contribute to a more focused due diligence process.

• If the Target is willing to provide assurances to the acquirer through representations, warranties, and indemnities, indicating their commitment to the transaction's success.

• In cases where the acquisition is structured as an asset purchase rather than a share purchase, resulting in the acquirer not assuming the liabilities of the Target.

By acknowledging these factors, we can tailor the due diligence process to align with the specific requirements of each unique situation.

On the other hand, it may be necessary to expand the scope of due diligence under certain circumstances, which may include:

• The Target displaying financial weakness, such as having a low credit rating, minimal cash reserves, significant debt, and limited contracts in place that create uncertainty regarding future revenue.

• The Target demonstrating reluctance to provide extensive representations, warranties, and indemnities, which could impact the level of scrutiny required in the due diligence process.

• If the transaction involves a share purchase, merger, or asset purchase where the acquirer assumes a considerable number of liabilities.

By recognizing these factors, it becomes crucial to enhance the due diligence process to ensure comprehensive evaluation and mitigate potential risks.

Acquisition Strategy

In our target market, it's common to find companies that are often mismanaged and lack the necessary capital to fuel their top-line revenue growth. However, our buy low and sell high model enables us to swiftly increase the valuation of these companies by offering a platform of valuable resources. This includes leveraging our purchasing power, assembling exceptional management teams, and providing capital advisory services, among others.

As part of our expansion strategy, we are actively acquiring trucking companies across the United States, with a specific focus on those that offer a diverse range of transportation and logistics services. We seek businesses that have the potential to augment our existing portfolio by adding complementary services. Our primary customers are companies that provide secure and profitable contracts, as they offer us larger, more dependable projects compared to the fluctuating budgets of smaller residential clients. This approach aligns well with the thriving trucking industry and presents an opportunity to unite companies under a unified vision.

Key Industry Points

Industry Growth    

In 2022, the trucking industry demonstrated its immense strength by generating a staggering $940.8 billion in revenue, accounting for an impressive 80.7% of the nation's overall freight bill. The top 10 industry giants played a pivotal role in this success, collectively amassing $817 billion, a remarkable 87% of the industry's total earnings. However, it's important to note that smaller companies and independent drivers also made significant contributions, capturing the remaining 13%, equivalent to approximately $123 billion. This showcases the resilience and diversity inherent in this vital economic engine.

Despite facing challenges such as driver shortages and fuel costs, the trucking industry shows no signs of slowing down. It remains poised to meet the ever-growing demands of e-commerce and a thriving global market, ensuring its wheels keep turning and driving forward.Bottom of Form

Competitors

In this industry, the majority of companies thrive by pursuing organic growth through strategic initiatives. However, the largest competitors gain a competitive advantage by combining these initiatives with strategic acquisitions. This advantage stems from their substantial financial resources, capital advisory capabilities, talented human capital, and exceptional management teams. Our main competitors are similar groups, including private equity firms, family offices, investment firms, and venture capital entities.

While our primary objective is to acquire high-quality companies, our ultimate success and exit multiple are determined by our ability to enhance these companies and leverage the multiple arbitrage that arises when integrating smaller entities into a cohesive whole.

Keys to the BHM Plan  

Management Team

Taking a macro perspective, BHM possess all the necessary skillsets and components to effectively execute our plans. Initially, our board of advisors will serve as the deal team for our rollup strategy.

Once we achieve a portfolio value of at least $5M, we can start delegating specific tasks, streamlining our processes and distributing the workload in a more efficient and hands-off manner.

Compensation for our directors is provided in the form of equity within the parent company, along with distributions that are paid out for every successfully closed deal, in the form of working capital. These distributions are directly tied to the effort exerted in closing each deal, creating an incentive structure that drives value creation for our firm.

Key Plans of the Targeted Investment

BHM recognizes the significant market potential presented by "small" trucking companies, which currently contribute 35% to the overall market revenue. Our strategy is to secure a substantial share of this segment by strategically acquiring trucking firms with annual revenues ranging from $1 million to $10 million. Our acquisitions will be based on EBITDA multiples, allowing us to make informed purchasing decisions.

To finance these acquisitions, we will utilize two primary methods: commercial financing and seller financing. Our initial acquisition will serve as the foundation for establishing a strong reputation, enabling us to pursue progressively larger and more lucrative deals. Many of the target companies we plan to acquire have not fully tapped into their revenue-generating potential. Leveraging the expertise of our board, we will implement strategic methods to enhance revenue post-acquisition.

The trucking vertical is highly fragmented, presenting ample opportunities for synergies and cost efficiency initiatives. This instant opportunity, combined with our projected growth trajectory, sets the stage for margin expansion with each new dollar that comes on board. We are excited about the potential for creating immediate value through our acquisitions under the BHM umbrella, representing a significant milestone in our expansion and market consolidation efforts.

Value Creation & Exit Analysis

To drive our business forward, the implementation of Enterprise Resource Planning (ERP) and Key Performance Indicators (KPIs) will be crucial. With ERP and KPIs in place, our system will provide real-time insights into our business performance on a weekly or even daily basis. This level of visibility becomes especially important during seasonal months when labor control is paramount. These numbers will be closely monitored against a budget or weekly goals, with a key focus on daily tracking. This allows us to make timely adjustments as needed early in the week or month.

In order to maximize synergy, it is essential that the management or ownership group aligns with the company's goals and objectives. Culture starts at the top and permeates throughout the organization. If everyone is aligned, the likelihood of synergy realization is high. However, if owners are not aligned, achieving synergy becomes a challenge. To foster alignment, all owners should have holdbacks or performance incentives tied to two years of company growth and performance metrics.

Integration poses the number one risk in this process. Without careful mapping and planning, value creation is compromised. We must ensure that the business possesses adequate resources, management, systems, and growth potential to fuel future upside. Identifying and preserving these factors is paramount, as many companies stumble by taking too long on integration, resulting in missed synergies. Performing a thorough deep dive into the integration process will be beneficial for us.

Our post-acquisition integration strategy will prioritize maintaining brand identity in the markets where each brand is well-known. We aim to minimize significant changes in compensation, benefits, and fleet/vehicle operations to avoid potential losses in employee base and negative impacts on customer relationships. By keeping the brands intact, and potentially even allowing healthy competition, we can mitigate integration risks for the first 1-2 years. Once this time has passed, we can confidently combine synergies with reduced risk.