Bernhard Capital sees deal opportunities in aging railway network

Bernhard-backed RailWorks announced the acquisition of H&H Engineering Construction last week.

As the country’s aging railway system is poised for improvements, Bernhard Capital Partners, a Baton Rouge, Louisiana-based PE firm, is strengthening its portfolio company RailWorks Corp, to be a key player in the space, said partner Mark Spender.

Last week, RailWorks Corp acquired H&H Engineering Construction, a Stockton, California-based rail maintenance and construction contractor. The company’s customers are predominantly in the passenger transit business.

Various technologies are being infused in the rail system to modernize and increase its efficiency. The federal government, states and cities are all focusing on upgrading infrastructure. The rail upgrades are part of the focus under the Bipartisan Infrastructure Law signed last year.

“We are seeing a tremendous amount of budget increases and project opportunities coming from that bill,” Spender said. “Also, all our customers right now are very well funded. They have money that they are looking for ways to use, and so it’s a good market opportunity for RailWorks over the next five to 10 years.”

The H&H Engineering Construction deal will add to RailWorks’ capacity on the West Coast, where the company is underrepresented compared with other regions in the US, Spender said.

He identified the growing trend of cities’ outsourcing rail maintenance service for their transit rail networks as an opportunity for RailWorks.

Bernhard Capital will be on the lookout for M&A deals that will help grow RailWorks’ tech-enabled services. “We would like to make sure we offer our customers any specialty service that we can provide ourselves, rather than subcontract or outsource,” Spender said.

Even though RailWorks’ customers are mainly part of the passenger transit sector, he said any rail expansion, even for freight, will be welcome to their business.

As for the future, Spender said, an IPO, a sale to another PE firm or another strategic buyer are all viable exit options.