One Equity reaps 5x its money on PS Logistics amid string of recent exits

PS Logistics doubled its EBITDA during OEP's three-year investment, executing 13 strategic add-on acquisitions.

One Equity Partners generated 5x its money on the sale of PS Logistics after scaling the company rapidly through an even split of organic and M&A growth, a source familiar with the deal told PE Hub.

Transacting amid a logistics industry that remains ripe for consolidation, Gamut Capital closed a deal to buy the Birmingham, Alabama-based business on Sept. 30.

OEP invested in the company in 2018, growing PS Logistics substantially over its hold period. The company’s EBITDA doubled to $150 million, from $75 million, during its investment.

PS Logistics, founded in 2004, provides flatbed transportation services in the US with a fleet of 3,500 tractors. Along with transportation, PS Logistics also has brokerage services and warehousing.

“OEP decided to sell now because of the progress that was made” and not because of the overall market environment, a source familiar with the deal said. “They had a number in mind and the timing was right; they had achieved the number but at the same [time] they would have been equally happy holding onto it longer if they needed to.”

UBS Investment Bank provided financial advice to OEP, and Kirkland & Ellis LLP offered legal counsel to PS Logistics and OEP.

Fueled by both M&A and organic growth, PS Logistics’ April 2019 acquisition of Celadon Logistics was one particularly notable deal through which it built out its brokerage functionality.

OEP followed with 13 additional add-ons that brought scale, density, non-asset operations and new customers, according to sources familiar with the firm.

The company, through add-ons, also improved its ability to attract and retain drivers, a major challenge in the logistics industry. OEP worked with PS Logistics to create a model that helped bridge the gap for drivers to become owner/operators, ultimately improving driver retention.

In contrast to a 90 percent attrition rate industry-wide, OEP helped bring PS Logistics to a 60 percent rate. It also increased PS Logistics’ fleet by growing its truck count by almost 3 times, the source said.

Meanwhile, the industry is ripe for continued consolidation.

“The top [companies] in the industry have less than 10 percent market share in flat-bed trucking, so there will be consolidation in the future,” the source said. At the same time, driver retention will remain a headwind, the person added.

OEP has had an eventful year with 13 partial or full exits in the past 12 months, returning approximately $2.6 billion to investors, according to sources familiar with the deals. The average multiple of invested capital was 3.6x on those 13 exits.

In recent activity, the firm reaped a cumulative 4x return on its exits of Results CX on Sept. 30 and Merfish on Oct. 1. The firm also recently exited its investment in ePAK, making roughly 5x its money.

The 13 exits equate to almost $2.7 billion in value, but that total will likely approach $3 billon by year-end, said one source. In all cases, OEP’s average IRR was well north of 20 percent, the source added.

OEP is a mid-market private equity firm focused on the industrial, healthcare, and technology sectors in North America and Europe. The firm builds market-leading companies by identifying and executing transformative business combinations. Since 2001, the firm has completed more than 300 transactions worldwide. OEP, founded in 2001, spun out of JP Morgan in 2015.

OEP declined to comment on financials of the PS Logistics deal and recent exits.