In the last quarter of 2020, ITS Logistics launched an almost entirely virtual sales process that ultimately ended with its acquisition by GHK Capital Partners in mid-2021. CEO Scott Pruneau says navigating the process without bringing anybody under the tent was a challenge.
"Our team is very strong," Pruneau says. "I have two business presidents who essentially kept the business running and executing while our CFO and I did a lot of the heavy lifting in the actual selling process."
That time, he says, couldn't have been invested if the structure of the business wasn't set up to operate successfully without she and him being so involved in the day-to-day.
While communicating through video was easy, articulating the company's business model to prospective buyers was a challenge, especially when they couldn't have someone come to the facility and see it.
"Being able to explain it, even people who knew the industry and wanted to slot us in with names you would know and having to explain how we're different, that was a big challenge," he says.
Another challenge was proving the sustainability of the company's growth. He says ITS Logistics has been on a nine-year growth path. But people getting into the sale process looked at it like a three-year growth path.
"We've been positioning ourselves to take advantage of future supply chains for years," he says. "We just didn't expect the future to get pulled forward as fast as it did the last 18 months. And so being able to articulate that we're not a product of ad hoc market opportunity, we're methodically taking market share. And showing how that has been happening in the prior two freight recessions, the prior to strong markets through this strong market, and having folks have the confidence that this is a sustainable story probably was the biggest challenge."
By believing in the company and its product to sell still have a great product, Pruneau believed that conviction would resonate and at some point they would find the right buyer who had the same level of belief and saw the future the way that they did.
"We put so much thought in our strategic plan and through positioning the organization and our culture, I knew someone would want it," he says.
Once ITS Logistics was getting close to narrowing the field down to the folks that they thought would end up being the ultimate buyer of the business and the values that we were circling around, he says it really felt like they were converging on a deal where everybody, including its former owner, McNally Capital, could win.
"I felt like the whole time through our process people were running to the deal based on the value, based on the return, based on the future opportunity."
He says he gives a lot of credit to the buyers for being open to having reinvestment from existing ownership and to all involved for understanding how important it was to keep the company's culture and have the founders be able to buy back in. He says they were able to create an environment in which a broad group of the company's key employees could invest as well to solidify the future of the organization over the next five to 10 years.
"We've created opportunity here where you didn't have to sell a great business and walk away," he says. "You get to stay part of the action. The business got a chance to not be saddled with too much debt or to have the dry powder necessary to continue to invest in our growth. Our new buyers had a chance to hop on a rocket ship at a point in time that it's going to continue to work and everyone wins on the back end. I've never been a part of a lot of M&A activity but I got to believe what we have created feels rare based on the discussions that I've had around this process."
Pruneau spoke at the Chicago Smart Business Dealmakers Conference about ITS Logistics recent process and ultimate sale. Hit play above to catch the full discussion.