CHS Capital - Case Studies - Baker Tanks, Inc.

Seal Beach, California
Leading supplier of liquid containment rental equipment and services
Investment Date: January 2004
Exit Date: November 2005
www.bakercorp.com

In the fall of 2003, the owners of Baker Tanks, Inc., a Chicago-based family office, initiated a broad auction to sell the company. CHS quickly recognized the attractiveness of Baker Tanks’ unique business model and rapidly assembled an experienced team of internal and outside resources to complete business and legal due diligence and prepare financing alternatives. When the sellers and their advisors evaluated potential buyers, ease of execution and attractiveness to management distinguished CHS’ proposal.

CHS’ investment plan at Baker Tanks included three primary planks: increase asset utilization; balance capital spending with long-term industry supply and demand expectations; and grow and diversify the company’s revenues organically and through acquisitions. Immediately following closing, CHS worked closely with Bryan Livingston and Baker Tanks’ management team to develop and implement procedures to monitor and promote increased usage of underutilized assets. The benefits were evident immediately. Utilization increased by several percentage points during the first year of CHS’ involvement with Baker. With management, CHS also designed and implemented novel programs to evaluate historical and future capital expenditures. Baker Tanks encouraged field management to invest prudently by benchmarking performance against new metrics and linking incentive compensation to performance. Despite an increase in average annual capital spending during CHS’ ownership of more than 20%, capital spending effectiveness increased under CHS’ supervision.

In October 2004, Baker Tanks acquired Cameron Environmental, Inc., a leader in high quality, specialty media filtration services. CHS worked closely with management to evaluate the opportunity, develop a comprehensive integration plan and arrange for the acquisition to be financed entirely out of Baker’s existing debt facilities.

The combination of outstanding performance and attractive capital markets allowed CHS and the management team to explore numerous corporate finance alternatives with Baker Tanks’ existing lenders in late 2004. In January 2005, exactly 12 months from CHS’ acquisition, CHS facilitated a dividend recapitalization.

Through 2005, outstanding leadership by Bryan Livingston, the senior corporate staff and the core field management team continued to generate performance above expectations. With management, CHS considered several alternatives to monetize all or a portion of CHS’ investment including a public offering, a leveraged recapitalization and an outright sale. Ultimately a competitive auction with numerous offers from strategic and financial buyers verified the decision to sell Baker Tanks. In November 2005, CHS sold Baker Tanks to a financial sponsor.

Case Studies have been selected for illustrative purposes. The specific portfolio companies identified are not representative of all active or prior CHS Capital portfolio companies; results may not be typical and it should not be assumed that investments in other portfolio companies will be or were as profitable. For complete listings of active and prior portfolio companies please visit the "Portfolio" section of the website. Investments in a fund involves significant risk, including loss of the entire investment.