 In
the fall of 2003, the owners of Baker Tanks, Inc. (“Baker
Tanks”), 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 at Baker Tanks which resulted in a cash distribution
of $40.1 million representing a 57% return on CHS’ original
investment.
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 attractive
offers from strategic and financial buyers verified the decision
to sell Baker Tanks. In November 2005, CHS sold Baker Tanks
to a financial sponsor. The net proceeds from the sale combined
with the January 2005 dividend resulted in an IRR of 115%
and a 3.3x cash on cash return.
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