On the Right Track: $55M SR 347 Expansion Over UPRR

King of Prussia’s HiReach Sells Most of Its Assets to Sunbelt Rentals

Fri June 17, 2011 - Northeast Edition
CEG


HiReach, based in King of Prussia, Pa., was recently acquired by Sunbelt Rentals.
HiReach, based in King of Prussia, Pa., was recently acquired by Sunbelt Rentals.
HiReach, based in King of Prussia, Pa., was recently acquired by Sunbelt Rentals. HiReach’s delivery truck fleet. Founded by Chris Pera, president and CEO, and a group of investors in 2009, HiReach carried JLG rough-terrain scissor lifts, articulated booms, telescopic booms 4 x 4, telehandlers, electric scissor lifts and industrial cranes from its King of Prussia, Pa

During a recent interview with Construction Equipment Guide (CEG), HiReach President Chris Pera sat down to discuss his company’s recent acquisition by Sunbelt Rentals.

Founded by Pera, president and CEO, and a group of investors in 2009, HiReach carried JLG rough-terrain scissor lifts, articulated booms, telescopic booms, 4 x 4 telehandlers, electric scissor lifts and industrial cranes from its King of Prussia, Pa., location.

Pera and HiReach developed a program with various equipment manufacturers to take possession of available units prepared for a buyer on a re-rental basis. In March 2009, Pera did the LLC formation and accepted HiReach’s first load of inventory the first week of May in 2009.

CEG: What led you to found HiReach?

CHRIS PERA: It was a great time to start a business [2009], because everyone was paring back, many competitors were having layoffs in addition to selling off fleet and cutting back their locations. Here we were with plenty of energy, fresh salespeople, new equipment, impressive delivery and service vehicles and a real appreciation for each and every order we received. We also priced ourselves very competitively.

But I recognized there was going to come a time when the manufacturers were going to look back and say “ante-up.” The $10 million or so in fleet value needed to get funded while also understanding the importance of additional goods for continued growth. I knew I needed help so I went ahead and signed an agreement with a venture capital group the beginning of December 2010. We decided to do this together and that we would have one great big mega location and fill it full of inventory and more trucks and more sales staff and send them out even farther. They wanted to grow our inventory to $60 million and then build 20 more locations across the country.

CEG: But the venture capital group ultimately fell through?

PERA: Yes. They were buying HiReach Group in its entirety: staff, real estate responsibility, vehicles, facilities, of which I would then own a percentage of the newly formed group. We worked on the project together beginning November 2010, but unfortunately their financing fell through at the last minute on April 14 of this year.

CEG: The inventory of course still required complete funding.

PERA: A percentage of the inventory had been paid for each month. It was on a rent-to-rent program of which a percentage of what I was paying was ultimately going towards the purchase of the inventory.

CEG: Were the manufacturers ratcheting up the pressure?

PERA: I paid them a small percentage of the original equipment price. And then 65 to 75 percent of what I am paying them goes toward the purchase price. However, it was on a really slow train and the vendors ultimately want to take sales treatment on the transaction and can’t possibly work with me under the same terms forever.

CEG: So what happened?

PERA: Hence … Lemons into Lemonade. Because of the backlog that started coming in and all of the large national companies were then beginning to place orders, manufacturing had begun to ramp up, but not fast enough to satisfy their demand. At the same time I was confident during that period thinking that I had my deal … and it was coming through in timely manner. There’s no better feeling than to stand next to someone who has really deep pockets or the wherewithal to provide the funding.

But unfortunately their funding fell through. From that point forward I had spoken with several of the top 10 from our industry and a collaborative effort was developed with Sunbelt Rentals to acquire many of the assets and potentially acquire some of the staff and certainly moving the customer base into their basket.

CEG: You say most of your assets. What are some that Sunbelt Rentals will not be acquiring?

PERA: It may not be practical for Sunbelt to purchase our delivery and service vehicles. They have an enormous fleet of vehicles and the cost comparison may not make sense.

CEG: They want consistency?

PERA: That’s exactly it. So we’ll sell our trucks to either another user within our industry or to someone.

CEG: How many total employees?

PERA: Thirteen total employees. Many will potentially be Sun-Belt employees.

CEG: Will this facility stay in place?

PERA: Temporarily, but not indefinitely. Sunbelt already has several branches in the community.

Where HiReach is located or where Sunbelt is located is really of no consequence. Where the customer requires the equipment is the only cost-effective objective.

CEG: What will your role be?

PERA: I have plenty of work to do to finish up everything here. I’ll take a little time off and re-enter the industry in some capacity.

CEG: With Sunbelt?

PERA: Sunbelt has been gracious enough to extend an interest as have others, but my priority for right now is completing this transaction and doing the best I can for the staff while tying up the loose ends.

CEG: What about your customers? How will they be affected by this transaction?

PERA: I think people make the difference. I think this is a relationship people-driven business and I think the transition will be transparent. The same people are going to come and visit you, only wearing a different hat with a much broader product selection.

CEG: If customers really liked dealing with one of your sales representatives, is there a good chance that they could do business with the same person?

PERA: Of course. Seventy percent of our inventory is on rent right now. So, it will just transfer over to Sunbelt.

CEG: How do you feel about your company being acquired by Sunbelt?

PERA: Sunbelt has been a great partner. They’ve come in with kid gloves and conducted themselves as true professionals. They can’t be any nicer. The manufacturers have been exactly the same. I’ve discussed with my wife that if I had to pick one area that I view as not cooperative … I can’t find one. It’s just circumstances and timing.

With everything that the banking/lending industry has gone through … the degree of confidence in ANY DEAL is slim.

Now lenders are so concerned about meeting all of the guidelines and criteria on lending that the government has imposed that they’re actually afraid to lend to anyone. Let me tell you, some really terrific companies that have been in business for decades but have just recently nudged their covenants have been placed in the doghouse. So, it somehow makes it easier to understand that I wouldn’t be able to leap frog over them while having barely two years of full financial history. That’s where HiReach was at … and that’s where we’re all at.

CEG: But the business plan made sense?

PERA: That’s the economics of it, though. It’s not shame on me, it’s what happens. I’m not the least bit discouraged because of it at all, either do a terrific job and go 90 miles an hour to control the things you have control over or make a responsible decision that works for all parties involved.

Not everyone really understands the financial crunch that our industry has been impacted by. It’s not that I didn’t have a good business plan. It’s dollars and cents. There are plenty of people operating out there who have poor business plans but still have a wonderful customer base. Others have wonderful business plans but lack the necessary financial structure

CEG: What do you want to say to you customers about Sunbelt Rentals?

PERA: I think they’re great folks. We’ve collectively sent a letter to our customers and many competitors stating that, “These economic times require that we examine our business strategies and make prudent decisions for the company. This process led to our decision to sell a number of our assets to Sunbelt Rentals.”

“On behalf of HiReach and Sunbelt Rentals, thank you for your business and we look forward to serving you now and in the future.”

That’s it really. They’ll definitely make every effort to do that. CEG