kV Power, LP
Capital-intensive provider of outsourced electric utility construction and maintenance services was seeking a capital partner to help expand their offerings and capitalize on current opportunities in their market.
Energy, Power & Infrastructure
Oilfield Services & Equipment
Construction & Engineering
A leading provider of outsourced electric utility construction and maintenance services, kV Power, LP (“kV” or the “Company”) is based in Andrews, Texas. Founded in 2012, the Company rapidly expanded to include branch offices in Big Spring, Pleasanton, and Monahans, Texas. Through these locations, kV provides distribution, substation, electrical automation, transmission, and instrumentation services to regional electric utility companies and large oil & gas operators in the Permian Basin.
Early on in kV’s existence, the Company’s owner realized they needed help with financial management reporting and accounting functions, due to their limited back office. The Company turned to Romanchuk & Co. for assistance. Due to both the long-term relationship and our expertise in the industry, we ultimately became the Company’s exclusive financial advisor during its recapitalization transaction.
CAPITAL INTENSIVE GROWTH
At the beginning of the transaction, we faced some challenges that needed to be considered when it came to deciding how we would most effectively present kV. As the Company grew and entered into the substation and transmission sectors, its owner had invested a large amount into leased equipment. Although this was necessary to enter the new market segments, it also produced significant rental expense on kV’s income statement. On top of that, neither the substation or transmission divisions of the Company had existed long enough to establish a strong track record of performance.
After overseeing kV’s successful expansion into new energy services divisions, the owner was reluctant to raise outside capital, as it would most likely result in him relinquishing control of the Company, despite his desire to position it to capitalize on growth opportunities.
TARGETED PROCESS LEADS TO TRUE PARTNERSHIP
To address these challenges, we worked closely with kV’s management team to build a realistic and defendable forecast for each of the Company’s divisions. We created a pro forma EBITDA model for the Company – assuming it purchased and owned the equipment it was currently leasing – along with the other standard marketing materials, including a Confidential Information Memorandum.
Thanks to our prior experience with the Company, we recognized that Rock Hill Capital, a Houston-based private equity firm, would be a good fit with kV’s management team. We were also uniquely positioned to easily determine that kV matched the type of company Rock Hill was actively looking to partner with.
Based on this knowledge, we facilitated and participated in numerous meetings between the two businesses. We also helped kV negotiate the Letter of Intent and Purchase Agreement and assisted with setting up and managing a secure virtual data room for Rock Hill and their advisors to access the Company’s information during due diligence.
Not only that, but we handled several due diligence meetings before the final recapitalization transaction was closed as a true 50/50 partnership between Rock Hill Capital and kV’s founder. This type of partnership was a first for Rock Hill Capital.
“We are excited to partner with Rock Hill as they have shown to effectively work with entrepreneurial industrial products and services companies. Through prior experience I knew it was time to find a financial partner to achieve the growth objectives in front of kV Power and to continue to provide our customers with the highest quality work and safety as we grow,”
- Bryan Hoffman, President of kV Power
VALUE ADDED OVER TIME
The fact that we were involved with the Company from an early stage made the entire recapitalization process extremely smooth. Our in-depth familiarity with kV’s operations, finances, and industry helped us find the right financial partner and the right valuation for the Company’s transaction.
We offer this same value to other companies thanks to our dedication in getting involved with our clients business early on. Beyond that, our early involvement provides lower-middle market companies the access to professional accounting services they may otherwise lack the resources for. It also helps owners maintain daily control over their company’s operations without having to worry about every detail that comes up as their business grows and expands.
“Having Romanchuk & Co. involved early-on definitely helped us be prepared for the transaction with Rock Hill. They knew exactly the type of partner I needed for my business and were able to communicate our growth story effectively in order to achieve the valuation I was after.”
- Bryan Hoffman, President of kV Power
The above testimonials may not be representative of the experience of other clients and should not be construed as a guarantee of future performance or success.