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Jul 07, 2020

The Deal: PE-Backed Pilot Freight Buys Up Franchisees

PE-Backed Pilot Freight Buys Up Franchisees
ATL-backed Pilot Freight Systems closes an acquisition of franchisees as it takes greater ownership of its delivery network, with more deals in the works.
By Steve Gelsi

The Deal
7 July 2020

Pilot Freight Services, the delivery and logistics platform company of ATL Partners LLC, continues to look for acquisition opportunities after buying up many of its franchisees.

“There’s a large number of deals we’re looking at on a regular basis,” Gordon Branov, chief executive officer of Pilot Freight Services, told The Deal.
Pilot Freight Services on Wednesday, July 1, announced it acquired five franchise stations in strategic markets in Wisconsin, Texas and Mexico, for an undisclosed price.
Based in Glen Mills, Pa., Pilot specializes in transporting large, difficult freight such as medical equipment or swimming pools.

When ATL acquired Pilot in October 2016, about half of the firm’s revenue came from franchisee delivery services in its network. After 25 franchise location purchases in the past three years, that percentage has fallen to 10%. This structure gives Pilot, “greater operational control over the network,” said Kirby Fine, a principal on the investing team at New York-based ATL.
Besides businesses that share Pilot's focus on heavy, hard to handle e-commerce deliveries, or business to business logistics, ATL considers new geographies or ways to grow its customer base and skill sets.
ATL typically targets platform companies with at least $15 million to $20 million of Ebitda, with equity checks up to $150 million each, plus additional capital from its LPs. Add-on deals typically run smaller, but the firm has not released any specific dollar ranges for that acquisition type.

In the case of Pilot, ATL identified a long-term trend of more online shopping and a need to provide logistics for that. “There’s significant space for further penetration of e-commerce,” ATL’s Fine said. Pilot has seen domestic business-to-business shipment counts in recent weeks exceed prior-year levels, as business starts to rebound.
“People are staying home so home recreation is taking off,” Branov said. The company closed an add-on acquisition of Manna Freight Systems in 2018. British Columbia Investment Management Corp. is a co-owner of Pilot Freight Systems with ATL. ATL has been financing Pilot’s add-on deals through a term loan with middle-market lender MidCap Financial Services LLC.