November 2018 Past Issues Supply Chain and Logistics

KJM Capital – Unlike the others

November 7, 2018

KJM Capital

Unlike the others

Business View Magazine interviews Kenneth Meister, Managing Director of KJM Capital, for our focus on Logistics and the American Trucking Industry.

KJM Capital is a private equity firm unlike most others. Formed in 2014 by partners Kenneth Meister, Shahin Sazej, and Roxane Kramer, the firm is focused on acquiring private companies with EBITDA of $3 million to $10 million. KJM’s advantage over other firms is found in its strategy to provide significant operational, financial, and IT support following the closing of a transaction. While the typical private equity firm provides capital to acquired business and general oversight, KJM Capital also provides daily involvement in the support functions of the business, allowing the company to implement growth initiatives and improve the customer experience.

In 2015 and 2016, KJM made three strategic acquisitions in the refrigerated trucking sector and integrated them into a single company: Cold Carriers. Operating under the respected brands of Interide Transport, Gantt Trucking, and Sunco Trucking, Cold Carriers specializes in moving temperature-controlled freight and other protected cargoes for customers throughout the United States. In addition to its portfolio of highly-regarded, mid-sized, regional carriers, Cold Carriers offers: an experienced team of transportation experts, drivers, and back office support; financial and managerial resources to modernize fleets and technology platforms; and a commitment to exceptional customer service.

Ken Meister, Managing Director of KJM Capital gives some insights into the company’s acquisition parameters. “Prior to starting KJM, my two partners, Shahin and Roxane, and I had worked together in various private equity firms for 20 years. Over that time, I came to understand that there are a lot of mid-sized, family-owned companies that have not invested in technology for efficiencies, processes, financial reporting, and accounting functions but still have an instinctively well-run business where they know the industry and have been successful for decades. We believed that if we got involved, we could bring our expertise in finance and technology to improve and grow the business through those infrastructure investments.”

KJM capital employees in the office at their desks.

KJM is particularly interested in core business services companies, such as transportation and logistics, specialty manufacturers, and distributors that are not prone to continuous technological change. They decided early on, as a team, to get involved in the refrigerated trucking sector. As Meister recalls, “I scoured the nation, meeting with family-owned trucking businesses and found Gantt Trucking based in South Carolina that we acquired in early 2015. They had been around a long time and did well, but they ran everything old school. The first thing we did was select our technology partners and implement software, so the company was state-of-the-art as far as systems and data management, and we could more efficiently operate the business.”

Two more acquisitions (Interide and Sunco) followed in 2016 and by then, KJM Capital had over 400 trucks and 700 reefers (refrigerated trailers). They continued to invest, and last year, switched focus to integration of the three companies under one name, Cold Carriers, getting them all on the same tech platform, improving operations, and building the team. Having the best talent from a management perspective led to the hiring of Randy Savoy in Oct. 2017 as COO of Cold Carriers. “Putting the right management structure in place is crucial, so we can more effectively run the business, grow it, and hire more people,” says Meister. “We always continue to use the same employees in businesses we acquire and grow from there. This is not a reduced-cost strategy.”

Investors and lenders like to see less volatile business models for private equity firms. Of refrigerated, dry freight, and flatbed truck companies, refrigerated carriers are the most resistant to recession because food and beverages tend to be less impacted by a slowing economy than construction, real estate, and other markets. Hence, KJM chose reefers as the better investment. Customer service is a key factor in temperature-controlled refrigerated trucking, because the product has a limited life span and you have to be punctual with delivery. Meister explains, “We are in a cycle where there are less sales and more selection, that means there’s a lot of freight and not much capacity in the market. The critical thing is that the shippers and the carriers match themselves up, so the right freight is hauled to the right location, effectively.”

When it comes to company culture, Savoy reports, “We’re a fairly large trucking company, but we’re really family-oriented. Right now, we’re three families hoping to grow to five. In my opinion, what sets us apart is that our focus has been on growing relationships built on trust. It’s all about service. For example, if we’re able to deliver company XYZ’s refrigerated product from point A to point B on time, every time, they’ll be more apt to continue offering us freight. Over time, that trust will continue to grow as long as we do what we promise. Everyone in our organization understands how important that is.”

With almost 450 employees, that family atmosphere becomes even more important. At KJM, each member of the senior team reaches out to five drivers every week and has a conversation with them while they’re on the road; asking how they’re doing, how the team is doing, and what the company can do differently. According to Meister, “It’s something that small family businesses do well. They know their drivers and families, intimately. It’s harder when you get to our size, but we actively push ourselves to reach out to those drivers, especially on holidays when they’re out there working. Each business we acquired was family-owned, so we tried to retain that part of it while we get larger and put more tech systems and structure in place. We don’t have one big central dispatch room, we’ve kept all the employees local, so the drivers see a familiar face when they come to the shop or the office and keep that bond.”

KJM Capital. Parked refrigerated trailers for semi trucks.

Technology is Shahin Sazej’s wheelhouse. One of the three founding KJM partners, Sazej did a great deal of research on software manufacturer providers when the company first decided to invest in the transportation sector. He was looking for proven technology as a core foundation for their mergers and acquisitions because it would be easier to convert all the companies and merge them together using the same software products.

“Eventually, we selected a software solution made by McCloud Software,” says Sazej. “It has a very decent market share and most mid-tier companies are using it. That software became our core, back-office operation for bidding, tracking, dispatch, and then we worked on expanding the solutions for our customers. We also use telematics – a device put on the tractor to send orders, dispatch, communicate with the drivers, and get their GPS location. Over the past 18 months, we put all our companies on the same operating platform and all the core businesses on the same system, so we can analyze and generate reports on a daily, weekly, and monthly basis. From that point of view everything is in place for growth both by acquisition and organically. The sky’s the limit as long as we are running a good solid business that continues to improve.”

Savoy shares an interesting perspective on the future of the industry. “If you consider where the trucking industry was 30 years ago, today, we have some giant companies, but the majority are less than 200 trucks. With all the competition for drivers, I don’t think that will continue. We’re exploring a number of different options, as an industry, to grow the driver base, including lowering the legal commercial driver license age from 21. I think trucking companies that can be successful at recruiting and retaining drivers are going to win. We want to give drivers that work for us in this industry a better quality of life.”

As for KJM’s goals for the next five years, Meister says, “We don’t want to be all things to all shippers. To succeed in this space, carriers need to be matched up with the right shippers. We believe that the secret of successful family-owned businesses is that they do one thing very well. Part of our strategy is to be in the right location around the country, so you can get to each operation in one day, two at the most. We want to keep that local feel, while making at least another two or three acquisitions to complete the map. Then we’ll see how big we want to get after that.”

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