How Mike Lampert Grew New England Truck Center Through Acquisitions

Mike Lampert: Right now our main focus, I mean we do towing heavy truck repair, we build and sell tow trucks. The brand is NRC. We represent the third largest in the world. They’re based out of Canada. And our, our focus is growing the towing side of the business through acquisitions, mostly some organic, but mainly acquisitions. So our our focus is New England and Upstate New York I guess overall.

Chandler Kohn: Great. So, so you spend most of your time focused on that. Obviously with 130 employees, managing that many folks must be challenging too. Are you spending a decent amount of your time on that as well?

Mike Lampert: I’m not. We have a great team here. I am not that involved in the day-to-day. I would say I’m I coach, I teach, I help oversee the high level stuff. It’s the stuff that comes natural after doing this for 25 years.

Chandler Kohn: Yeah, Good, good. Well, let’s let’s kind of jump into the strategic rationale behind growing, why it’s important. You know, a lot of times, you know, you know, I, I speak with a lot of people across the industry and the automotive aftermarket in general. And some are hyper focused on growth, some are OK with their businesses kind of being like a cash cow and, and remaining flat. So want to understand why growth is important to you and then we’ll jump in.

Mike Lampert: Well, growth is important to me because at the at the end of the day, we want to offer more options and for our employees really and for our customers. This industry typically hasn’t been looked upon as like a career. It’s slowly changing. I think as we grow, we have more opportunities for the employees to make more money, expand their roles, learn new skills. And honestly it with our growth in the geographic region of all of New England, if someone wants to move or needs to move, whether it’s a family reason or they just want to, they don’t have to switch jobs and transfer them into a different location because we we don’t want to lose any good employees by any means. I mean they’re that’s our main asset.

Chandler Kohn: Yeah, definitely. Well, that’s important. Thanks for bringing that perspective there. You know, there’s, there’s, there’s two ways to grow, right. You know one’s through new products and services or in in kind of I guess adding locations and then another way is through buying those profits or buying those new products and services or buying those new customers. How do you think about that? How do you think about going and said about setting up a Greenfield location versus buying another established location?

Mike Lampert: I mean, obviously organic growth is long term more profitable, I think, but it takes, it takes a while to get there. There’s something to be said about if you can find the right acquisition that has a good team, good equipment, a good core base of business and you you buy them at a fair number that everybody’s happy with, you have instant income. You’re just you’re running. You hit the ground running instead of crawling and walking and getting up to speed.

Chandler Kohn: Are you keeping the same logos on the building or are you rebranding?

Mike Lampert: No, we’re, I guess we’d like to say we’re a House of brands right now. So we, we right now we’re running 1234 different brands.

Chandler Kohn: OK. Yeah, a lot of a lot of the folks we work with, just small family businesses are really concerned about their legacy. They’re right. Even if they have like we go and get them a a good offer, they’re really concerned to make sure that sign stays on the building. Sometimes in the larger groups like Fleet, Fleet Pride or whoever acquire them, that sign changes and it’s important to them.

Mike Lampert: No and and I hear that all the time and I appreciate that I mean they’ve a lot of these guys the towing world is historically always been mom and pop family businesses and it’s blood, sweat and tears. It built it and they don’t want to see their name go away. And honestly that if, if we’re buying them, their name has value. They they have a place in the market. We keep, we keep their name. We keep, you know, the trucks are branded theirs. They’ll still say, you know, a division of New England Truck Center, you know, so we’re legally dot stuff, keep stuff all together, but it ties our brand in with theirs. And for us it works.

Chandler Kohn: Yeah. So let’s talk a little bit about, you know, what percentage of acquisitions is your growth strategy right now?

Mike Lampert: It’s probably 75 percent, 80%.

Chandler Kohn: OK. And then what about the other 25% or 20%?

Mike Lampert: It is.

Chandler Kohn: What are you doing there?

Mike Lampert: We’re adding on where we can add on to products and services. We buy, we we do an acquisition somewhere and they’re mostly police towing. Well, we’re, we do really good at Rd. service and commercial accounts. We can easily add that in over there. We also do a lot of transportation for construction companies like the United Rentals, Sunbelt, stuff like that. So we’re, we’re pretty good at what we do. I actually, I like to think we’re really good at what we do. Our customers love us. And if we open up another location, we can usually approach them and they’re like, yeah, if you can help out this location from your new location, we can put 2 trucks on as soon as you can start. So that’s where I’m looking at. You know, we had on our organic that way. We really only done one where we took another location and started going from it. But I don’t want to say it’s cheating, but it’s a lot easier to acquire the right company and just start going with it.

Chandler Kohn: Yeah, I, I hear you. You know about probably 20% of our client base across focus investment banking is, is doing buy side acquisitions, helping people acquire. So the way we usually work is starting with kind of a target list of criteria and say, hey, like what, what do you need to acquire? What do you want to see in the business, that type of thing. And it can be a very detailed and and kind of tedious process to find those right acquisition targets. How do you think about that in the industry? How do you think about what that right acquisition target looks?

Mike Lampert: To be honest, I keep a list that’s ever that’s constantly evolving. I mean, I’ve been in the industry long enough. You get a really good feel of who’s who, who’s doing what. It’s it’s amazing. You, you can tell I’m usually really close with what I think they do for revenue and what they do for EBITDA. It’s kind of scary sometimes how accurate that is from a gas, but it’s just been, I’ve been doing it so long. So we, we try to find the ones that are the right size, the one and two truck operations unless it’s really strategic, it almost doesn’t work for us. It’s too small.

Chandler Kohn: And you don’t have to share it here if you don’t want to. Are you looking for a certain revenue or EBITDA number?

Mike Lampert: No, it’s a pretty wide range. We like to see them a million and a half up, but we would look at a million. I, I don’t know if I would, yeah. And EBITDA, I don’t know if I would. I, we would look at, put it this way, we’ll look at everything and it depends on where it is and if it makes sense. But what I’ve noticed too is the smaller companies, you’re just not going to get the sale price that makes anybody want to jump and do anything if they’re not making any money. You know, because a lot of these guys, unfortunately the small businesses, no matter what anyone says, you know, it’s they’re pulling a lot out and they can’t keep track of it. So there’s figuring out the ad backs is, is very hard. It’s hard for the seller.

Chandler Kohn: Yeah, usually the financials aren’t clean. The multiples are two to three maybe for smaller businesses, you know, the markets reward larger businesses and and that’s part of the reason for this is, is helping, you know, business owners understand that, you know, whether it’s you’re, you’re trying to grow the business for 30 years or, or you’re interested in valuation, right. I mean that that this is kind of what we’re talking about and the purpose of it. So that’s a good point to bring up. When you’re balancing risk and reward here of making an acquisition, what’s your philosophy? It can be very risky. Talk about that for a second.

Mike Lampert: Really I don’t know that we’re doing any that are I would consider super risky. I mean if it’s a, it’s a good salt. The ones we’ve looked at, the ones we’ve done, the ones we’re currently looking at are great businesses, very solid, good books. You know, it’s updated equipment, good employees. I mean, there’s risk in everything, right? But we do very thorough due diligence. We try to mitigate whatever risk there is and we try to plan for it. I mean, there’s always something. We just don’t need anything nuclear so.

Chandler Kohn: Yeah, yeah. There. There’s always going to be, you know, some some type of issue with an acquisition. You just don’t want a major skeleton in the closet, which exactly you do uncover, have you? Have you ever really wanted an acquisition and and found something that you just couldn’t handle?

Mike Lampert: Not yet.

Chandler Kohn: Had to cancel the deal.

Mike Lampert: Not yet.

Chandler Kohn: That’s good. Not knock on wood there, right?

Mike Lampert: Exactly. Honestly we’ve had, we got a great team doing the due diligence and stuff, especially financial and insurance. They’re pretty good. Listen, this every deal I want to do, but you’re not in love with it till you get through all that stuff. And then you’re like, OK, this, this is this makes sense.

Chandler Kohn: Yeah, who’s who’s doing that? Is that your buyer the the the owner of New England majority owner or is that you’re just employee base?

Mike Lampert: Employee base and and vendors we we use like for our financials we’re using Canaan Crossing. They’re down in Atlanta area, a great group down there, very thorough. They’re fast moving. Our attorneys are great. The insurance people are great. So and then the rest we’re doing in house.

Chandler Kohn: OK. Interesting that that’s, that’s very, that’s very helpful. You know, if a business looks good kind of on the back end, the financials look good, good operation, good customer, low customer concentration, all of that when it comes to price, how are you thinking about that? I mean, you know, often there’s a, there’s a valuation gap between what the seller’s willing to accept, what that, you know, you’re willing to pay.

Mike Lampert: I mean, we, we, we have our, our formula that we use. I don’t know that I want to share it, but it’s, it’s pretty standard. We don’t negotiate it. It’s a, this is what it is. In this business though sometimes people have a lot more assets than is needed and we’ll we can look at that on a case by case and adjust for that. But really we use our multiple of on earnings and we stick with that.

Chandler Kohn: Yeah. But that that makes total sense. You know one of the things to, you know, debt is used to essentially supercharge a business particularly in low interest rate environments. How are you thinking about debt versus cash flow to make acquisitions and even if you have the cash flow still taking on debt?

Mike Lampert: We’re still doing the debt. It makes sense for us. We manage it very closely. I think the team here does a great job with it. We’re working with Bell Bank, which they’ve been great to deal with and for us it makes sense.

Chandler Kohn: Yeah, that, that makes sense. I, I get it, You know, and then the explain the leadership team kind of the board role, you know, how does everybody essentially agree and approve on an acquisition is there?

Mike Lampert: Well we, we have a 55 member board which I’m one member of and we all vote on it really and any major decisions go to the board. Other than that, the day-to-day stuff is is run by the team.

Chandler Kohn: Yeah, makes sense. OK. Integration can be a challenge, right? And you know, after a, a group, whether it’s a strategic buyer or a financial buyer makes an acquisition, you know, most buyers want the sellers to stay on at least a year to help with the integration because it’s a, it’s a challenge from day one in many cases. How do you guys think about that and how do you handle that?

Mike Lampert: We haven’t kept any sellers on other than a couple of weeks.

Chandler Kohn: Yeah. So those relationships with their customers as that ever been in jeopardy that that could be the biggest thing to manage right when you.

Mike Lampert: Make not really because the the companies we’ve looked at have had good people working. It wasn’t. And obviously we need to be make sure we’re retaining the management staff there, but the actual owners, like we’re looking at one now where the guy brings a lot to the table and we want to keep him around, you know, a very smart individual. And I think it would benefit the team to keep them around. I guess we look at it case by case. Most owners though, I think no matter how small of a change you make, they, I think they, it hurts them personally. You know, it’s a little bit of ego. So it’s tough and you don’t ever want the the staff to see, you know, the owner bummed out, I guess, for lack of a better term. And we’re not making major changes. But, you know, looking at it from both sides, you know, you do. You do something one way your whole life, and now someone comes in and changes it. It’s like, well, I wasn’t stupid, but you know, it doesn’t. You know, people hate change.

Chandler Kohn: Yeah, No, I, I get it. I, just before this, I just got off a call with one of our sellers and he, he was telling a potential buyer, Hey, I, you know, I know you’re going to come in here and probably change things up. But the way we’ve done, it’s always worked and I like the way we do it, but I’m open to change too, which is, it was, which is good to hear, but some people really don’t like their operation being changed, particularly their sign. And I totally get that. When it comes to culture, you know, I, I think sometimes culture, if you get more than 1520 employees, then you really need to start to look at it. Do you look at that? Do you consider it? You know, I I know it’s kind.

Mike Lampert: Of you know, we did one acquisition, we didn’t look at culture and it, it is been a hard Rd. the fit wasn’t just there. So we we’ve definitely struggled and we’ve learned from that as we’ve gone forward-looking at the culture that’s there is probably as important as the numbers.

Chandler Kohn: Yeah. And like what? What if you’re able to say what was off with the culture? What was different than?

Mike Lampert: It just didn’t mesh with how we do things. I don’t really want to get into it too much. Yeah, like it’s, it’s not that it’s wrong, it’s just wasn’t right for us.

Chandler Kohn: Yeah, I understand. And then you know, I think obviously when we talk about KPIs and, and measuring an acquisition success, they’re all going to be different, right? Each, each acquisition is different and probably some are going to be better than others. Are you just looking at the financial profitability of the company, so the EBITDA? Are you looking at the payback. Are you looking at, you know, the potential upside from here to determine if it’s successful or or or not as successful as you thought?

Mike Lampert: Yeah, we’re, I mean we’re looking at all that, not necessarily the payback. Per SE because I guess that kind of goes in line with with what we’re what we’re paying for the business. So, but we’re looking at their financials, we’re looking at what is the upside, what does it bring to the overall organization? Does it make us better? Does it increase, you know, our footprint? Does it work with our existing customers? Can we offer more services? I mean all that is at play I guess.

Chandler Kohn: Yeah. And then on the back end from like a technology standpoint, any, you know, any critical technology that you guys got to have to run a, you know, you know, 130 person organization.

Mike Lampert: Yeah, We’ve made a lot of changes in HR. We’re trying to put everything we can, you know, electronic we can, whether we’re using Paylocity right now, I believe just it’s green blind, a lot of things just making it easier. I mean, we have our software for our dispatch services. We have this different software for shop services. Just making sure everything meshes together and gets to the right place. So we have good data to to run the business by.

Chandler Kohn: So for all the acquisitions, I’m sure each one of those locations probably had a different back end system.

Mike Lampert: Somewhere paper and pen.

Chandler Kohn: Wow, yeah, that means it’s pretty common.

Mike Lampert: That’s it’s a lot of work to get that onto a platform.

Chandler Kohn: Yeah. So for for the ones that you had to sunset, how did you, you know, how did you manage that? I know that can be a major headache, not just transferring the data, but just going through the whole process.

Mike Lampert: It’s a lot of work, it’s a lot of hands on. I mean, just transferring the data, making sure it’s there’s nothing corrupt that goes smooth because you’re not stopping the business while you do it. So it’s like it’s happening in real time. And honestly, it’s a solid 90 day process to iron out the little bugs and it’s training people how to use it.

Chandler Kohn: For the paper and pen businesses, how do you know I, I, I would suspect managing due diligence was a complete pain because probably a lot of that data at the end of the year is, is no longer kind of obtainable the next year. We’re actually seeing that with the current client. But I just want to understand that piece a little bit from you.

Mike Lampert: Well when I say they were paper and pen like they were writing service taking orders. Their dispatch was sticky notes. Their drivers were filling out paper logs. I mean, they had QuickBooks, but you know, the info is only as good as what goes into it. But it was there. Through quality of earnings we could verify that stuff was real. If there wasn’t, you know, it got flagged. More explanation. We haven’t dealt with one that was strictly 100% paper and pen. I don’t know. They would probably be so small it wouldn’t work for us. That’s the problem is if it’s too small, maybe it’s just better as you just buy in the trucks. You almost don’t even care about what the financials are at that point because in this industry the trucks are very expensive. So yeah.

Chandler Kohn: How much are those going for now?

Mike Lampert: Well, a rotator can be you know, 1,000,000 to 1,000,003 million, 4,000,005 actually for an 85 ton. Your regular ramp truck that tows tows passenger cars is 150 to 180 grand now so.

Chandler Kohn: So are you guys, yeah, and this is a good point are are you guys adding in remanufactured powertrains to these trucks?

Mike Lampert: We are not. We, we’re constantly buying new. We have our CapEx schedule and everything’s on a rotation based upon what’s kind of always works for us and we’re just trying to sell the used ones and upgrade to new ones.

Chandler Kohn: Yeah, I, I know some of the maintenance around the new ones can also be very expensive. You know, just the diesel fuel systems I believe and some of the other pieces in them are just a, a challenge, even light duty too. Like I know the foreign EcoBoost is struggling, but yeah, it’s interesting to hear because I know some people take a remanufacturing approach to most of their assets so.

Mike Lampert: You know, I, I, none of our stuff is that old, then I think it would make sense. In our commercial Body Shop, we do a lot of sandblast paints, stripping stuff down. There’s some fleets that are, they’re still running trucks with old CAD engines with no emissions. And it works for them because say every 10 years they’re completely going through that truck and they may put 150 grand into that truck, but it’s cheaper than the 250 it is to replace it and it doesn’t have any of the extra stuff. So there’s value in that. I think we never did that and when you get to the the newer trucks, I don’t know that it makes sense ’cause there’s so much other stuff that you can’t repower it with an old pre emissions engine. So for us, we have our timeline and we’re just trying to rotate the equipment.

Chandler Kohn: How many trucks do you guys have now?

Mike Lampert: We have 109 units on the road.

Chandler Kohn: Wow, it’s impressive. So you probably have a few folks and you know that just work on your trucks, right, ’cause those things take a beating especially.

Mike Lampert: We we run 15 diesel repair shops, so we don’t have anyone dedicated just to our own fleet, but we treat our own fleet like we’re a customer.

Chandler Kohn: Yeah, yeah, that makes sense. You know, when we bring a company to market to sell, you know, owners looking to sell, every single buyer asks us, you know, what is your capacity to add more revenue? So essentially more is, you know, the ones doing traditional service and, you know, they always get the question, you know, why haven’t you bought a new location, they’re gone and opened up a second location. What’s kind of the one thing that this audience can walk away with on how to kind of think bigger, how to think about adding more locations, You know, buying a business because it’s scary. I mean, it’s scary for them to jump in and finance it and take the leap and take on the risk.

Mike Lampert: I mean, you look at it and it looks easy. The hardest thing is the people making sure you have the people to do it because what good is a second location if if you’re now splitting your time between two, you know, if you’re really good. I kind of look at like restaurants, right? People that run a great restaurant always want to open a second one and then they fail because now they’re splitting their time. So you really have to have the team. And I guess that’s another thing we look at our acquisitions are it’s not just the business, it’s it’s we’re buying trucks, people and what’s there like and the people is a huge part. We can’t do what we do without great employees.

Chandler Kohn: When it comes to you know, kind of really doing the financial analysis and and knowing where you have a good chance of ending up and kind of that financial risk you’re taking on. Have you guys done that internally? Have you outsourced that to almost a consultant? Have you approached that?

Mike Lampert: Well, we’re, our quality of earnings are put together by outside source, but we’re making that determination internally and then presenting to the board and then we go from there.