Case studies

Overview

The Client was a vertically integrated producer with operations throughout the United States, seeking a geographic expansion into a rapidly growing market in the Southeast. The Client had surface-level knowledge of the Southeast but recognized that the market it was considering was complex. The Client sought a more comprehensive understanding of that market before deciding whether and how to enter.

The Client engaged Inlet Capital Group to provide a detailed analysis of the market, including recommendations on the viability of entry and the optimal approach.

Engagement approach

Inlet Capital Group engaged as strategic advisor to the Client and undertook an analysis of the market. We first identified the market’s overall drivers and long-term trends, then catalogued how the market was served, with what products, and by whom. We evaluated current supply against historical and projected demand, segmented the market by product and geography, and gathered intelligence on wholesale pricing by product and location.

These analyses revealed unexpected pricing anomalies in the aggregates sector, which, if accurate, would materially affect the optimal entry point and the management approach required after entry. We spent considerable time validating these anomalies, understanding why they existed, and assessing what they might mean for the Client.

Overview

The Company was a well-known, reliable producer of high-quality construction aggregates in Florida, with a 15-year operating history and production of approximately 2 million tons per year. The shareholders, seeking to focus on other business interests, sought to exit at the highest possible value, and engaged Inlet Capital Group to facilitate a sale.

Engagement approach

We initially engaged as strategic advisor, helping the Company identify and implement several initiatives that would increase value, including accelerating a lengthy permitting process for a new mine. With those efforts underway, we approached a small group of carefully selected buyers and managed a discreet sale process, receiving multiple offers within or above the target valuation range.

But permitting of the new mine advanced more quickly than expected, and it became clear that the shareholders would capture more value by securing final approval and opening the mine before selling. We recommended suspending the sale process until the new mine was operating.

Overview

The Company was a leading producer of high-quality industrial sand in the United States. Launched with a single production facility, the Company grew quickly, building a portfolio of assets that included two production facilities, 150 million tons of reserves, and nine distribution terminals. Seeking to continue that growth, the Company developed a pipeline of new projects and engaged Inlet Capital Group to explore debt and equity financing options.

Engagement approach

We examined the Company’s existing capital structure and determined that it was suboptimal. Term-loan amortization absorbed the bulk of free cash flow, even though the Company had excess debt capacity. Recognizing that a more flexible capital structure with expansion features could free up operating cash flow and support the Company’s growth, we launched a financing process involving banks, alternative lenders, junior capital providers, and equity investors. We advised the Company throughout its discussions, helping it evaluate options, select the best path, and negotiate the most favorable terms.

Overview

The Client was a financial sponsor with no previous experience in the construction materials industry. The Client had invested in a greenfield quarry in Florida, backing an operator new to aggregates. The quarry had not achieved its pro forma projections and was struggling to find its footing even as the market boomed. The Client had lost confidence in the operator and engaged Inlet Capital Group to develop and implement a recovery plan.

Engagement approach

Inlet Capital Group engaged as strategic advisor to the Client and assembled a team with deep subject-matter expertise in quarry permitting, reserves analysis, operations, and equipment optimization. We assessed the current situation, identified operational deficiencies, and determined the actions needed to correct them. We also analyzed the markets the quarry could serve to determine its commercial potential.

With the issues quantified, we estimated the necessary capital investment and valued the quarry both as-is and with the recommended improvements in place. We also identified a new management team to replace the operator and oversee the turnaround and ongoing operation of the quarry.