Hobbs, New Mexico-based Controlled Recovery, Inc. (CRI) dominates the oil-and-gas waste disposal and transportation services business in the Southeastern New Mexico portion of the Permian Basin.
THE SITUATION
In 2006, CRI was owned by its 67-year-old CEO and a passive, uninvolved investor. The CEO wanted to sell the business and retire. Through a friend, the CEO approached Dos Rios Partners Wayne Patterson and Bo Baskin when they worked at predecessor funds (“the Funds”) and expressed an interest in selling.
INVESTMENT
Bo and Wayne, acting through their predecessor funds, led the 100% acquisition of CRI.
POST-INVESTMENT
Shortly after making the investment, Bo and Wayne moved swiftly to improve CRI’s operations. First, they retained a new CEO, John Barnidge; the firm’s first-ever President (and Chief Sales and Marketing Officer); and the firm’s first-ever Chief Financial Officer. Second, the team proceeded to improve CRI’s systems for accounting, safety, quality control and waste collection. Third, the team introduced a new Customer Relationship Management and database system that enabled the company to identify and meet waste opportunities materially in advance of its competitors.
RESULTS
In less than three years, CRI dramatically increased its market share; increased its EBITDA by almost 5x; paid down all its debt; and distributed to shareholders 1.4x their initial investment. In 2010, CRI was sold to R360, a new oil and gas waste company sponsored by a large private equity fi rm, for cash and a small (10%) passive ownership in R360 resulting in an exceptional cash-on-cash return on capital investment. R360 was subsequently sold to Waste Connections, a public waste collection and disposal business. From these two sales, the original shareholders received a total return on invested capital of approximately 15x. Meanwhile, the CRI management team whom the shareholders retained (and who ultimately became senior offi cers at R360) collectively earned over $37 million in capital gains.