KNOE: South La. company sells for $50 million, what NELA businesses need to know about acquisitions

Transcat, Inc., a leading provider of calibration, cost control and optimization services based in Rochester, N.Y. announced Monday (April 15) that the company acquired a south Louisiana company for $50 million.

Woodbridge International, a global mergers and acquisitions firm that manages the south Louisiana company Becnel Rental Tools LLC, made the announcement Tuesday (April 16) about its client’s closed deal.

Becnel has served the oil and gas industry since 2012. According to Transcat, Inc.’s news release, the $50 million purchase price was paid in combination with $32.5 million in company stock and $17.5 million in cash and is subject to certain customary holdback provisions.

KNOE reporter Kenya Ross spoke with two local economists about what business owners in northeast Louisiana need to know if they’re thinking about selling their business.

Professor of economics at the University of Louisiana at Monroe, Tammy Johnston, said whenever companies buy out privately held businesses it indicates it was a strong business.

“The owners, obviously, are benefiting. But employees and the community also benefit from the longevity that this buyout hopefully provides this company,” Johnston.

According to Transcat, Inc., President and CEO Lee Rudow said, ”Becnel is a well-run business, with great leadership and significant industry experience in the rental of equipment used in the highly regulated end markets associated with decommissioning and maintenance of oil wells. They have demonstrated the ability to scale in support of the growing number of wells that are in need of decommissioning, and we believe that the resources and expertise that Transcat brings to the table will position Becnel well for continued growth to take advantage of the tens of thousands of wells targeted to be decommissioned in the next 10 to 15 years and beyond, as well as future service expansion opportunities.”

Rudow continued saying, “Becnel operates in a niche part of the oil and gas industry, and we believe the business is largely isolated from the inherent market volatility. Their customer relationships are very strong and as a result, we believe that the highly regulated markets that Becnel serves will provide significant opportunity for cross-selling of Transcat’s calibration services, as well as our core distribution products.”

Louisiana Tech University’s Associate Professor of Economics Patrick Scott said sometimes the success of the acquisition depends on the industry and who’s doing the acquisition. Scott also stated they don’t always have the same consequences within the general market.

“If a company is acquired by another firm that is kind of related to it within its own supply chain, this could lead to some efficiency opportunities. We may see some cost savings that occur here. As a result, it could end up strengthening the positions of both locations - the location of the company that’s doing the acquiring as well as the company that was acquired; and this could actually lead to a virtuous economic cycle,” said Scott.

Scott mentioned another reason a company could be acquired.

“It could be done so strictly as an investment tool and especially if the acquiring firm is out of state. It’s possible it could lead to job cuts,” said Scott.

Johnston at ULM said in other instances, it’s about growth.

“What is hoped by these buyouts, whenever these larger companies are buying these companies here locally, is they’re hoping they can increase the business that the local company is doing, and often, they try to do businesses with their other businesses,” said Johnston. “Now the big benefit, as far as the synergistic is that they put the human resource operations under one umbrella - meaning like the payroll and the insurance and the retirement; therefore, that saves money.”

With student business pitch competitions on the rise, student entrepreneurship is another side of the “acquisition transaction,” as Scott with LA Tech describes it. He says students who own an idea or possibly copyrightable intellectual property benefit from the transaction because they just sold something of value.

Johnston with ULM said as an entrepreneur, this could be your dream - that you start a company that somebody else then targets for an acquisition. That’s the ultimate success.

“A true entrepreneur is someone who’s continually starting a business, selling it, and starting another one,” said Johnston.

ULM is hosting its third annual Entrepreneurship Pelican Cup Awards Luncheon on Friday, April 19. It’s open to any full- or part-time, certificate- or degree-seeking student enrolled in a four-year college or university in Louisiana, according to ULM’s Office of Marketing and Communications. The largest cash prize is $50,000. Find more information about this competition here.