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Behind the Deal: Align Capital Partners Acquisition of Tolling Tech Company ETC

D CEO's Mergers and Acquisitions Awards included a deep dive into a pandemic deal that almost wasn't.

An acquisition is a complicated matter in the best of times. Throw in a global pandemic, international negotiations, and an owner who wanted to sell a company to buyers that weren’t interested, and the deal becomes even more unlikely. But those factors were merely speeding bumps on the road to Dallas-based Align Capital Partners acquisition of Electronic Transaction Consultants. 

Last month, D CEO hosted a panel to dive deeper into the deal and included players representing firms involved in the acquisition. They discussed the importance of relationships in deals and the challenges of securing deals during the pandemic. The panelists were Bowen Diehl, CEO of Capital Southwest; Joe Durnford, chairman and senior managing director of JD Merit; Matt Iodice, vice president of Align Capital; Bret Kidd, CEO of ETC. Gemma Descoteaux of Sheppard Mullin moderated the panel. 

ETC is a company that many don’t know exists, but almost all have used. They are the tolling technology company behind the North Texas Transportation Authority and have contracts in Harris County, Georgia, California, and Colorado. They helped the North Dallas Tollway and others transition from toll booths and change to a completely digital service that allows travelers to continue their way without stopping. 

They allow travelers to travel between states with the same account and soon have interoperability to allow the same account to function across the nation. With a massive gap between the needs of the nation’s roads and the available funding, toll roads will likely be an increasing presence moving forward. As a 20-year-old company with locked in long-term contracts, it made an attractive target for private equity. A majority of the company was acquired by Italian infrastructure-focused conglomerate Atlantia.  

Bret Kidd was brought in as CEO a couple of years ago. A Dallas native, he had decades of experience at the intersection of technology and transportation and was well prepared to lead the company into its next chapter. Atlantia had purchased ETC with the hopes of making a larger infrastructure play in the US. Still, as a company that focused on physical infrastructure rather than technology, movement stalled, and they were looking to unload ETC. 

When COVID-19 hit Italy, it threw the country and its economy into turmoil, and divesting in ETC made even more sense for Atlantia. But with travel limited and face-to-face meetings rare, the deal became more complex. Atlantia dealt with its own turnover and had a new CEO, and wanted to sell ETC to one of its competitors to keep the deal simple.

“It was a strategy they tried before and failed at, but we spent October through December 2019 talking to two parties who concluded it didn’t fit,” Durnford said.

But ETC eventually chose boutique investment firm JD Merit to help facilitate the deal. They felt that the smaller firm would be better more innovative in getting the deal done than one of the big firms.

“This was pre-COVID,” Kidd said. “Little did we know how important creativity and tenacity would be.”

Around the same time period, Align began discussing state and local government technology companies; ETC became a topic of conversation. The company had strong leadership and existing contracts in a growing market, making it an attractive asset.

“We saw an opportunity, and we saw a business with great core attributes,” Iodice said. “It had some hair on it and needed some TLC.”

During the pandemic, many private equity companies hunkered down. They played it safe, but Iodice says the last recession rewarded companies that remained aggressive during hard times, and they wanted to do the same. They were intrigued by the way parking, tolling, and mass transit were converging.

“Bret and his team were ahead of that and were proactively building a platform to attack that space,” Iodice says.” We have a team, we have the technology, and we have the angle. We said, ‘Let’s get aggressive during a time of uncertainty.’”

With interest from Align, Capital Southwest felt this would be an excellent opportunity to make their play and provide funding for the deal. Both Align and Capital saw it as a true partnership with a shared vision.

“With their success, a gazillion lenders want to lend them money,” Diehl said. “With the competition scared and hunkered down, it created an opportunity for us.”

Eventually, Atlantia came around and saw the value of the sale, and the parties made a move. They look forward to growing the company as it expands nationwide. With the funding, management support, and demand, the company is poised to grow as the country climbs out of the pandemic. While the numbers have to make sense, getting any deal done (especially one during a pandemic) is all about the people.

“The relationships are the deal,” Descoteaux said. “It is those relationships that matter.”