How Highlight Motor Group attracted the attention of a private equity investor

From a single shiny purple truck 13 years ago, to a fleet of more than 450 today, Highlight Motor Group’s (HMG) growth has attracted plenty of attention. Most recently, it caught the eye of private equity firm Credit Mutuel Equity, the North American arm of the large French banking group Credit Mutel Alliance Federale.

The firm wrote Highlight a check for $55 million, taking a stake as a minority shareholder and funding the next chapter of Highlight’s growth. The private equity investor said it was drawn to Highlight’s success under founder Kirk Kalinitchenko, the company’s current president and CEO.

“Kirk founded HMG at the age of 25, starting out in the transportation industry as a driver/owner-operator of a single truck. His dedication, field experience and leadership have enabled HMG to become a dominant player in the North American transportation and logistics market over the past decade, with the strongest growth in Canada according to the Profit 500 ranking,” said David Dickel, managing director of Credit Mutuel Equity in Canada.

Kalinitchenko got his start in the trucking industry as a driver for four years, during which time he studied the industry and came up with a list of improvements that could be achieved.







“As a driver and owner-operator, I used to work for many different companies and there were always things I didn’t like in the company. Something that, if I would run the business, I’d do differently or improve,” Kalinitchenko told Today’s Trucking in an interview at Highlight’s Concord, Ont., headquarters. “I had a different vision at that time and I said to myself that if I ever own a company, I want to avoid all those mistakes previous owners I used to work for made that made my job not as comfortable as I like. I was in that seat. I know how hard the job is. I know those low points in that job.”

Eugene Netanel, chief financial officer for the company, said the company has attracted drivers by focusing on eliminating wasted time. It operates a network of terminals where longhaul drivers drop loaded trailers, which are then taken to their final destination by local drivers. As a result, drivers typically aren’t stuck waiting to be loaded or unloaded. Highlight also will drop off empty trailers at customer sites a few days before the scheduled pickup so they are loaded and ready when the drivers arrive.

Fighting for drivers

“We fight for the drivers. We provide them with new equipment. We provide them with 24/7 support from dispatch and basically we make sure the truck driver doesn’t waste time,” said Netanel.

Today, Highlight runs about 460 tractors with more than 850 trailers. It has close to 550 drivers and owner-operators. In 2019, the company grew its volumes by 25%. It also doubled its logistics business revenue in 2019 and is expanding its Concord, Ont., warehouse. The facility today features 128 crossdock doors and more than 100,000 sq.-ft. of office and warehouse space. The company also operates terminals in New Jersey, Los Angeles and Chicago, with another 150,000 sq.-ft. of warehouse space.

Kirk Kalinitchenko

It serves a diverse customer base with no one customer accounting for more than 6.5% of its revenue. Highlight recently agreed to take over the Kal Tire facility that’s on the same property, which will be converted into a repair shop. Highlight has called the facility home since 2014.

“At the time, it was a pretty big bite for Highlight,” recalled Netanel, who joined the company after the move into the current facility. “It came from a significantly smaller facility. Kirk’s vision was that we could grow into this facility. In 2015, the company doubled in size. It moved into this facility with 96 trucks and in the first year more than doubled that fleet and has been pretty much adding 100 trucks a year since then.”

Much of 2019 was spent working on the Credit Mutuel Equity transaction, which began with initial discussions as far back as December 2018. By May 2019, a letter of intent was signed followed by four months of financial due diligence. The transaction was approved in early October 2019, and then came more due diligence, this time from legal representatives. The deal also had to be approved by the Federal Competition Bureau and Canadian Transportation Agency. Finally, on Jan. 14 2020, the deal was announced.

What attracted the big-name investor?

“They were fascinated by Kirk’s success story and wanted to be a part of the business, a part of that success story and help us support our growth,” said Netanel.

Those who know Kalinitchenko well praise his work ethic. He routinely works 16-hour days, six days a week. Kalinitchenko himself said it’s the only way to run a company and that the commitment to work is contagious.

Putting in the time

“A lot of people want to succeed in business, but not many want to put the hours into it,” he said. “To build a business is like a sport. If you want to succeed and you want to be number one, you have to spend the time and always set yourself apart from the competition. All my employees, when they see the owner of the company work so many hours and being so much involved in daily operations, they get a taste for that and want to be part of a dynamic growing company. Guys see a young, successful growing company and want to be part of the success. In my opinion, it’s very important they see the owner really cares about the business and wants the company to succeed – not an owner saying ‘Do what you’ve gotta do, I’ll go golfing.’”

Another key to success, said Kalinitchenko, is to bring passion to the job.

“You’ve got to love what you do,” he said. “I see a lot of times when people are buying a business or opening a business, they don’t like what they do. If you don’t like what you do, you’re not going to succeed.”

On the hunt for acquisitions

To this point, Highlight’s growth has been completely organic, but the $55-million cash injection allows it to explore acquisition opportunities. So far, the company has gone so far as to identify the criteria that would make for a good fit.

“We didn’t want to do much until everything closed,” said Netanel. “Eighty-three per cent of merger and acquisition transactions fail. We certainly knew the risks. We haven’t seen anything right now that would make us say yes, we want to do it right away. But there are a lot of companies on the market. This is a good time to acquire someone.”

“We are also looking for pretty much any logistics companies with a strong book of business,” Netanel said. Another longer-term ambition is to build a state-of-the-art Ontario headquarters large enough to comfortably house the growing operation.

Some of those ideal characteristics would include a company with a terminal in Montreal, which would better allow Highlight to service Atlantic Canada. Or, perhaps even a terminal in Laredo, Texas, to advance its ability to truck Mexican goods into Canada.

So, about those purple trucks, which are likely to grow in numbers quite drastically in the coming years?

“My idea was not to just build a regular company. There are lots of companies who can transport product from Point A to B,” Kalinitchenko explained. “My idea was to build transportation in style. Basically, nicely branded, new, clean trucks and trailers. Uniformed drivers with a notepad and a smile who has good customer service skills and can offer five-star transportation services. The customer is going to enjoy dealing with us. That was important. Lots of companies have many trucks, but they’re not visible. They’re dirty and not decaled well and nobody is going to pay attention.”

He added customers and the general motoring public regularly comment on the truck and trailer designs, and kids are thrilled to receive a diecast model of the trucks. The company regularly receives letters and emails from motorists who appreciate the designs.

“We put a lot of effort into keeping our trucks clean,” added Netanel. “We spend a significant amount of time and money to make sure every truck and trailer that leaves the premises is washed, cleaned and looking good.”

James Menzies

James Menzies is editor of Today's Trucking. He has been covering the Canadian trucking industry for more than 18 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.

Have your say

We won't publish or share your data

*

  • Just curious if you discussed the Driver Inc model with the owner and how that has affected his ability to maximize profit while not paying his fair share and taking advantage of drivers?

  • greetings from peru I would like to be part of this important company I am a semi tryler operator with 5 years of experience in special cargo and dangerous matrices

  • Congrats Kirk, your company has always gone above and beyond for my company right from the beginning and we look forward to you continued growth with your company.

    From all of us at Stephen Frederick Logistics, way to go…