Genesis eying additional acquisitions to bolster rail services and solutions for the largest railroads in the U.S. and Canada
rivate investment firm Auxo Investment Partners announced today that it has acquired Genesis Rail Services, LLC, a full-service railroad maintenance company based in Bluefield, W.Va., and Roanoke, VA. As part of the transaction, Cody Harman, son of company founder Jeff Harman, will retain a minority ownership stake in the company and continue in his role running day-to-day operations. In addition, railroad industry veteran John McPherson will serve as Auxo’s operating partner and a board member.
Founded in 2009, Genesis Rail Services provides outsourced mission-critical maintenance of way (MOW), mechanical and construction services to Class I, Class II and industrial railroads across the country. Class I railroads are the largest railroad companies in the United States, owning thousands of track miles that require routine and recurring maintenance and replacement, as well as derailment and yard services. The company recently patented its flagship service – a tie plate distribution system which significantly reduces costs while improving uptime for rail operators.
The investment marks Auxo’s first foray into the rail services industry – which is projected to grow significantly in the coming years, driven by positive macro-economic trends for rail, the restocking of depleted inventories and a tight trucking market with expectations of long-term driver shortages. The increased freight volume, led by the growth of intermodal freight, is expected to cause additional wear-and-tear on tracks, leading to increased demand for reliable and cost-effective rail maintenance.
“Given strong industry tailwinds and our company’s history of success, Auxo’s hands-on operational approach and impressive resources come at a perfect time,” said Cody Harman, who has managed the company’s day-to-day operations since 2017. “It was important to find a trustworthy partner who was extraordinarily knowledgeable about the railroad industry. With Auxo as a partner, our goal is to eventually provide maintenance of way and mechanical services to every Class I and Class II railroad in the country by growing and expanding our current offerings.”
According to John McPherson who has held executive-level positions at some of the country’s largest railroads: “Market trends are moving in a direction that make Genesis’ value proposition all the more compelling as rail companies increasingly seek cost-effective solutions to their expanding maintenance needs. Having worked in the sector for more than 50 years, the company is in a unique position to scale its operations and serve the market in an unprecedented way.”
Rail Services Primed for Future Growth
America’s seven Class I railroads (which are defined as railroads earning approximately $900M or more in annual revenues) together have an estimated repair budget of $7.2 billion. Genesis works with many companies in the Class I and Class II categories, including Kansas City Southern, Norfolk Southern, Canadian National, Amtrak, and Florida East Coast Railway, among others.
“Genesis’ strong industry relationships, growing suite of innovative service offerings, and customer-centric approach position the company for continued growth, especially as railways increasingly outsource maintenance of way services to more cost-effective third-party providers,” said Jeff Helminski, Auxo co-founder and managing partner. “The company’s growth trajectory is impressive, and it continues to add valuable new services and revenue streams that build on its history of industry-leading technology.”
When Genesis introduced its patented tie plate distribution system in 2013, it automated a process that had previously been done manually. Over the past four years, the company has introduced several new services including thermite welding, pile driving, derailment services, ballast cleaning, and traffic control. Genesis recently further refined its tie plate distribution system by providing software that will allow railroad companies to access key performance metrics and GPS coordinates of each plate.
“Genesis Rail provides an established platform for us to build on, given our conviction about this sector’s room for growth despite significant barriers to entry,” added Jack Kolodny, co-founder and managing partner of Auxo. “We are actively pursuing an aggressive acquisition strategy to add new service lines, new customers and new geographies as we build a full-service right-of-way maintenance partner with national reach for North American railroads and industrial customers.”
Advisors and lenders on the transaction included Miller Johnson PLC, Barnes & Thornburg LLP, BDO USA LLP, Marsh & McLennan, Aon Plc, Strategies Wealth Advisors, Krauter & Co., Thomas Brady & Associates, Mercantile Bank of Michigan and Miedema Appraisals.
Prior to its acquisition of Genesis Rail, Auxo has acquired 11 companies. In August, the investment firm announced its acquisition of Altus Industries Inc., a designer, manufacturer, assembler and marketer of medical, point-of-care workstations used across the healthcare industry. Previously, Auxo acquired Bernal Rotary Dies, Atlas Die, AtlasFlex, Midway Rotary Die Solutions, DieCraft Engineering & Manufacturing, and GC Dies, which comprise the Auxo Die Holdings platform. It’s marine platform, Auxo Marine, was formed by the acquisitions of M/G Transport Services, a leading inland barge transportation and logistics company, and Andrie, the premier Great Lakes marine services company serving customers with challenging safety and specialty material handling and transportation requirements. Other acquisitions include Paramount Tube and Euclid Medical, niche manufacturers of custom-engineered spiral wound tube and pharmaceutical packaging, and Prestige Stamping, a high-speed manufacturer of custom engineered stampings for the fastener industry.
