Maintenance & Condition Assessment Leads to Asset Value Confidence

A middle-market infrastructure investment group was evaluating a potential acquisition opportunity in the student transportation space. They were looking for assistance in their due diligence of the target company’s fleet of school buses and motor coaches.

The group wanted an overview of the fleet’s physical condition, fleet age compared to school system contractual age limits, any deferred or large CapEx expenditures on their replacement schedule, and a go-forward replacement plan with a focus on reducing the average age of the fleet over time. Their concern was that an appraisal, though important, would not provide the future CapEx expense they may be facing or the fleet maintenance improvements they may need to implement post-closing.

To address the client’s diligence needs and potential post-closing concerns, the advisory team worked with Hilco’s Valuation and Financial diligence teams. To provide a complete and accurate picture of the bus and motor coach fleet, we performed a physical condition and current fair market value assessment of the fleet, a financial analysis of the historical CapEx, a review of the school systems’ contractual fleet age requirements, an analysis of the preventative maintenance records and procedures, and a roll forward view of the maintenance and capex expenses.

An on-site condition inspection of 24% of the fleet was completed, and the information combined with the desktop appraisal of the assets to produce the fair market value of the total fleet. A historical CapEx analysis focused on key metrics including Net Book Value (NBV), maintenance expense as a percentage of Operational Expense and as a percentage of CapEx, and maintenance cost per unit by age and mileage bracket. These metrics were used to develop CapEx projections for the next 5 years.

Confirmed fleet was maintained to the highest industry standards, with 90.3% of preventative maintenance (PM) completed early or on time.

Confirmed fleet mileage meets or exceeds industry averages, ensuring efficient operations and instilling client confidence in their investment.