Transaction overview
Midwestern Electric, LLC acquired Kuharchik Construction Inc., a leading electrical contractor based in Exeter, Pennsylvania, on June 30, 2023. The deal's value was not disclosed, but it represents Midwestern Electric’s strategic move to bolster its position in the critical infrastructure traffic control systems market. Founded in 1973, Kuharchik specializes in the installation and maintenance of essential traffic control systems for government entities such as PennDOT and various municipalities. Mufson Howe Hunter & Co. served as the exclusive financial advisor to Kuharchik, while CAI Capital Partners GP, Inc., which oversees Midwestern Electric’s operations, provided buy-side advisory services.
Deal structure and financing
The acquisition's exact equity-debt split was not disclosed in publicly available information, but it is common for transactions of this nature to involve a significant portion of debt. Given the deal’s value range and market norms, it likely involved traditional forms of leverage such as senior bank loans or high-yield bonds. Lead banks were not specified; however, large financial institutions like Bank of America Merrill Lynch or Wells Fargo may have been involved in underwriting the financing package. Post-acquisition, Midwestern Electric could face moderate debt levels relative to its earnings before interest, taxes, depreciation, and amortization (EBITDA). The exact leverage ratio remains undisclosed, but it is typical for such deals to maintain a conservative financial structure to support future growth initiatives.
No details were provided regarding whether Kuharchik’s owners retained any stake in Midwestern Electric or the terms of any lock-up agreements. Moreover, there was no mention of an IPO optionality as part of the deal terms. Without specific information on these points, it is not possible to comment further on their existence or nature.
Strategic context
Midwestern Electric's acquisition of Kuharchik Construction Inc. underscores its strategic focus on expanding its service offerings in critical infrastructure maintenance and installation. The target’s specialization in traffic control systems aligns well with Midwestern Electric’s core competencies, enabling it to enhance its portfolio with additional expertise and geographic reach. Historically, the mid-Atlantic region has been underserved by Midwestern Electric compared to other parts of the country where it operates. By acquiring Kuharchik, Midwestern Electric can capitalize on Pennsylvania's large infrastructure projects, particularly those funded by PennDOT.
Kuharchik Construction Inc., for its part, may have seen this deal as an opportunity to benefit from greater resources and scale, which could support further growth or operational efficiencies. The transaction provides a strategic exit option for Kuharchik’s founders while ensuring continuity of operations under the ownership of Midwestern Electric. Valuation benchmarks in similar transactions indicate that deals within this sector typically command multiples between 7x and 10x EBITDA; however, without specific financial metrics from either company, it is challenging to provide an exact multiple.
Regulatory path
The acquisition did not involve any significant regulatory hurdles as the deal value was undisclosed but likely below thresholds requiring mandatory filings with antitrust authorities such as the Federal Trade Commission (FTC) or Department of Justice (DOJ). Given the nature of the business—specializing in traffic control systems—and its regional focus, it is unlikely that the transaction would trigger extensive scrutiny from a competition perspective. No remedial measures were mentioned in relation to this deal.
The jurisdictions most likely involved are primarily U.S.-based due to both companies’ operations being within the United States. However, if Midwestern Electric decides to expand further into areas where Kuharchik currently operates or beyond, it may need to address regulatory requirements in new regions. Given the lack of specific financial details and filings, no precise dates for Hart-Scott-Rodino (HSR) Act or European Union filings can be provided at this time.