Brandon Adams·March 29, 2022

6 Months in the Truck: Buying an Ice Delivery Biz

Brandon Adams, an Army veteran turned hedge fund analyst (eventually at Blackstone/GSO), partnered with childhood friend Don Ware to form K4 Investments and acquire Philadelphia Dry Ice Company, a 45-year-old ice distributor based in South Philadelphia. They bought the business from a prior owner who had grown normalized EBITDA to roughly $825-850k before a COVID windfall year of ~$2.8m; the deal was structured at 80% SBA / 10% seller note / 10% equity on pre-COVID figures. The thesis was portfolio-building: use the cash-generative, simple ice distribution business as a foundation to acquire 5-10 businesses over 15 years. A key due diligence miss was failing to realize the prior owner ran the entire operation from the driver's seat — resulting in Brandon spending his first six months physically driving delivery trucks, which turned into an accidental advantage: deep operational knowledge and strong team credibility. Ongoing challenges include the 24/7 on-call nature of the business, a tight labor market for drivers, and the difficulty of scaling dry ice resale without expensive manufacturing equipment. Growth opportunities being explored include upstream expansion into industrial gases and welding supplies and downstream into healthcare logistics real estate.

Deal facts

sde ebitda: SDE/EBITDA pre-COVID ~$825k (2018), ~$850k (2019); COVID year 2020 ~$2.8m; normalized basis used for purchase
financing structure: 80% SBA loan (10-year amortization) + 10% seller note (1-year standby then 10-year amortization with bullet at year 5 of amortization) + 10% equity
notes: Business founded 1975; original owners sold to prior owner ~4 years before Brandon's purchase. Prior owner grew EBITDA from ~$550-600k (original owners) to ~$700k year 1, ~$825k year 2, ~$850k year 3, then ~$2.8m in 2020 (COVID anomaly). Deal was valued on pre-COVID normalized earnings, not 2020 windfall.

Why this business

The simplicity of the business was the primary draw — very few SKUs, a straightforward logistics operation, and strong cash generation that could serve as a 'cash cow' to fund future acquisitions in a planned portfolio of 5-10 businesses. They saw operational inefficiencies they could fix, and viewed the baseline as very hard to screw up while having upside in sales/marketing and potential upstream/downstream expansion into other industrial gases or healthcare logistics.

What's working

Business generates significant cash flow on a normalized basis, serving as a platform for future acquisitions
Strong existing customer relationships and supplier relationships create barriers to entry for upstarts
Spent first six months driving the truck, which built credibility with the team and gave deep operational knowledge
Culture and team-building: Brandon's military background made him eager to manage people and build relationships with the existing team
Customers are sticky — large volume buyers (20,000-40,000 lbs/week) have switching costs and relationship dependency
Dry ice supplier relationships are a meaningful moat since dry ice manufacturing equipment is very expensive

What's hard

Due diligence failed to surface that the prior owner was a full-time driver — they didn't realize he ran the business entirely from the truck cab
Bought right at the start of busy season (closing dragged from January to end of April due to seller's lawyer), leaving no ramp-up time
Labor market was very difficult over the summer — couldn't hire additional drivers at $15-30/hr
Business operates 24/7 with on-call hours; Brandon was getting calls at 8-10pm and 3am, had to leave dinner with family to deliver ice
Wet ice market is very saturated and competitive
Scaling dry ice resale without manufacturing is very difficult; manufacturing equipment is capital- and labor-intensive

Notable quotes

We had the idea of wanting this long-term holding company where we assemble a portfolio of maybe five to ten businesses over the next 10 to 15 years very similar to the Chen Mark model and this seemed like a great opportunity where if nothing else this is going to generate a lot of cash for us to go out and purchase other businesses down the line. There's very little risk of us screwing up what's already been established and there's a decent chance that we could grow it a good amount.

He understood that 2020 was an anomaly. He wasn't looking for a multiple of 2.8 on the business. He was very upfront about that. He said I don't expect that — I don't even expect a multiple on a fraction of it. Just you know the business is what it is prior to 2020.

After a couple weeks of that it really started to reflect on me that this was a real gift. All the other guys saw that we weren't afraid to do hard work and get in there and do their jobs and oftentimes get up to speed on their jobs faster than they do and do their jobs better than they do.

I had to a couple times leave the dinner table with my wife and my daughter to run downtown and deliver ice and that was a — I talked to Don my partner after that — I said something's definitely going to change, like not just for me but for the other employees too, because how do you put a price on having to leave the dinner table with your child to go make sure some dingy restaurant has a couple bags of ice.