Michael Dusi Trucking and Michael Dusi Logistics Warehouse, inc., collectively known as MDL Logistics, suddenly shut its doors on Friday. The California-based trucking company and warehouse operator had 45 power units and 120,000 square-foot of warehousing space. More than 30 employees were impacted in the shut-down.
MDL primarily served the wine industry, a major industry in Paso Robles, a small city in central California where wineries are a major part of the local economy.
In September 2018, Headhaul Capital Partners, a New York based middle-market private equity fund purchased MDL from the company’s founder. Headhaul raised $150M of capital back in 2016 and has made 11 investments. The PE-firm was founded by Jefferies investment banker, Seth Wilson, and specializes in transportation and logistics buyouts.
Headhaul Capital Partners has four other transportation assets in its portfolio, including Anderson Cargo; DSI Logistics; Great Western Leasing; and OL International Holdings. The team behind Highland has been involved in transactions that include Arnold Transportation, Atlas Airholdings (NASDAQ:AAWW), K-Sea, and New Century Transportation.
According to Pitchbook, Headhaul raised $3.75 million of debt from Siena Lending Group to finance working capital and expansion initiatives of MDL when it purchased the company.
In a letter sent to vendors and clients of MDL, now laid off employees of the logistics firm blamed Headhaul Capital Partners for the plight of the company. In a strongly worded statement, posted by the Paso Robles Press, the letter describes the disruption caused by the private equity fund.
Private equity funds have had poor track record in taking over asset-based trucking businesses. Often, when the companies are shut down by private equity firms, the firm does so abruptly, leaving the employees, vendors, and stakeholders with little explanation or recourse except to fight for debt obligations in bankruptcy court.
Falcon, a large flatbed trucking company that had been purchased by a private equity fund a few years prior, was suddenly shut down. Cold Carriers, another private equity backed rollup, tried to restructure to keep operating, but couldn’t make it work and announced that it was shutting down a few months later.
Below is a copy of the letter sent from employees of MDL:
To Whom It May Concern:
We regret to inform you that Michael Dusi Trucking and Michael Dusi Logistics Warehouse, collectively known as MDL, will be shutting our doors effective immediately.
The saga of Michael Dusi Trucking and Warehouse companies is a long one and like all great sagas, whether good or bad, there must be an end. This one has been a very bad end. Many of the employees started with the company at the beginning or grew up seeing the big shiny Michael Dusi Trucks driving down the 101 or the 46 freeway. In the past year and a half, we’ve recruited new team members that uprooted their families to take an active role in transforming this company. Every one of us took immense pride in being part of a company that has been a part of the fabric of Paso Robles, the Central Coast, and the entire wine community.
Unfortunately, the investors who came in to save the company were not the business-savvy personas they projected to all of the loyal employees. We were given the choice to ‘keep on trucking’ and pay our rent, mortgage, daycare, etc. to continue to live and work in this beautiful place, or leave. The employees that remained until today have poured their blood, sweat, and tears into trying to make this company work, and we were gaining significant momentum. As we were beginning to see the fruits of our long nights and lost weekends come to fruition, the investors and company leadership summarily departed to the East Coast without warning. Effectively, we have been left to close down the company with no guidance and no warning from our leadership team. We are very sorry this must end this way.
You are our community, you are our neighbors, and you are our friends. Our kids go to school together, we hit the same bars on Saturday, and ask for forgiveness for it in the same places of worship on Sunday. The last thing we want to do is end our 20+ years of service with you with a bad taste in your mouth. You deserve better and we deserve better. We will be doing whatever we can to make this dissolution as painless as possible for you, our customers, our vendors, and our friends.
We will start by asking a favor. When our investors and current leadership threw in the towel, they left highly qualified talent with deep industry experience holding nothing but sand. As the last remaining employees attempt to close down the doors our primary concern is for our team, our work family, and that they land on their feet. We will be providing a list of our staff, their skill sets, and their contact information to any customer who wants it to keep this community strong. If you have an opportunity available or know of opportunities, please help support us, your neighbors. We are still here, in this community trying to sort out our situation. We’ve set up a temporary email address where you can reach out with opportunities firstname.lastname@example.org. Former staff members will continue to distribute this information long after we receive our final paychecks.
Next, we ask that you bear with us during this short wind down and dissolution. We know you have questions. For more than a few of you, the practices of this company have negatively impacted you. We have had our sleepless nights with these practices too. We will be functioning with an incredibly small skeleton staff moving forward. Today will be the last day for the majority of the under signers but we will do our best to limit the negative impact on our customers as much as possible.
Finally, we want to apologize again for the abruptness and pain this will cause. We did our best to make this thing work for you and for us and we would have achieved it if not for the failure of our leadership.
Thank you for your support and business over the years.