Fenix Parts, a recycler and reseller of various auto parts, has a pipeline of more than 20 potential targets and hopes to complete four acquisitions before the end of 2024, said CEO Bill Stevens.

The Hurst, Texas-based company, backed by Stellex Capital Management since 2018, is in discussions with several of these businesses, Stevens added. Fenix has roughly USD 400m in annual revenue, Stellex Managing Director Mike Livanos said in a joint interview with Mergermarket. Stevens said bolt-on targets could generate revenue in the USD 10m-USD 20m range.

Earlier this month, Fenix was placed into a continuation fund in which new capital will bolster additional acquisitions, among other growth goals. The deal also enabled Fenix to refinance its debt capital structure, with TCW Private Credit Group acting as lead lender and administrative agent. Financial details were not disclosed.

Beyond providing Fenix’s investors the option to either “receive liquidity or choose to retain their exposure,” the continuation fund also grants Stellex “more dry powder in the form of equity and debt to continue rolling up prospective [targets],” said Livanos.

Hollyport Capital was the anchor investor for the continuation vehicle, he noted. Livanos added that the term loan for the vehicle had a “delayed draw component that gives us committed refinancing to continue prospective add-on acquisitions.”

The company wants to continue bulking up its Northeast, Southeast, Southwest, and Midwest footprints via M&A, said Livanos. Another goal is to establish more of a California and West Coast presence after its recent acquisition of California-based Green Auto Parts & Recycling, Stevens added.

He named major metropolitan areas in Connecticut, Utah, Washington, and Oregon as examples of attractive strategic locations where Fenix could continue its expansion.

Fenix has made 19 add-on acquisitions since Stellex’s investment, most recently of Neal Auto Parts in Peoria, Illinois. In January, Fenix bought Stafford’s Auto Parts, a well-known business based in the thriving Chicago area, which is an ideal market for Fenix to deliver parts to, so further potential bolt-ons in and around that city would be logical, said Stevens.

The company has operations in California, Florida, Georgia, Indiana, Massachusetts, Michigan, New Jersey, New York, North Carolina, and Texas.

Asked if Fenix could make a transformational buy, Livanos said Fenix evaluates such targets but has none on its radar at this time. It is focusing on its core market of used and recyclable parts, he added, though he suggested that an eventual new owner could branch out Fenix’s product lines into areas such as new parts and remanufactured parts.

Regarding an eventual exit strategy, Livanos said potential options may include another private equity firm buying Fenix and “building a scaled competitor across the aftermarket spectrum,” selling to a large strategic player that wants a strong recycled business, and perhaps becoming a public company again.

Fenix launched on NASDAQ in 2015 but delisted to the Pink Sheets two years later; in 2018, Stellex affiliates acquired the business for just over USD 8m in cash and also assumed more than USD 40m in debt and long-term liabilities, according to a press release. Livanos said the company has grown immensely under private ownership.

As for competitors, LKQ [NASDAQ:LQK] is the only nationwide provider in the recycled, remanufactured, and reconditioned auto parts space, with a strong presence in multiple aftermarket spheres including salvaged parts, which is Fenix’s specialty area, Livanos noted. “We believe there is a lot of white space to continue building our platform, enough to create a business of similar size and scale and to serve our customers on a national level,” he added.

He mentioned three other private equity portfolio groups that compete in the sector: Incline Equity-backed Road Tested Parts, American Pacific Group-owned Aesop Auto Parts, and Highview Capital-backed B&R Autowrecking. If these firms eventually decide they want to combine with a larger group like Fenix, the company may consider that option but has no plans of that nature right now, he said.

Evercore acted as financial advisor and Kirkland & Ellis served as legal counsel for the continuation fund transaction.