New McLarty venture involves public entity, eye on making deals

It’s been one month since the primary deal closed, and now, Franklin McLarty is ready to make more deals happen. His newest venture was designed to do just that.

The chairman and CEO of McLarty Diversified Holdings is now the executive chairman of MDH Acquisition Corp., a special purpose acquisition corporation (SPAC), that is trading on the New York Stock Exchange. SPAC’s have been around for awhile, but have become increasingly used in order to take companies public or invest in high-growth private firms.

A SPAC is a publicly-traded entity that makes investments to either bring private companies public or help scale private companies in a significant way with a certain degree of discretion and privacy. McLarty thinks his SPAC, MDH Acquisition Corp., will consider both.

“Our preference would be to do one deal with one company that wants to access the public markets. And the only reason for that is just simply lower execution risk dealing with one company than with multiple companies, although that’s certainly not off the table,” McLarty said in a Talk Business & Politics interview.

Lower costs of ramping up and more privacy for confidential negotiations are two other advantages that SPAC’s offer.

“I think that you’re seeing a lot of companies who might have traditionally over the last 10, 15, 20 years gone to venture capital or private equity say, ‘Hey, we like the public markets. Getting from A to B on a traditional path is a little too cumbersome and distracting for our operating business, but doing a deal with a SPAC isn’t.’ And that’s exactly the type of company, at least from a mindset perspective, we’d like to find,” he added.

MDH Acquisition Corp. went public on the New York Stock Exchange on Feb. 4. The initial IPO offered 27.6 million units at a price of $10.00 per unit, basically a $276 million launch. The stock trades under the symbol “MDH.”

MDH Acquisition Corp. describes itself as “a blank check company whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.”

The investment vehicle will utilize its business and personnel expertise in the following industries: transportation and logistics, telecommunications, financial services and professional services.

The management team is comprised of others with Arkansas roots, including Beau Blair of Little Rock, who helped run CapRocq, and Brent Whittington, who formerly served as the COO and CFO of Windstream Holdings. Franklin’s father, Mack McLarty, is also part of the endeavor serving as a senior advisor. Darrin Williams, who began his career in Little Rock and is now CEO of Southern Bancorp, Inc., is also on the SPAC board.

McLarty said the company will primarily focus, but not limit itself, to deals in the American Heartland – basically non-East or West Coast transactions.

“I think we defined it generally as starting in the Rockies, going over to the Atlantic Ocean, and straight down to the Mexican border. But, I think the real focus area for us and the real thesis is that the center of the country – however you want to define that, certainly inward from the coasts – has really been overlooked in the last 10-15 years of economic growth,” he said.

“I think that when you look in the interior of the U.S. you have some amazing public companies that have grown for years and decades, obviously several of those right in our home state, northwest Arkansas, central Arkansas and so forth. And I think that over time as you’ve had the investment banks, the private equity and investors, venture capital investors, maybe recede a bit more to the coasts, it’s left a real void in the market. I think that’s been dramatically exacerbated during COVID,” McLarty added. “We think we’ve got a competitive advantage there building on four generations of our family building and scaling businesses in the Heartland.”

You can watch Franklin McLarty’s full interview in the video below.