Implementing a Succession Plan


Company

Industry

Cottman Transmission Systems, Inc.

Consumer; Franchising

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Implementing a Succession Plan


Company: Cottman Transmission Systems, Inc.

Position: Consumer; Franchising

Location: Fort Washington, PA

Date of Investment: August 1999

Exit Date: April 2004


Company Description
At the time of our purchase, Cottman was a leading franchisor of automotive transmission centers that repair, remanufacture and service transmissions. Cottman, the "Transmission Physician," opened its first transmission repair center on Cottman Avenue in Philadelphia in 1962, and when Sentinel sold the company, had approximately 400 centers in the United States and Canada.

Background
Sentinel acquired Cottman from the company's three owners who were seeking liquidity for estate planning purposes and looking to transition out of the business. Cottman’s owners had originally purchased the business from its founder in 1979 and over the next two decades they had tripled the number of centers and increased revenues tenfold. During their ownership, Cottman earned numerous franchising industry awards.

The Opportunity
To transition the leadership from Cottman’s long-term owner/manager to next generation executives and to partner with, groom and augment a young and ambitious incumbent management team who had not yet established personal wealth.

Accomplishments
Completed a Smooth Transition to Sentinel Ownership: As Cottman was a business with a 20-year history of being actively managed by three owners who exited at closing, Sentinel and newly-appointed successor CEO, who had been at Cottman for 10 years, worked closely together to ensure a smooth transition.

Augmented Management for Accelerated Growth: To position Cottman for accelerating its growth, Sentinel helped recruit two experienced executives as COO and CFO and actively assisted management to upgrade Cottman’s IT infrastructure.

Recruited Outside Board Member to Mentor Younger Executives: To assist its newly-appointed CEO, Sentinel recruited to Cottman’s board the retired Chairman and CEO of Dunkin’ Donuts, who oversaw its growth from 100 to 3,000 units.

Outcome
During Sentinel’s four-and-a-half year ownership, Cottman doubled the number of franchisees in its system and expanded into several new geographical regions. As a result, Cottman’s sales grew significantly and its profitability doubled. In April 2004, Sentinel sold its stake in Cottman in a second management buyout to financial services firm American Capital Strategies. Under leadership of the team Sentinel had backed, Cottman continued to grow and subsequently acquired AAMCO, its largest competitor, to become the U.S. category leader in transmission repair.

Engineered Controls International, LLC

Industrials

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Implementing a Succession Plan


Company: Engineered Controls International, LLC

Position: Industrials

Location: Elon, North Carolina

Date of Investment: August 2010

Exit Date: December 2013


Company Description
Engineered Controls (“ECI”) is the leading global provider of highly engineered, mission-critical flow control products used in the transportation, delivery, and storage of LPG, LNG, and other cryogenic gases. ECI serves a large, global customer base in more than 85 countries including distributors and OEMs.

Background
Sentinel acquired ECI from a prominent family who, for several years, was uninvolved in the day-to-day operation of the business. Management, who had run the business for more than 25 years but did not own any equity, was looking for a partner to help transition ECI to its next phase of growth.

The Challenge
ECI's long-term CEO planned to retire during our ownership and wanted to work with us to recruit his successor. Given the long tenure of the senior management team and the CEO's strong reputation amongst ECI's key customers and within the industry, finding the right successor was critical to the success of our investment.

Accomplishments
Worked Collaboratively to Recruit New CEO: Involving ECI's outgoing CEO and his senior management team was crucial to ensuring that the CEO transition would be smooth and successful. Following a broad search process, we recruited as CEO an exceptional senior executive with significant experience in both flow control related products and niche manufacturing. The new CEO, who had the full support of the former CEO and the other senior executives, stepped seamlessly into the business.

Outcome
During Sentinel's ownership, ECI built a strong foundation for growth, expanded into new markets and geographies, and significantly grew its profitability. In December 2013, ECI was sold to another private equity firm in a management buyout, which was highly successful for Sentinel and its management partners, who did not have the opportunity to share in equity appreciation under prior ownership. The smooth and seamless CEO transition was a very important factor in achieving our return objectives.

Spinrite Inc.

Consumer

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Implementing a Succession Plan


Company: Spinrite Inc.

Position: Consumer

Location: Listowel, Ontario

Date of Investment: January 2004

Exit Date: January 2007


Company Description
Spinrite is the leading designer, manufacturer, and marketer of consumer craft yarn products in North America. Spinrite is well known to the hobby market for its Bernat, Patons, Caron, Peaches & Crème, Lily Sugar’n Cream, and Phentex brands, which are sold through mass merchants, craft stores, and independent specialty stores.

Background
Spinrite was founded in 1952 in Listowel, Ontario. Following the death of the founder in the mid-1980s, his son inherited the business and assumed leadership of the company. Spinrite is located in a rural community where the company is the largest employer and the owner and his family are well known to and deeply involved in the local community. With a significant portion of the family’s net worth invested in Spinrite, they decided to sell a majority stake in Spinrite to a financial partner so they could diversify their holdings and implement a succession plan for the owner, who had reached retirement age. Following a limited round of bidding by potential financial partners and an extensive due diligence process conducted by the owner and his advisors on the small group of potential financial partners, Sentinel was selected as his preferred partner.

The Opportunity

  • To acquire a category leader with the most comprehensive brand portfolio in the craft yarn segment

  • To partner with Spinrite's owner and committed and experienced management team

  • To invest in an industry with strong projected category growth due to the aging of the baby boomers and increased number of younger knitters

 

Accomplishments
Completed a Smooth Ownership Transition: Spinrite made a smooth ownership transition after more than 50 years of family ownership.

Implemented a Smooth CEO Transition: Following the closing, Sentinel and the former owner successfully recruited a new CEO with a deep experience and a proven record in the consumer products industry. The new CEO worked seamlessly with the founder and after a brief transition period, the founder was able to achieve his objective of retiring.

Achieved Growth Objectives: In a short period, Spinrite grew substantially by capitalizing on category growth, introducing new products, and increasing its share of the retail channel.

Outcome
By 2005, Sentinel and management had achieved the growth objectives established at the outset of the transaction and Spinrite completed an IPO on the Toronto Stock Exchange in a highly successful transaction for Sentinel, management, and the former owner.