For Transtar, private equity investment is driving big-time growth
The company has accelerated its growth since it took on Blue Point Capital as a controlling shareholder in 2021, it's CEO says. Transtar, a company that sells aftermarket automotive products, is experiencing significant growth through private equity investment. The company, which began in the 1970s as a distributor of remanufactured transmissions and parts, has opened 100 locations across the U.S. and plans to double or triple this in the next three to five years. Private equity investment by Blue Point, which bought a controlling stake in Transtar in 2021, has been instrumental in the company's growth. The 100 locations are warehouses and distribution points, mostly in the US, but also in Canada and Puerto Rico. TranStar has been expanding its product offerings and has opened warehouses in Texas, Florida, and Pennsylvania recently.
Publié : il y a 11 mois par Dan Shingler dans Business
“We have 100 locations now,” Sethi said. “We’ll probably double or triple that ... in the next three to five years.”
Transtar, which began life in the 1970s as a company selling remanufactured transmissions and parts, sells a variety of aftermarket automotive products, mostly to independent repair shops around the company.
The company does not disclose its revenues, but Sethi said it’s growing at a double-digit percentage rate that has accelerated since Blue Point bought a controlling stake in early 2021. The company employs about 1,300 people, Sethi said.
Neither Transtar nor Blue Point disclosed what the private equity firm invested in the company, but Sethi said it bought a controlling stake that has been transformative by giving Transtar the capital and backing it needs to buy other companies and open new locations.
“IT was the catalyst for a lot of acquisitions and growth,” Sethi said.
The company’s 100 locations are warehouses and distribution points, mostly in the U.S. but also in Canada and Puerto Rico. It has been leasing space for new warehouses recently, including locations in Brook Park and Mentor that Sethi said opened in the last nine months.
“We used to have one location in (Greater) Cleveland, and now we have three,” Sethi said.
It also has bought other companies that also distribute automotive parts and supplies and had warehouses in other parts of the country.
Most recently, Transtar has opened warehouses in Texas, Florida, and Pennsylvania. One, in Tampa, Florida, opened May 13, and another in Fort Worth, Texas, was announced in April.
Transtar has been growing by buying other companies with warehouse and distribution operations, most notably Arch Auto Parts, a company with 21 distribution centers in New York City - a market where Transtar previously had only one. he company also has expanded its product offerings. In April it announced it will begin offering recycled OEM engines to auto shop customers.
The company has been spending its money on horizontal acquisitions, and Sethi said it has no intention of going vertical through purchases of auto parts manufacturers, auto repair shops or direct-to-consumer retailers.
NexaMotion also has sold part of its operations not related to Transtar. In May, it announced it was selling its CoverFlexx Group, a coatings and paint company, to Axalta Coating Systems. Terms of the deals were not disclosed, but Sethi said CoverFlexx, which has more than 120 employees, had sales of about $80 million per year. That deal is only awaiting regulatory approval to close, Sethi said.
On the buy side, Sethi figures he’s doing well with his current strategy so he plans to continue it.
“It’s been really exciting for us because we’re able to grow in two ways,” Sethi said. “One is to buy these businesses, partner with them, make sure there’s an alignment of value, and then invest and grow those businesses even more. The second is we’re creating space in our current footprint and adding product lines.”
Sethi said his controlling owners at Blue Point have not given him a specified amount of capital to deploy, nor any limits on how much he can invest. Blue Point does closely watch his acquisitions and their results, though.
Blue Point partner Brian Castleberry, a Transtar director, said he and his firm are on board with Sethi’s strategy.
“The strategy Neil laid out is definitely the strategy we’ve made good progress with in recent years,” Castleberry said. “And we look forward to continuing those efforts with the company. Neil and his team have done a great job of finding acquisition candidates.”
Sethi, who said he’s constantly looking at new deals and doing diligence on companies he intends to buy, predicted Transtar will announce further acquisitions this year.
“There are a number of other distributors we’d like to partner with,” Seth said. By that, he said, he means buying them and bringing their management and other staff on board at Transtar.
Sethi said the company is enjoying some tailwinds that have so far been persistent - and that he thinks will continue.
As vehicles become more expensive, people tend to hang on to them longer, he said, especially when interest rates are higher. That trend is supported by vehicles that last longer than they did a decade or two ago, Sethi added.
That necessitates more repair work and more shops to do the work, which increases Transtar’s customer base.
Most of the company’s current products are directed at vehicles with internal combustion engines, but Sethi said he’s not nervous about the advent of electric vehicles. EVs still will need plenty of the parts the company already carries, such as parts for brakes and suspension systems, and a lot of new parts that Transtar will add.
For instance, Sethi said the company is exploring how it might supply repair shops with batteries that eventually will be needed when EVs’ original batteries wear out.
Nor is Sethi concerned about Blue Point’s exit, which he knows will come.
Castleberry said his company’s typical investment is for five years but said there’s no hard and fast rule governing how long it stays in any one company.
Eventually, it will sell its stake though. Sethi said he’ll cross that bridge when he gets to it, but predicts he might just end up with another private equity owner.
That’s fine, he said. Transtar already was doing well before the Blue Point investment, and any future investor is bound to want it to grow further, Sethi said.
Les sujets: Private Equity