Finding a Fit for the Family Business

When it was time for Craftmaster Hardware, a third generation business, to once again pass hands, the current owner, Michael Spingeld considered what no one in the family had before: selling to a private equity firm.

Statistics tell us that the likelihood of private businesses remaining family-owned decreases with each generation. The Craftmaster story is a perfect example of why this phenomenon occurs.

“We’re seeing an interesting bifurcation of sellers right now,” explained Mike Richmond, Managing Director at The DAK Group, the investment bank that helped Spingeld find the right buyer for Craftmaster. “On one hand you have sellers on the older end of the spectrum hanging on to their businesses, because they don’t have any place to invest the money they would receive from selling.” Spingeld is one example of the other side of the equation: younger sellers in their early and mid 50s with the desire to take their success and earnings gained from exiting their business and apply it to a new venture or passionate pursuit.

Three Generations of Growth

Craftmaster’s roots date back over 60 years, when founder Jules Austin (and Spingeld’s grandfather) opened with the intention to provide general hardware to customers in lower Manhattan. Even in a crowded market, Austin succeeded in building a competitive position as a preferred provider of physical security hardware (locks, bolts, keys, etc.) to customers throughout the region. Under his ownership, Craftmaster achieved status as a fully operational small-batch locksmith supplier with well under $1 million in sales.

Two generations later, Spingeld (who had taken the reigns after his father-in-law carried on Austin’s vision for Craftmaster as a small business) began to broach an entirely new market.

Realizing the decline of the locksmith industry in local Manhattan and with a desire to become a true business-to-business enterprise, Spingeld evolved Craftmaster from a provider of hardware, to the experts in design, installation, upkeep and emergency replacement and repair of speciality locks.

Moving away from the retail market, Craftmaster looked to large institutions, such as prisons, universities and hospitals with a fresh marketing strategy. Bolstered by the strong supplier relationships they had built over decades in business, Craftmaster successfully rebranded itself as a solutions provider, articulating the value they add to the security customization process and transcending their locksmith roots to grow into a multi-million dollar enterprise.

Inspired by such success and only 54, Spingeld’s passion for growing companies gave way to the pursuit of a second act. With his adult children involved in academic careers and his right hand business partner approaching retirement, it soon became clear that it was the end of the family line for Craftmaster. Spingeld found himself in the unfamiliar, and somewhat uncomfortable, position of planning a future for the business that would not neglect years of his and his family’s hard work and the growth potential that the company still held.

From Family-Owned to Financial Sponsor

As advisors to multi-generational family businesses like Craftmaster, the DAK Group is accustomed to facing situations like Spingeld’s. “CEOs like Michael often have a few competing priorities,” Richmond said. “What is the best way to get the best possible valuation for this company, while at the same time preserving the family legacy, keeping the name intact, and staying loyal to employees and suppliers?”

It was with this mindset that Richmond advised Craftmaster to start the search for a buyer. Considering a wide berth of potential new owners, from strategic to financial buyers of different sizes and intentions, it finally came to fruition that Capital Resource Partners, a Boston-based private equity firm, was the best fit.

“It was actually their first investment in a physical securities business,” said Richmond. But that’s not the way Capital Resources Partners, or the current owner saw the deal. With a growing need for providers like Craftmaster amongst institutions not traditionally considered high-security, such as primary and secondary schools, Capital Resource Partners and Spingeld shared a vision to grow the company well beyond it’s current customer base.

“One of the most difficult things the owner underwent during this deal was telling his parents that he was selling,” said Richmond. “It was important to find a buyer who recognized what Craftmaster had achieved and wanted to build upon that.”

Richmond and The DAK Group believe Spingeld’s story is just the beginning of a larger narrative for middle market companies in strong positions like Craftmaster. “This really is an excellent time to sell, because you have strategic buyers that are sitting on a lot of cash, you have private equity firms that need to use the funds that they’ve raised 5-6 years ago as they’re nearing the end of the fund cycle. And the banks are coming back strongly in terms of the amount of leverage they’ll provide.” In other words, for sellers of great companies like Craftmaster, opportunity is endless.

About Axial Member, The DAK Group    

The DAK Group focuses exclusively on the M&A needs of middle market companies. We help middle market CEO’s, entrepreneurs, and stakeholders navigate their financial options for growth and expansion as well as pursue successful exit strategies.

Since its founding in 1984, The DAK Group has completed over 600 transactions across a broad range of industries. We are committed to maximizing enterprise value for our clients in mergers, acquisitions, divestitures, capital raises, and financial restructuring. In addition, we provide business valuations and fairness opinions Optimizing shareholder value, maintaining confidentiality, providing senior level attention, and being a trusted partner are at the core of DAK’s client-centric philosophy.