Summary
In 2024, the owners of this Massachusetts-based leader in powder-metal manufacturing were ready to retire and sell their company. They worked with Eastern Bank for financing and cash management solutions in support of the company’s 100% sale to an employee stock ownership program (ESOP), turning each of their 280 employees into part-owners of the company. The sale to the ESOP allowed the company to remain privately held and independent while offering employees an ownership stake in the business and meaningful retirement benefits. This has created a winning culture that provides long-term sustainability and the employee-owners with enhanced alignment to business goals, as well as liquidity and tax advantages for the company.
Case Study in Brief
- Industry: Powder-metal manufacturing
- Size: 280 employees
- Location: Wrentham, Mass.
- Founded: 1952
- Challenge: Help the company evolve into employee ownership as the owners retired.
- Results: Eastern Bank provided the financing to convert the company to an employee stock ownership plan (ESOP), creating 280 employee owners and liquidity and tax advantages for the company.
- “With Eastern Bank’s term financing, we were able to create an ESOP that was just right for our company and enable our owners to transition out of the business.” – Atlantic Sintered CEO Ben Hall
The Challenge
For over 70 years, Atlantic Sintered has forged a leadership position in the powder metal manufacturing market. At its Wrentham, Massachusetts, factory, the company’s technicians combine precise mixtures of specialized powders and lubricants and feed them into multi-hundred-ton presses, carefully shaping the material into customized parts such as gears, sprockets, and other structural components. From there, the parts spend hours in a 2,000 degree Fahrenheit furnace – the sintering process – before heading to CNC (computer numerical control) lathes, heat treating, or other processes to emerge as finished products. Atlantic Sintered acts as a leading supplier to automotive manufacturing giants (a $3 billion North American powder metal market) and has a strong presence in a range of other applications, including industrial, lawnmowers, snowblowers, household appliances and all-terrain vehicles.
According to Ben Hall, president and CEO, the company’s success comes from more than great technology. “We win because of our people – it’s as simple as that,” he said. “Many of our employees have been with us a long time. They care about our customers and have built great, collaborative business relationships with them. They care about the safety, quality and reliability of our products. And they’re committed to delighting our customers. That’s something I’m proud of, and something everyone in our company is proud of.”
But like every success story, in 2024, Atlantic Sintered was ready to turn the page as the company’s owners neared retirement age – a scenario that’s not uncommon among many closely held and family-owned businesses. The sellers wanted to generate liquidity while preserving the legacy of a company they built and was beloved by employees and customers alike. That created not only a financial inflection point – but also an opportunity to rethink and rebrand the organization.
Ben Hall, an industrial business leader, joined the company in January 2024 to help make the transition happen. “I am passionate about U.S.-based manufacturing, creating jobs and building high-performance teams,” he said. “This company was a great fit for me in every way.”
He added, “Business owners will often sell their companies to strategic partners in M&A transactions or maybe cash out through sales to private equity or venture capital firms. But the sellers agreed those transactions often overemphasize financial returns that can lead to significant operational and management changes, restructurings, and unwelcome disruptions to employees and customers. We wanted a solution that would prioritize our people, our customers and our community – because they’re the essence of our success. That’s when we met with Eastern Bank to talk about an employee stock ownership plan.” Capstan Atlantic, now Atlantic Sintered after the ESOP transaction, was working with a business valuation consultant in establishing a company valuation to be used in the ESOP conversion and for financing due diligence, and they made the introduction to Eastern Bank.
The Solution
Using a predetermined formula (typically based on salary or years of service), an ESOP plan allocates shares of company stock to each employee through a retirement plan that holds the stock in trust on behalf of the employees. This enables the employees to share in the company’s success and gain a stake in its strategy, goals and outcomes. ESOPs can provide important benefits to companies:
- For the Business – Rising employee productivity helps align goals and improve performance. That can also translate into greater employee retention – an important consideration when owners are transitioning out of the business. Employee-owned companies can become S Corporations, meaning they do not pay taxes. The additional funds, that would have been paid to the government, can be reinvested into the company.
- For the Employees – Unlike a 401(k) plan, with an ESOP, employees don’t need to make out-of-pocket contributions. Ownership of company stock can help to close the income inequality gap, especially among low- and middle-income earners.
- For the Sellers – With ESOPs, sellers can exit the business, but can also remain involved with the company and continue the legacy of what they built while rewarding employees. Sellers can elect to sell a certain percent of the company or their entire stake in the company.
The Results
“Converting to an employee-owned company involved a major collaboration with Eastern Bank,” said Hall. “With Eastern Bank’s term financing, we were able to create an ESOP that was just right for our company and that enabled our owners to pass the business on to the next generation while safeguarding their financial interests. Eastern looked at our cash flow and debt, and customized a loan that made sense for our company and our exiting owners.”
The Atlantic Sintered/Eastern Bank relationship doesn’t end with the ESOP – in fact, it’s only the start. “We have access to a revolving line of credit, so we can quicky get the capital we need to modernize our equipment and expand our company on our timetable. We also rely on Eastern for all of our banking needs. All of our transactions are done through Eastern – our money market, checking, accounts receivable, check transactions and electronic payments – it’s a complete relationship that gives us a very solid foundation for the future.”
Given the volume of checks involved with its daily operations, the company is also benefitting from discussions with their Eastern Bank relationship team about cash management best practices and tailored solutions, such as setting up Positive Pay that provide improved security and best protect against fraud.
Youssef Abdouh, a Senior Vice President in Eastern Bank’s Commercial Banking group and Atlantic Sintered’s Relationship Manager, said, “It has been a pleasure working with the Atlantic Sintered team during this transition. Atlantic Sintered has become a leading producer of precision powdered metal gears, sprockets and complex structural components, and a local manufacturing business with a strong financial track record and long-term growth prospect. We at Eastern were able to provide the company with customized financing structures and cash management solutions to meet their specific needs.”
ESOP: The Catalyst for a New Brand and a Stronger Culture
Concurrent with its new ownership structure, Hall is leading the company to a new strategy and brand – a distinct and deliberate transition away from its former identity as Capstan Atlantic. As a newly structured company with employee owners, the business is returning to its roots when it was first known as Atlantic Sintered. Today, the company aims to build out new product and market capabilities, recruiting additional engineering experts to optimize manufacturing. “We also have many tremendously talented people who’ve been with our company for decades,” he said. “The team we’re building gives us the best of both worlds – deep institutional knowledge and fresh perspectives – and the ESOP is key to attracting and retaining these great people.”
“We’ve always adopted a strong customer-first philosophy, but the ESOP has made our culture even stronger. Every employee is a part-owner of the business – and that’s really exciting for us. Everyone – at every level of the organization – has a stake in the outcome. With our monthly company-wide meetings and Town Halls, we’re providing transparency across the organization using open-book management where we talk about our finances. We’re having healthy dialogues and increasing our employee recognition. For us, the ESOP started as an important financial transaction – but it ended up as the catalyst for a new culture and brand. It has been a win-win for the prior owners and the employees.”
The Right Bank
“We’ve enjoyed a high level of collaboration with Eastern Bank and an outstanding level of customer service and engagement,” Hall said. “They’re the right bank for us – we never feel like we’re getting lost in a large, faceless organization.”
Abdouh added, “We are intent on taking a personalized approach to banking and customer service, and helping to address Atlantic Sintered’s immediate needs while solving for the long-term where our goal is a working relationship for many years to come.”
Moving forward, Hall envisions that relationship to only grow stronger as the technology at the heart of its business continues to rapidly evolve. “We need to stay current and ensure we’re on the cutting edge to compete most effectively,” he said. “Whether it’s capital financing or other financial services, we know that Eastern Bank will be there to help us continue on this successful path.”
Wondering if an employee stock ownership plan (ESOP) is right for your business? Eastern Bank takes the time to understand your goals and is here to support your commercial banking needs. Contact us to learn more.
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