Succession Plans
TranSystems is a leading provider of engineering, architectural, and design consulting solutions for U.S. transportation end markets. TranSystems plans, inspects, designs, and provides related services to some of the most complex transportation infrastructure projects in the country. With more than 1,800 engineers and technical employees working from 71 strategically located offices, TranSystems serves a diverse client base across the public and private sectors, including government, freight, transit, aviation, and intermodal end markets. TranSystems’ expertise includes award-winning design and engineering work on bridges, highways, tunnels, railroads, airports, and multi-modal facilities.
Background
Before Sentinel, TranSystems was owned by a group of current and former employees and an Employee Stock Ownership Fund (“ESOF”). Over time, the ESOF’s required stock redemptions constrained TranSystems’ ability to grow. In 2020, TranSystems hired an investment bank to find a financial partner who could recapitalize the company and position it as a well-capitalized platform to consolidate its highly fragmented industry. Sentinel was selected as the buyer because of our relevant experience investing in engineering and consulting businesses, our record of helping similar businesses scale rapidly through accretive acquisitions, and the strong chemistry we developed with management.
Challenge
TranSystems’ CEO and president planned to step back during Sentinel’s hold period and wanted to work with us to transition the leadership to the next generation of executives within the organization. Given the long tenure of these two individuals and their strong reputations in the industry, effectively transitioning the leadership was critical to the success of our investment. Fortunately, TranSystems had a deep senior leadership team, providing candidates with strong sector expertise.
Accomplishments
Completed a Smooth Transition to Sentinel Ownership: Management and the broader TranSystems organization had spent most of their careers working in an employee-owned business, so Sentinel and management worked closely to ensure a seamless transition to private equity partnership.
Worked Collaboratively to Transition Leadership: The involvement of TranSystems’ outgoing CEO and President was crucial to ensuring a smooth and successful leadership transition. Following the promotion of two internal TranSystems employees, the former CEO and President remained on the board and in part-time positions to partner with and mentor their successors.
Built a Strong Partnership with Management: Sentinel established a strong and productive relationship with TranSystems’ management and employees. More than 280 employees, many of whom were the founders of legacy engineering firms that had combined to create the TranSystems platform, coinvested.
Outcome
Having accomplished our investment objectives in under four years, Sentinel and management sold TranSystems through a mutually beneficial merger with an industry peer owned by another private equity firm. In a highly successful transaction for Sentinel and management, the combination created an industry leader in transportation infrastructure services and the #7 transportation firm based on Engineering News-Record’s rankings, up from #21 at the time of Sentinel’s investment.