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Strategic Sale of Niche Manufacturer of Critical Components for Railroad Maintenance of Way Applications

  • Location: Southeastern United States
  • Sectors: Railroad and Steel Industries
  • Ownership: Privately Held
  • Situation Type: Strategic Divestiture

Company Overview:

Founded over a century ago, the Company is a niche manufacturer of mission critical components for railroad maintenance of way (MOW) applications and a value added distributor of other railroad products. The Company’s core manufacturing business is a scarce asset; it is one of only a few companies in North America that manufactures its portfolio of mission critical components. Both the Company’s manufacturing and value-added distribution businesses serve the $11 billion railroad maintenance of way industry. Its primary customers are Class I, regional and short line railroads that are required to reinvest up to 10% of their annual revenue to maintain their railroad infrastructure. The Company’s products are used in conjunction with both replacing existing track and installing new track.


Due to extensive advisory work in the railroad sector, Brookline developed close relationships with a number of well-funded strategic investors in the industry that were interested in acquiring or otherwise partnering with railroad maintenance of way assets. The Company’s owners were nearing retirement age and did not have a succession plan in place. However, they had developed an exceptional independent management team so the shareholders no longer had to be involved in the day-to-day operations of the business. Brookline knew the investment vehicles in the market and approached the Company about testing the market with a select group of qualified investors.

Brookline's Process:

Brookline ran a confidential auction process among a small group of well-capitalized strategic buyers that were intimately acquainted with the railroad maintenance of way sector and had established a track record of quickly closing transactions at the agreed-upon terms. Brookline worked with management to build a comprehensive financial model including normalizing adjustments and to draft a confidential information memorandum that highlighted the Company’s strategic value to the selected group of potential investors. Ultimately, Company ownership and management selected the investor that had the most strategic interest in the asset, could afford to pay a premium for it and provided an excellent new home for the Company’s management team and employees. The entire process from signing an LOI with the Company to closing a transaction with the investor took less than 50 days.


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