Most people don’t know that each locomotive has a 16-cylinder generator to power each of its eight wheels, and each wheel has its own 1,000 horsepower motor run by the generator. Sometimes, those motors fail. Motor Coils Manufacturing was a Pennsylvania-based business that repaired or remanufactured these failed motors for the locomotive industry. With two main locations, one in Braddock, just east of Pittsburgh, and another in Emporium in northwest Pennsylvania, Motor Coils had built a thriving business model supporting one of America’s greatest industries: the railroad.
The business’s owner passed away suddenly, leaving the company’s future uncertain. Two members of the executive team, the Chief Financial Officer and Vice President of Sales, were interested in purchasing the company from the now deceased owner and continuing the motor repair business as partners. However, without legal backgrounds, they weren’t sure how to develop management buyout strategies or come up with funding, so they turned to Renaissance Partners for help.
The Renaissance Partners legal team got work, negotiating with the local labor union and finding a source for capital. We quickly found an entrepreneur who was willing to put up equity, got financing from the bank, and helped the former CFO and VP of Sales buy the company. Ownership was split right down the middle, 50/50, between the two.
Bill Agee, CEO of a well-known Idaho-based civil engineering firm called Morrison-Knudsen, made the decision to enter the locomotive business. At the time, General Motors (GM) and General Electric (GE) were the only two companies in the country making locomotives, holding a monopoly in the market. Agee, in an effort to compete against the two locomotive behemoths, purchased several companies. Motor Coils Manufacturing was one. Agee put the two Motor Coils Manufacturing owners in charge of his new business, which he renamed MotivePower. Renaissance Partners helped Agee take the business public.
MotivePower continued to grow and do battle against GM and GE, until another Pittsburgh-based company called Westinghouse Air Brake Company (WABCO) purchased MotivePower to form a WABCO spinoff called Wabtec.
After jockeying for market share against GE and GM for years, Wabtec announced its merger with GE in September 2019. GE Chairman and CEO H. Lawrence Culp, Jr., said, “This transaction is good for GE shareholders, who gain equity in an organization at the forefront of rail innovation; for GE, as we work to reduce leverage and strengthen our balance sheet; and for Wabtec, which now has a stronger and more diversified business mix to serve its customers.”
Wabtec’s history, from its humble beginnings as Motor Coils Manufacturing through its various iterations and eventual merger with GE, is an often cited success story for mid-sized industrial company management buyout strategies; the story has even been used as case study for graduate students at prestigious Harvard Business School.
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