Investor partners with the Raben family to grow Raben Tire
Thirteen years after Tom Raben was named Modern Tire Dealer’s Tire Dealer of the Year, the Raben family has sold an equity interest in Raben Tire Co. Inc. The buyer is a fund affiliated with Palladium Equity Partners LLC of New York City, a middle market private equity firm with a specialized focus on family-owned businesses.
The family piece is important because running Raben Tire, which encompasses 25 stores, two wholesale distribution centers, and three retreading facilities in five states, is a family effort. Tom Raben, who is president, says the partnership with Palladium will help keep it that way. “One thing that makes our relationship with Palladium exciting is that our family members who are involved stay involved. And we actually afford greater opportunities for them.”
Raben’s move also creates opportunities for other family-owned businesses transitioning to new leadership. Raben and Luis Zaldivar, a Palladium managing director, explain why in an exclusive interview with MTD.
MTD: How will taking on a partner help Raben grow?
Raben: Palladium specializes in working with family-owned companies. We think they bring an expertise to the table that will be welcomed as we try to grow our footprint. We’ve been 62 years in business; we think we have a great name in our market, and we think we are a wonderful platform to grow from.
MTD: What makes Palladium different from other private equity firms?
Zaldivar: We help families that founded their own business transition from a purely family-owned business to one that has some institutional ownership with institutional relationships and capital sources. We seek to help family-owned businesses by forming a board of directors and then augmenting the resources of the company. We think we’ve developed the sensibilities and respect for legacies that have been established over many years. Sometimes there are multiple generations of owners. Some families may want liquidity, some may not; some may want to stay in the business, others may not. The objectives are numerous and unique to every business. We try to be flexible, listen to the founders and families and understand their objectives.
MTD: The press release announcing your agreement mentioned growth through additional services, locations and acquisitions. Would that be for your retail-only locations or your wholesale and retreading facilities?
Raben: All of the above. We have a number of stores that are retail, commercial, farm and auto service. We think that model gives us a bigger market in the smaller markets we might be in.
If there’s an opportunity that is strictly commercial or an opportunity that is strictly retail, we would want to avail ourselves of that opportunity but not limit it to any one of the things that we do.
Zaldivar: As we had looked at the industry and met the Raben family and looked a little bit deeper at the company, what we liked was its diversification and ability to offer its customers multiple services to address different customer needs, the strong relationships with suppliers and the ability to service tires across multiple platforms of retail and commercial. As we seek to grow the business we would be open to continuing to grow along all of those lines.
MTD: Why is now a good time to add a private equity partner?
Raben: We think this afforded us an opportunity to accomplish our family goals as well as accelerate the growth of the company.
MTD: What are your plans for the near future as far as new services, locations and acquisitions?
Raben: This is a fairly new process for us in the sense that we made our deal with Palladium in the early part of December, but we are working on some things. As far as the areas, we’re not going to rule out any segment.
MTD: What are your long-term plans for services, acquisitions and expansion?
Raben: We’re looking to broaden our services offering and expand our footprint. Our expansion is expected to focus initially on markets in and contiguous to our existing footprint in Indiana, Kentucky, Illinois, Missouri and Arkansas.
We know that a lot of tire businesses are privately held, and we think in some cases there are folks out there who are looking for an opportunity to where they might pass on their business, and where they might have people who are involved in their business and want to stay involved.
MTD: What percent of your revenue comes from your commercial business versus your retail business?
Raben: We’re probably 40% retail, 40% commercial and the other part would fall into wholesale and national account services.
MTD: Who is the majority owner of Raben Tire?
Raben: We prefer to keep the terms of the investment confidential.
MTD: Have you set a time line to meet objectives?
Zaldivar: There’s no time line. The company continues to execute on its current plans. One of the values we aim to bring to investments is helping the management team work through strategic plans to figure out where there might be opportunities to accelerate growth, expand the management team, expand the board of directors and make acquisitions.
MTD: What’s your vision for Raben Tire?
Raben: Our vision is expanding our company and growing our footprint. My vision would be someday that Raben Tire might be a nationwide company, coast-to-coast.
MTD: What is the future for the independent dealer channel?
Raben: I think it’s great. I think the future’s really bright. I think we have a lot to do with what makes our future, and a lot of it has to do with how hard we work to make things happen.
We kind of own our own future, I think, by our level of participation in what we do.
I think we’ve got as much opportunity, or more, than we’ve ever had. There’s things out there that will change and are changing, but if we’re able to adapt we don’t have to be afraid of anything.
I think our business is solid, and we’ve seen it perform well with good times and bad times. We’re excited about growing the business and expanding our business organically.
MTD: Why should independent tire dealers consider partnering with Raben Tire?
Zaldivar: Raben is seeking to grow both organically and through acquisition. A well-capitalized partner and experienced group of investors have invested alongside the family. It’s a group that understands family businesses that are going through transitions, whether they are generational transitions or they want to have a partner. Raben would be open to those kinds of discussions. Now there’s a participant in the industry that can provide liquidity for other privately held businesses that are seeking some kind of a transition or exit.