The fruits of collaboration.
Learn how Tonka Bay and three thriving businesses elevated growth together.
Learn how Tonka Bay and three thriving businesses elevated growth together.
Headquartered in Eden Prairie, Minnesota, NuSource Financial is a bank technology, equipment, and security systems provider focused on serving regional financial institutions.
In 2015, NuSource CEO Jon Erpelding sought a partner to help him execute a growth strategy. He recognized that bank technology was changing rapidly and wanted to capitalize on the opportunity, but he knew that doing so would require additional capital and other resources. Tonka Bay was introduced to Erpelding through a mutual connection, and the firm was a good fit given its background in similar businesses and situations.
“Tonka Bay was transparent from the start, and it was clear that they take more of a partnership approach,” Erpelding said. “I sensed that they really believed in our business model and wanted to invest in our people and help develop the right processes.”
In partnering with Erpelding and the NuSource management team, Tonka Bay leveraged its recent experiences with similar business services companies to help structure a transaction that would provide liquidity to NuSource ownership and capital for growth. “They took a lot of time to listen and learn our business,” Erpelding said. “I sensed right away that they wanted to invest in our people and help us develop the right processes. That approach sets them apart.”
After finalizing the transaction, Tonka Bay and Erpelding developed a roadmap for executing his vision for the business. Erpelding was introduced to Tom Adamson, a Tonka Bay operating partner, who joined the NuSource Board shortly thereafter.
Erpelding and Adamson worked closely to size up the evolving market and develop strategies to get ahead of upcoming changes. As more financial institutions were choosing managed services agreements (MSAs) over one-time equipment sales, NuSource quickly became a leader in offering MSAs in addition to providing customers its best-in-class Interactive Teller Machines (ITMs) and other products.
The two also worked together to enhance the management team, developing a profile for two new positions to round out the group: a VP of Operations and VP of Finance. The team worked with an executive recruiting firm from Tonka Bay’s network to fill the new positions — both of which proved central to the significant value NuSource created as a Tonka Bay partner company.
NuSource and Tonka Bay implemented a management framework that helped establish priorities and focus on key initiatives. The team developed a plan to grow revenue by increasing density in existing markets, expanding geographically to new markets and customers, and capitalizing on bank branch transformation trends. In addition, two add-on acquisitions were completed to further expand the company’s geographic footprint while adding new talent and incremental service offerings.
Revenue grew 2x
EBITDA grew 2x
Recurring revenue >30% of business
While NuSource was a Tonka Bay partner company, revenue and EBITDA doubled, employment increased 22%, and recurring revenue grew to more than 30 percent of the business. The sales pipeline also expanded significantly, driven by new customer activity and geographic expansion. This performance contributed to increased value for shareholders and continued momentum for success under new ownership.
“I thoroughly enjoyed working with Tonka Bay, and they were there any time I needed input on key decisions for the business,” Erpelding said. “Their guidance was critical as our management team executed our strategy to strengthen our foundation and offer new value-added technology to our customers. We left the partnership in an excellent position to continue to grow and thrive well into the future.”
Based in Charlotte, North Carolina, P.T. International Corporation (PTI) is a leading supplier of mechanical power transmission products and motion-control components across North America.
PTI was cofounded by Tom Haffner in 1994. Originally from the Midwest, Haffner had spent his early business career working for a multinational power transmission manufacturer as an engineer, ultimately moving into strategy and business development.
The company had achieved exceptional success by 2012 and the cofounders began to discuss their next phase of ownership. “My partner was ready to retire and I was not,” Haffner said. “We had a tight, trim, and extremely profitable business and hand-picking the right buyer was important to me.”
“Tonka Bay came across as genuine, and they seemed to want to partner with the owners and learn our business and industry before anything else,” Haffner continued. “Our shared Midwestern roots also built trust. You could just tell they wanted us to feel comfortable and go at our own pace. We knew we had found the right partner.”
Combining Haffner’s strategic and business development background with Tonka Bay’s prior industrial distribution and bearings experience, the team developed a clear vision for making an already thriving business even bigger and better. The vision included a roadmap for Haffner to transition from day-to-day leadership to serving as a board member, mentor for successors, and resource for questions from employees and customers.
“During our strategic conversations, Tonka Bay mentioned the possibility of bringing in an outside contact with operational experience in our industry as a resource,” Haffner said. “It turned out that this operating partner offered beneficial guidance throughout the process, and he even sat on our board.”
2x increase in employee base
2.5x greater revenue and EBITDA growth vs. overall market
The five-year PTI partnership with Tonka Bay resulted in several significant accomplishments. The team completed the largest product launch in company history, which diversified end markets and increased the addressable market. They finalized a strategic add-on acquisition that increased the PTI product offering, end markets, and geographical reach.
In terms of leadership, the management team saw the addition of a new CEO to succeed Haffner, along with a new VP of Sales and VP of Engineering. Three outside directors were also identified and recruited to serve on the board, each of whom brought decades of power transmission experience to help execute an organic growth strategy.
During Tonka Bay’s ownership, PTI doubled its employee base and grew revenue and EBITDA more than 2.5 times the overall market.
“Tonka Bay has worked with numerous founders, and they knew how to navigate growing a business while investing in people and managing someone like me who wants to pull back,” Haffner said.
Today, Haffner often serves as an operating partner to other active Tonka Bay partnerships. “For a person in my former situation, having access to someone who went to the mountain with Tonka Bay and is still involved with them is a huge credibility builder.”
Based in Port Richey, Florida, Seaway is a manufacturer of highly engineered plastic components serving the medical and high-precision end markets.
Founded in 1974, Seaway has steadily built a high-margin business by specializing in quick-turn, prototype, and low-volume plastic injection molding. The company is renowned for its engineering expertise, product quality, and rapid order fulfillment.
In 2014, company leadership recognized an opportunity to achieve further growth through a renewed focus on industries where speed-to-market and full lifecycle production were important, such as medical products, electronics, and aerospace. Accelerating growth in this manner would require expanding the sales and marketing team, along with making equipment upgrades and exploring M&A opportunities.
All these initiatives would require capital to execute, for which Seaway chose to partner with Tonka Bay. Seaway leadership saw the firm as a good fit due to its extensive experience in engineered plastics, the medical industry, and other prototype-to-production business models, which would be instrumental to helping the Seaway management team pursue the company’s growth goals.
One of the early steps in the partnership involved enacting a plan for the two owners to maintain an ownership stake in the business and remain active in management. Both owners sought to transition into retirement, but they felt it was important for them to stay involved to ensure that the next owner retained the culture and service excellence that have made the business so unique.
Tonka Bay and Seaway established a board composed of the two existing owners and multiple outside directors with industry and private equity experience, including Rick Shand, who held the Lead Director role during the investment period. A new CEO, Tom Orr, was also hired, and a CFO and VP of sales and marketing were added to the management team. Together, the board and enhanced management team developed a strategic plan for increasing business growth in the medical and aerospace high-end reliability markets.
The new CEO and Lead Director met regularly outside scheduled board meetings to discuss strategic initiatives involving organizational development, manufacturing operations, sales, and marketing. The lead director’s experience running a private equity-backed business serving highly regulated markets allowed him to understand and appreciate the value of Seaway’s emphasis on engineering and quality to the marketplace.
With an enhanced team and well-defined strategy in place, Seaway and Tonka Bay successfully executed several new initiatives during the investment period. Those included implementing a new ERP system to improve financial reporting and operational processes, along with developing a sales strategy with new sales resources to improve quoting and the targeting of specific customer types. Seaway also acquired Wright Engineered Plastics in Santa Rosa, California, which expanded the company’s medical customer base and geographic reach.
Revenue grew 2x
EBITDA grew 2x
Medical revenue > 50% of total sales
During Tonka Bay’s investment period, Seaway revenue and EBITDA achieved double digit annual growth rates, concentration of medical revenue doubled, and more than 50 jobs were added. In 2022, Seaway was sold to a larger private equity group that valued the company’s experienced management team, well-defined sales strategy, and track record of M&A.
“Our strong performance has been driven by investments in our team and our focus on the medical end-market,” said CEO Tom Orr. “Working with Tonka Bay equipped us with an experienced management team, a well-defined sales strategy and a valuable acquisition, positioning the company well for continued success under new ownership.”