Sentinel drives away with a $77.3m exit

The New York middle market firm has sold transmission parts and services franchiser Cottman to American Capital Strategies as it proceeds to harvest Fund II.

New York-based middle market shop Sentinel Capital Partners announced the sale of Cottman Transmission Holdings to publicly traded private equity firm American Capital Strategies for $77.3 million (€65 million).

Sentinel originally acquired Cottman in 1999 for $48 million with equity from its Funds I and II. David Lobel, Sentinel’s founder and managing partner, said Cottman’s sale falls within the firm’s five-year holding window and will yield Sentinel a more than 30 percent IRR.

Cottman is the second largest US franchise operator of automotive transmission centers that repair, remanufacture and service transmissions and related components. The franchiser operates almost 400 centers in the US and Canada, with concentrations in Pennsylvania, Texas, North Carolina and Oklahoma City.

Lobel said Cottman’s success is a function of the transmissions market. With modern automotive systems becoming more highly technical and complex, mom-and-pop transmission repair centers have been ill-equipped to handle the increase in automotive service requirements.

American Capital invested $46.2 million of its own equity into Cottman, giving the Bethesda, Maryland-based firm a 78 percent ownership stake. Antares Capital provided senior term loans for the deal.

According to Lobel, Sentinel sold to a financial buyer because the firm felt Cottman could still benefit from further buildup and growth over the next three to five years. This is not the first time American Capital has partnered with Sentinel. In February, the firm supplied the senior and subordinated debt and co-invested with Sentinel in golf parts company Nivel Parts and Manufacturing.