Chattanooga group created to invest in traditional manufacturing businesses makes first investment

Chattanooga group created to invest in traditional manufacturing businesses makes first investment

November 13th, 2016 by Dave Flessner in Business Around the Region

Chris Rowe, managing director, Andy Stockett, managing director, Lou Ziebold, president/owner, Ben Brown, partner and Jay Hildebrand, partner, from left, stand Tuesday, Nov. 8, 2016 in the shop at Southeastern Tool & Design.

Photo by Angela Lewis /Times Free Press.

Company at a glance

› Name: Southeastern Tool and Design

› Products: Machining, engineering and automation solutions to top-tier manufacturers in the automotive, flooring, power generation and metal stamping industries

› Location: 2121 Chestnut St. in the Southside

› Started: 1980 in Ringgold, Ga.

› CEO: Lou Ziebold, who bought the business in 2010

› New investment: Alderman Holdings LLC joined in a partnership with equity investment this month in a deal arranged by FourBridges Capital Advisors

A Chattanooga investment group created last year to invest in traditional manufacturing businesses spent more than a year looking across the Southeast for its first investment.

Ultimately, Alderman Holdings found it only a couple of blocks from the company's Southside headquarters, and officials believe they have found the right investment and partnership.

Southeastern Tool and Design, a 36-year-old machine tooling and design business that a veteran engineer and businessman has grown five fold in the past six years, expects with the new capital from Alderman to double in the next couple of years and then to double again in the subsequent two years.

"This is in our wheelhouse as a so-called "old economy business" that makes products needed by other businesses, but it still has a tremendous growth potential," said Ben Brown, one of the founders and partners in Alderman Holdings.

"Southeast Tool and Design is a great business, run by an industry veteran who is a high-integrity guy who shares our values and knows how to build a great team to grow a company."

Ziebold previously served as a business segment manager at Dupont's nylon division, which is what originally brought the Ohio native to Chattanooga, and later served as senior vice president of sales at Synthetic Industries, as president and CEO of Tennessee Rand and as general manager of Astro Turf before he bought Southeastern Tool six years ago.

"I've headed four different business groups in my previous jobs — each getting a little smaller until they got down to the size I liked," Ziebold quipped. "Now that I have my own business for the first time, we're building it up to be like the others I worked at."

Originally established as a one-customer outsourced machine shop in 1980, the Chattanooga machine maker under Ziebold has grown into a more client-focused, technology-driven provider of machinery and equipment that helps companies maximize production and enhance manufacturing processes.

"This is not an easy business to be in, but if you are good at it you can do really well — and the needs are definitely growing," Ziebold said.

When he bought Southeastern Tool and Design in 2010, the company had only three employees, and 80 percent of its business involved equipping a plant for Shaw Industries. Ziebold saw the opportunity of tapping into the growing Southern automotive industry, as well as other manufacturing operations.

After buying an abandoned 15,000-square-foot tile store on Chestnut Street and bringing on new engineers, Ziebold invited Volkswagen officials to his office to discuss machine tooling needs for VW's Chattanooga automotive assembly plant.

VW and its suppliers, along with other automotive industry manufacturers, now comprise a majority of the company's business.

"You grow a business by doing a great job for your customers," Ziebold said. "I don't get enamored with growth for growth's sake. But we see tremendous opportunities in the Southeast."

At age 57, Ziebold wasn't interested in selling the business when he hired the investment consulting firm FourBridges Capital Advisors in Chattanooga to help look for new investment capital and a business partner.

"Lou Ziebold and his company represent the true 'sweet spot' that FourBridges serves," said Andy Stockett, managing director of FourBridges. "We enjoy working with business owners and entrepreneurs who have built quality businesses and are now looking to sell the company — or, as in Lou's case, find a partner that can bring capital and operating expertise to the table."

FourBridges analyzed Southeastern Tool's financial statements, developed a forecast and compiled a confidential information memorandum that told the company's "story" to potential partners. A diverse universe of private equity groups, strategic investors and family offices were contacted and, eventually, Alderman Holdings was identified as the best fit.

A Chattanooga-based partnership, Alderman Holdings acquires or invests in companies facing an ownership transition. The group targets mostly mature, traditional companies with quality leadership teams and a proven product or service.

Ziebold said he was impressed with the long-term investment approach by Alderman, which will gain a seat on a new company board organized for the growth of Southeastern Tool and Design.

"I spent six years building a great team and technology. After investing in people and technology and acquiring a diversified customer base, I felt the company was at an inflection point," Ziebold said. "I wanted to find an investor who could help me take the company to the next level."

Ziebold, who already has invested more than $1 million on tooling and computerized design equipment at his facility, said with the new investment he plans to add on to the building next year and expects to continue to add to his staff.

"We think with the team, technology and customer focus we have built that we're poised for significant growth," he said.

Contact Dave Flessner at dflessner@timesfreepress.com or 423-757-6340.


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