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When family-owned tire distributor Rubber Inc. — a $400M national player founded in 1939 — bought out Massachusetts-based Automotive Distribution Specialists (ADS), a much smaller family operation doing an estimated $25M in annual revenue, the headline looked straightforward: expand New England service, add fleet capacity, and bring customers more buying power.
But the more interesting detail? ADS founder David Lama Sr. didn’t walk away. Instead, after 40 years of running his business, he accepted a step-down role as an Account Manager under Rubber Inc.’s banner. In the world of acquisitions, that often signals something far more strategic than sentimentality.
Is This The Earn-Out in Disguise?
On paper, the deal delivers geographic expansion for Rubber Inc. and stronger buying power for ADS customers. But Lama’s decision to stay on in a sales role hints at an undisclosed earn-out or retention agreement.
In industries where customer loyalty is tied to personal relationships, buyers often insist that the seller remain active long enough to transfer trust and keep key accounts from walking. By keeping Lama visible to customers, Rubber Inc. lowers deal risk while buying time to integrate operations.
What a Step-Down Really Signals
For many founders, stepping into a smaller role after selling isn’t a defeat. It’s a sign — but of what depends on the deal structure.
A bridge to retirement: Some owners want to ease out gradually, keeping the part of the work they enjoy while shedding the stress of payroll and operations.
An earn-out in play: Others are financially motivated, with payouts tied to revenue retention or growth targets that make sticking around the smart choice.
Customer assurance: In client-heavy industries, the seller’s continued presence is a way to signal stability and prevent churn.
A Pattern in Distribution Deals
This step-down arrangement is not unusual. Distribution and supply industries rely heavily on trust and repeat customers, which makes continuity essential. Recent examples include American Tire Distributors acquiring Terry’s Tire Town, where executives stayed on to guide the transition, and U.S. AutoForce’s deal for Max Finkelstein, where former family leadership remained in customer-facing roles. These structures reassure both employees and customers while protecting the buyer’s investment.
Takeaway
The ADS sale is a reminder that ownership transitions don’t always follow a clean break. Sometimes the seller cashes out and steps away. Other times, they step down but stay close, whether to earn out, protect relationships, or glide toward retirement. For buyers, it’s a safeguard. For sellers, it’s a compromise that preserves both value and legacy. The title may change, but the role of the former owner often remains central in the years immediately after a deal closes.
What I Read So You Don’t Have To
SRS Acquiom: Lower Middle Market M&A Deals — In deals between $5M–$50M, buyers are leaning more heavily on earn-outs and escrows to manage risk. More than a third of such deals now include earn-outs, with smaller transactions often pushing higher contingent payments.
Goulston & Storrs: “What’s Market: Earnout Provisions — Based on ABA Private Target Deal Points Studies, earn-out provisions appeared in about 26% of reported private-target deals in 2023, typically tied to revenue or EBITDA performance, and remain one of the most heavily negotiated terms.
SRS Acquiom: 2025 M&A Deal Terms Special Report — Lower Middle Market — Earn-outs, working capital adjustments, and closing consideration are shaping deal structures in sub-$50M acquisitions, offering insight into how buyers are protecting themselves in today’s market.Disclaimer: The deal terms have not been disclosed. Observations here reflect industry trends and educated assumptions, not confirmed details of this transaction.
Resources
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Sources & Further Reading:
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