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Family business sees changing of the guard

A son’s story of succeeding his father as head of 130-year-old company

Second of a three-part series exploring the often challenging issues of business succession.

ATW Companies, based in Warwick, R.I., is a 130-year-old family business and outlier when it comes to executive succession. It has persevered through five generations of family ownership and management, defying the odds of the majority of companies that don’t make it beyond two successive generations.

ATW’s business line isn’t sexy—it makes precision tubing and fabricated metal components, mostly for the medical devices and defense industries. But it stands out among peers not just for the way it has successfully managed difficult family transitions, but also for the way it treats all employees—now numbering more than 400—as family members.

Peter C. Frost recently completed a buyout of the company from his father, Fred, who ran ATW for more than 40 years. He talked frankly with the Talking Business Advice Series about the difficulties, pitfalls, and complexities of the transition. Family succession isn’t nearly like a normal business transaction, of course, because of the various family dynamics, personalities, emotions, and issues.

Peter FrostPeter Frost

Frost said he always knew in the back of his mind that he would work at ATW, originally called A.T. Wall after Peter’s great-great grandfather. He worked at the plant during his teens before going his own way after college, founding a company of his own. But the notion he would someday return to Rhode Island was always present.

“My great-great grandfather started the company in 1886 and it passed from generation to generation. The Walls were from my mother’s side of the family and my father came in with some business background and eventually bought the business for a very nominal amount of money.

unnamed-1Fred Frost (center) at the grand opening of ATW’s Warwick, RI facility in 1968.

It seems like I was involved in the business from the day I was born. It wasn’t a company as much as a brother to me, really. And it was not a means to an end. The company was as important to me as the money it generated. I love working at it…and I eventually worked in every department, and this was as much a part of my identity as anything. Even though after college I went and did something different for 10 years, the story was still here.”

It was toward the end of that decade that Fred Frost contacted his son and asked him to consider coming home. Peter was managing a business in South Africa at the time. In the conversation, Fred implicitly mentioned succession and his belief that Peter should get some more experience at the family company before any transition. However, no formal transition plan was ever initiated—something business experts say is a common, and sometimes fatal, mistake.

He said he might have to start thinking about selling the companies and he wanted me to come and work there for a while if I wanted to. I inferred that he was talking about grooming me for succession.”

The topic of succession came up several times over the years but didn’t gather much steam.

“I started talking about transition maybe six or seven years ago, and his response was always: ‘Make me an offer.’ But I didn’t want to do that. I believed we should work on an offer together and it should be a mutual thing.”

Peter eventually became president and CEO and, after a near 20year career at the company, Fred Frost finally brought up the subject of transition.

An ATW employee An ATW employee adds detail to a piece of metal

“We had a crappy year in 2014 and the bank started hovering around and there wasn’t anything we could do dramatically that would turn it around. So somewhere in there when we’re going through the meat grinder I think my father began to reflect a bit. He had seen some of his colleagues die, he was 74 years old, and I think something clicked. He didn’t want to take any more risks; he’s concerned that his retirement fund is evaporating in front his eyes and he doesn’t want to fire his kid from the company.”

So Fred Frost raised the topic of selling out. Only he seemed to be talking about selling to a third party, not keeping the company in the family.

“It was in early May of last year when he said, ‘I want out, I’m thinking of selling the company.’ My first thoughtand word to himwas ‘betrayal.’ He asked me to give up my life in South Africa, and I came here under the assumption that some kind of family transition would occur, and now he’s going to sell it out from underneath me after many years of working here? I was pretty upset and pessimistic. He was fairly stoic and unemotional, but I don’t think he expected my response. I used the word ‘betrayal’ because it felt like betrayal to me. I thought we were on some kind of road that would pass the company on to me. It was probably stupid not to have written it down.”

Peter figured his father believed selling to a third party would be an easier alternative. Neither wanted to play tough with the other during negotiations, yet both wanted to secure his own interests in the transaction.

There were a lot of challenges associated with the idea. I kept planting the seed, saying, ‘How can we make this work?’ I didn’t really have a sense of how it was going to play out and I’m pretty sure my father didn’t either. I kept poking and prodding and bringing up things like redeeming his shares and putting him on a salary, but he was never willing to go down that road. And there were other complications. My sisters owned shares in the company, and I would have to buy them out. There’s capital gains and taxes and all that while everybody wants to walk away thinking it’s a win-win. But it’s not easy.”

Unlike many transactions of this kind, Peter did not rely on outside consultants or family dynamics advisors and pretty much kept his own counsel.

“I’m probably not that evolved on it. I read a few books and found that every family is different, so probably one or two sentences from each book were applicable. All of the psychological mumbo-jumbo I knew would be of zero interest to my father. I’m sure he didn’t want to destroy his relationship with his son, but he wouldn’t think some kind of shrink was needed to prevent that. Also, he didn’t want to be told by anyone what to do. He wanted to run it himself. And I think the foundation of his principles was to preserve the family integrity and wealth in a meaningful way. I don’t think he knew for sure how he was going to do that, but he was going to do it his way. I talked to some friends and colleagues about the situation, but I didn’t even have my own lawyer. I used the corporate attorney because I thought the company’s objectives and my own personal objectives were perfectly aligned, so I didn’t need two lawyers. It was really just me, my dad, and two attorneys.”

The negotiations began in earnest in mid-2015 and initially were bumpy.

Fred (left) and Peter FrostFred (left) and Peter Frost (right)

“My father and I were not arch enemies but we were certainly adversaries when it came to the negotiation process. But I could understand why he was asking for what he was asking and, actually, his posture helped keep the drama off the table. I don’t think he was being unreasonable at all. I think it was a good thing he was the decision-maker and he was mostly concerned with himself, as he should be. I was glad for that because it reduced the number of negotiating partners and we’re here just one-onone.

Determining the value of the company, though, isn’t easy.

“There’s a value the company maintains for insurance purposes and one for tax purposes and there’s all kinds of valuation methods and ranges. There’s liquidation value, which is probably one-third to one-fourth of what the actual market value is that someone might be willing to pay for the individual elements. And then there’s the challenge that he didn’t want to sell at a bargain basement liquidation value because he doesn’t want to give me preferential treatment over my sisters. And he doesn’t really want to sell at full market value because there would be nothing on the back side for me and there would be no way I could work the company out of the debt we’d be saddled with.

Finally, the two parties agreed on a number. It was luck and coincidence that brought them together.

“He proposed a number that was, funnily enough, reasonable and very close to what I was thinking. He probably thought that if I had to raise any more money we wouldn’t be able to make it work or we might have to sell off assets to raise the money. But the number he came up with was in the ballpark of what we thought would be reasonable. And he didn’t use science. It was pretty amazing that we arrived at it. And suddenly there was momentum and the transaction was within reach.”

Still, Frost said, he had to remind some parties that this was a family-friendly transaction.

“He had his lawyer, arguably a nice guy, but the moment lawyers get involved it starts feeling more like a contentious divorce and they started behaving like real adversaries. I asked my lawyer at one point to call my father’s lawyer and remind him that regardless of the outcome of this transaction, my father and I are still father and son. There doesn’t have to be a decisive winner and a decisive loser, which it seemed they were going for. We’ve got to have it a win-win on both sides. In order for the relationship to perpetuate in any meaningful way, we can’t be screwing over each other and after it’s over, never speaking to each other again. Both sides have to bend.”

The father and son closed on the deal last fall. Reflecting on it all now, Peter Frost says there are three elements that have to be maintained in any family succession.


“You have to understand what you’re up against and what everyone’s motivations are and be able to appreciate the pressures, both socially and economically, that they’re under that might be driving them. You have to be generous. It depends on what you want for the family and what’s most important to you. Really, this transition stuff is an enormous pain. And people get tied up in the money, in the status and all that kind of stuff and it makes those negotiations between fathers and sons difficult. Certainly the money and the opportunity to continue to be gainfully employed and well paid was important to me. But I was also desperate to maintain the company culture. Part of my identity and everybody’s identityfrom the guy sweeping the floor to the CEOis tied up in who they are here and what they have accomplished within this business. I want to create an environment that allows these people to become who they want to become as human beings. Yes, we make metal components and we make them for medical devices and firearms companies and so forth. But we are 400 people, all of whom are trying to get to a point where we can look back when we’re in our rocking chair years and be proud of what we’ve accomplished.


“There has to be trust on both sides. I had to trust that he was not going to take a posture that would leave me and my sisters in dire straits, and he had to trust me that I’m not going to squander the assets and be flying around in corporate jets the minute I take over. I think the hardest part for him was giving up control. It’s like forging a contract with your son, and you know people break contracts all the time. He wanted to keep adding different wording here and there, for this and for that, and finally it occurred to him that between all of the bricks spelled out in the contract was going to be the mortaror trustholding it all together. He had to trust his kid.”


“The key ingredient was that we were both flexible. If flexibility wasn’t there and the willingness to bend on both sides wasn’t there, we’d still be negotiating or we would have walked away by now.

Now, when he has some free time, Peter concedes he thinks about what’s ahead for him in this same context: he has three children.

“I’m going to be in an exact same boat as him in 15 to 20 years. So how would I do it differently? Being a patriarch now, where before I was the child, is difficult. I think that if the patriarch, the person in charge, has the transition in mind and is willing to work on it actively and work through the issues in advance, it might make for a more orderly transition.”

This content was produced by Boston Globe Media's Studio/B in collaboration with the advertiser. The news and editorial departments of The Boston Globe had no role in its production or display.