Third-Generation Succession Proves Tricky with Crain Family

The former headquarters of Colonial BancGroup in Montgomery, Alabama, was transformed into the Capitol Commerce Center after the Crain family acquired it for $10.2 million in 2010.

Searcy entrepreneur Paul Crain didn’t have to deal with any family complications to transition his namesake wholesale company to the next generation of ownership. When his son, Larry, talked him into acquiring a stake in the business and managing it 55 years ago, there were no other heirs in contention.

“It was not my dad’s desire for me to come back to be part of the business but just a dad’s desire to help an only child start a dream,” said Larry Crain Sr. of wanting to own a business.

His father was 46 at the time, interested in early retirement and mulling over a sale to employees to accomplish that. Three years out of college and working as a certified public accountant in Little Rock, Crain Sr. convinced his dad to sell to him instead.

“When I came into the business in 1966, I wanted to own 50% of the business, so in order to do it, I borrowed money from the local bank to finance my interest,” said Crain Sr., president of Crain Management Group.

With that, Paul Crain Wholesale became Crain Sales Co., precursors of today’s Crain family of ventures that operate under the Sherwood-headquartered group.

Crain Management Group tallied 2020 revenue of more than $618 million, ranking No. 23 among the largest private companies in Arkansas (see 2020 Brought Feast, Famine to Private Companies.) Based on projections, 2021 revenue is tracking toward $800 million, according to Crain Sr.

Unlike his father who died in 2007, the 79-year-old businessman doesn’t want to retire and relinquish control of the company. Over the years, that created a fractious rift with his two sons and an altered plan of succession that now looks to the fourth generation for corporate leadership.

Frustrated with their lack of operational autonomy, Larry Crain Jr. exited the family business in 2012, and Chris left in 2017. Despite the outcome, Crain Sr. wouldn’t change his approach to succession and estate planning.

Larry Crain Sr.

“I probably wouldn’t do anything different except make my offspring realize this is the plan and I won’t deviate from it,” he said. “So accept or know you will be removed from the will that is being created and the interests you have accumulated are minority interests that you will control in the future at your mother’s and my deaths.”

The strained father-son relationship grew into estrangement and an ongoing lawsuit by Chris Crain against his father. Among many things, the suit seeks to disentangle Crain Sr. from interfering with operations of the younger Crain’s Hyundai dealership in Conway.

Though owned by Chris Crain, management of the dealership falls under the dictates of Crain Automotive Holdings, controlled by his father.

Today, a string of 18 Arkansas automobile dealerships provides the revenue horsepower for Crain Management Group. This line of business didn’t join the corporate menu until 1990.

New Lines of Business

In 1966, Crain Sr. stepped into a wholesale business founded on his father peddling general merchandise ranging from fishing tackle to health and beauty aids. Paul Crain worked from the trunk of his 1953 Chevy before upgrading to a panel truck serving a clientele dominated by service stations, mom-and-pop grocery stores, cafes and bait shops.

The enterprise graduated from its first warehouse, the family garage, to a 10,000-SF facility when his son joined the ownership picture.

Crain Sr. helped his dad peddle goods while growing up. At one stop, he had an encounter with an inventive garage owner who concocted a recipe for grease-removing hand soap.

“He offered to sell me the formula for $15 dollars, and I bit, then started my Crain’s Handy Cleaner company,” Crain Sr. said. “The formula was to mix and heat Ivory Snow soap flakes and salt with boiling water then allow to jell.

“I had the local printing company make labels and then started selling the products to grocery stores and service stations out of the back of my car.”

Looking back, he noted with a laugh: “Not everything I’ve done has worked out.”

In 2002, entrepreneurial experimentation and opportunity would manifest in Crain Media and the addition of radio stations to the mix of investments.

Crain Sr. describes the media move as “purely by chance starting, with some local friends considering buying the local station that was being offered for sale. When that didn’t happen, the chain of buyers that followed developed financial problems due to lack of capital and I was approached to buy them out.”

In 2004, he dipped his toe in professional sports with the short-lived Arkansas RimRockers, an American Basketball Association franchise in North Little Rock, which morphed into a National Basketball Association Developmental League team in 2005-07.

Auto Options

Paul Crain dabbled in the auto parts business, which served as a gateway for Larry Crain Sr. to build a small chain of stores after buying out his father’s remaining stake in Crain Sales in 1981.

That effort resulted in 14 Karpro Auto Parts outlets in Arkansas, which generated sales of $26 million in 1999. The Karpro venture followed the 1977 purchase of KarGo Auto Parts Inc. of Memphis from the U-Haul Co. by Crain Sr. and his brother-in-law Danny Lesley.

The familiarity with the auto parts business and the relationship with dealerships that developed served as a launching pad to enter the car business.

“We were selling to Ford and GM dealers, primarily across the seven or eight states as a result of our being named direct distributors of Motorcraft [Ford] and AC-Delco [GM] original parts on their new vehicles,” Crain Sr. said. “As we did that over the years starting back in 1969-70, we made friends with dealers and started to see opportunities that could be developed out of the related operations.”

In addition to buying its first auto dealership (renamed Freeway Ford Lincoln Mercury in Benton), 1990 also hosted another milestone event in the corporate evolution.

Real estate investing as a separate enterprise joined the Crain family of ventures nearly 21 years ago after a $14 million deal was struck to sell KarPro Auto Parts to O’Reilly Automotive of Springfield.

O’Reilly bought the inventory and assets of 14 Arkansas stores and a distribution center while Crain retained ownership of the real estate.

O’Reilly consolidated the retail outlets into nine locations, which were leased from Crain along with the North Little Rock distribution center. The other five stores became the starting point for a portfolio of for-lease properties owned by Crain.

Shortly after the sale to O’Reilly, Crain closed on the $5.1 million purchase of the 50,900-SF GMAC Building in west Little Rock. The October 2000 office building acquisition marked the company’s first direct real estate investment in an income- producing property.

In November 2010, that was topped by what Larry Crain Sr. still considers his biggest real estate deal: the $10.2 million purchase from the Federal Deposit Insurance Corp. of a 209,000-SF office building and its three-story parking deck in Montgomery, Alabama.

The 15-acre development was the former corporate headquarters of Colonial BancGroup Inc., the defunct $26 billion bank holding company for Colonial Bank.

“When we acquired it, there were no tenants, and today it is fully occupied,” Crain Sr. said.

Renamed Capitol Commerce Center, the office building remains in the Crain portfolio while the GMAC Building was sold for $7.1 million eight years ago.

Source: The company