You're absolutely right. Coats was recruited to run in 2010 because Republicans didn't think Hostettler or Stutzman could beat Bayh. Had Coats not ran in 2010, Bayh probably would have ran for reelection since it would have been much easier to beat Hostettler/Stutzman.
Coats had actually been raising money in 2014/2015 and was helping local candidates, so initially, word on the street was that he was thinking of running again. I think he decided against it when he got wind that Holcomb and Young wanted it, since he knew both would be able to keep the seat for Republicans. Had Bayh announced early on, though, I definitely could see Coats sticking around for another term to prevent Bayh from taking the seat. Perhaps work out a deal with the Republican Governor to retire after a couple years and pick his own successor.
The way you described Young and Holcomb made me think of some grandpa passing his business to his grandchildren for some reason lol. "You must take my spot now."