 |
 |
|
|
Hamilton Robinson
History
1984 - 1996
The firm was established by Hamilton (Tony) Robinson in 1984 to pursue a strategy of investing in smaller businesses in partnership with operating managers. Tony set a high standard of service, dedication to investment and management partners, and high ethical standards which remain the bedrock upon which the firm has grown. Funding was arranged through a group of three concurrent funds under the Spinnaker Funds moniker. A domestic limited partnership served a large family office, several institutions, and numerous individual investors. Two international funds served a variety of European family and private offices and one Middle Eastern investor. From the first LP funding in 1986 to the last fund distribution in 1996 this $38 million group of funds invested $33.3 million in five portfolio companies and realized proceeds of $95.9 million.
That group of funds invested in Yegen Financial Group (consumer loan origination services - 1987), Galveston-Houston Company (industrial components - 1987), DI Industries (domestic land drilling services - 1988), Maginnis and Associates (insurance brokerage - 1989) and AGCO Corporation (agricultural equipment - 1990). The most noteworthy investment of the fund was the 1990 acquisition of the AGCO Corporation, near Atlanta, GA from KHD of Cologne, Germany. Tony Robinson served as board chairman, Scott Oakford served as a director and temporary chief financial officer, and executive affiliate Richard Johnston served as a director. In a very difficult economic and industry environment, HRCo backed Robert Ratliff and his management team in this acquisition of a $200 million revenue equipment business which had once been the agricultural equipment component of Allis-Chalmers. HRCo took the company public through CSFB and Dillon, Read & Co. in 1992, with Howard Keenan and David Russell capably leading that effort at those banks. The business grew, effected numerous add-on acquisitions before and after the IPO, and today (2007) its sales exceed $5 billion with a market value of over $4 billion.
The investment team in Fund I was Tony Robinson, Scott Oakford and Robert Maroney, supported by executive affiliate Richard Johnston. Our CEO and top manager partners to whom we owe the bulk of the credit for the performance of our investments in this period were Bob Ratliff, Ed Swingle, John Shumejda, Jim Seaver, and Allen Ritchie who succeeded tremendously at AGCO; Carl Fusco who tried to turn around Yegen; Don Lang who ably led Maginnis; Max Dillard at DI Industries and Nathan Avery at Galveston-Houston who soldiered through the ups and downs of the energy service cycles.
1992 – 2000
HRCo continued its investment program with a series of three independent investments largely in partnership with leading financial institutions. HRCo became more adept at sourcing investments outside of the auction process. This “front end” of the private investment business for HRCo would not shift from this strategy in the future. Also becoming more codified during this period was the process of value creation post-closing. Culture change using many management tools, and development through add-on acquisitions, became clear value creation strategies. Investments included:
- the acquisition of Republic Realty Mortgage Corporation (commercial mortgage banking services) from First Interstate Bank in 1992;
- the acquisition of Maloney Industries Inc. (oil and gas process equipment) of Calgary from Jim Wolter, its long-time owner, in 1995; and
- the capitalization of Applied Process Solutions Inc. in 1998 to effect the acquisition of the T.H. Russell Company (oil and gas process equipment) of Tulsa, OK and the merger of Maloney Industries, then an Alberta registered corporation, into a new US registered C corporation.
All acquisitions were complemented with add-on acquisitions to accelerate development of the base businesses.
During this period HRCo refined its strategy of proprietary investment opportunity development, value purchasing, and growth through add-on acquisition. HRCo and its funds invested $28.3 million and returned $114.7 million to investors.
The investment team consisted of Scott Oakford, Tony Robinson (who retired in 1995), Chris Carmel, and Mark Riser. Executive affiliate Richard Johnston contributed importantly at Republic Realty. Key management partners included Al Behnke, Mike Luby, Vacys Garbonkus, John Fogarty, Ralph Winkler, Hal Purcell, John Levy and others at the industry leading Republic Realty Mortgage Corporation in Chicago, Pasadena, and Richmond; and Brad Goebel, Scott McFarlane, David Cook, Greg Chumik, David Zachariah, and Mitch Ulrey at Maloney and APSI in Calgary, Tulsa, and Birmingham England who grew the business in dramatic fashion. In all, 62 managers (82 total investors) participated in the value created in this portfolio of businesses, including mid-level operating managers to whom their participation in the equity value creation was a significant financial event for themselves and their families. We are unabashedly pleased with the results we have produced for our business partners. The single most rewarding aspect of our profession is seeing our partners succeed.
2000 – 2007
HRCo further strengthened its competitive position with the addition of Steve Crihfield in 2000, Phil Cagnassola in 2001, and Chris Lund in 2002 to its organization. Investment strategy was further refined to focus on culture change in acquired companies, lean process development, and development through add-on acquisition. Industry focus continued to be on high value added industrial equipment and processes (manufacturing, assembly, and distribution) and on business services – where HRCo has robust deal flow and much experience. The firm continued its efforts in non-auction deal sourcing and value investing which continued to mean seeking opportunities in less-than-perfect businesses where significant gain could be made by addressing identifiable issues. A second private equity investment fund was raised in 2001 in an SBIC format with private capital provided from long-time HRCo investor-partners and a new large financial institution.
Investments since 2000, 80% of which were non-auction transactions and 70% of which were control investments, include the following:
- the acquisition of Dexter Magnetic Technologies (industrial components) from Henkel/Loctite in 2001;
- the formation of Petreco International Inc. (oil and gas process equipment), a joint venture with Baker Hughes Inc., in 2001;
- the growth capital investment in Trillion Digital Communications (K-12 internet connectivity) in 2001;
- the acquisition of Black Clawson Converting Machinery (plastic extrusion and converting equipment) from a family owner in 2003;
- the co-investment in Lifestyle Media (specialty publications) in 2003;
- the acquisition of All Island Media Inc. (shopper publications) from the Wells Fargo Bank loan work out department in 2003;
- the co-investment in GranQuartz (industrial distribution) in 2004;
- the acquisition of The Fitzpatrick Company (pharmaceutical process equipment) from a family owner in 2005;
- the acquisition of Magnatech International (industrial equipment) from a family owner in 2006; and
- the recapitalization of the Davis-Standard Company (plastic extrusion and converting equipment) in 2006.
Numerous add-on acquisitions were made for these portfolio companies during these years. HRCo additionally developed a creative joint venture structure to allow large public companies to monetize non-core assets through a formal program of partnering with a private equity firm. Baker Hughes Inc. (NYSE: BHI) and Chemtura Corporation (NYSE: CEM) were two successful users of this method in partnership with HRCo.
Realized investments in Fund II as of early 2007 have generated $46 million of proceeds on $16 million of cost and the firm has an additional six portfolio companies in the Fund and another investment in a single purpose partnership. Total revenues of current HRCo companies approach a half-billion dollars. The businesses are profitable, growing, modestly levered, and have very significant manager and employee ownership. Co-investment in our transactions, primarily from Fund II partners, is significant.
Our CEO and key manager partners in this group of companies, to whom we again owe the credit for accelerated value creation, include Pete Peltier and Hank Lipschitz at Dexter; serial value creator Brad Goebel and his team at Petreco; Terry Johnson for his efforts, albeit unsuccessful, at Trillion; Mark Panozzo, Charlie Buckley, and a broad team at Black Clawson and Davis-Standard; Rich Megenedy, Bob Sussi, and Paul Gregory at All Island Media; Peter DeKok at GranQuartz; Tony DiVito at Fitzpatrick; and Shawn Anderson, Scott Klemas and Rose Hagy at Magnatech – who incidentally run the most efficient business we have ever seen. In total 86 managers (123 investors) participated in significant ownership at these companies.
HRCo has now developed a proven full-cycle private equity program dedicated to investors and operating-manager partners at the smaller end of the middle market. The program applies standard procedures and resources to the sourcing, closing, and developing methodologies refined over 20 years of small private company investing. Today the investment firm’s skills and experience closely match the target market. The front-end activities of originating and closing transactions with smaller companies is complemented by the post closing value creation process of culture change, lean process implementation and business development. These are the drivers HRCo uses today in practicing the art and science of building quality small businesses and generating competitive investment returns.
The outlook for the private investment business at the lower end of the market is favorable for practitioners with the skills, experience, resources, and temperament for dealing with the issues inherent in a small business investing. This relatively underserved market has seen service providers and competitors alike migrate to the big deal arenas, which suits us fine. Like the observer who witnessed a bank robbery and said it’s good to see that someone still appreciates the value of a dollar, we will still appreciate a niche business with a passionate management team even though the annual revenues at our high end might be less than the minimum annual earnings required to get a look from Warren Buffett, the big funds, or even the ITWs and Dovers, all quality buyers, who have moved up and out of our market. You will hear no complaints from us. David Swensen of Yale recently said “Size is the enemy of performance.” Who are we to argue with him?
|
|
|
|
|
|
