Industries
Capital Markets Report 2007
June 2007
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Our annual update on activity among the state's venture capital/private equity firms and investment banking community
Avondale Partners | Brentwood Capital Advisors| Clayton Associates | Coleman Swenson Booth| Council Ventures | Decosimo | Delta Capital Management | Gen Cap America | Harpeth Capital | MB Venture Partners | Pharos Capital | Southern Appalachian Fund
Venture Capital/Private Equity
The verdict is in. It is no longer in vogue to be a publicly traded company. At least in Tennessee it isn't—the likes of HCA, Central Parking and Dollar General voted with their shareholders' hands and feet in 2006 and early 2007. Six Tennessee-based companies ran away from Sarbanes-Oxley, the bogeyman of the stock exchange, into the sheltered, private embrace of cash-rich national buyout giants like Kohlberg Kravis Roberts (KKR) and the Blackstone Group. As a result, large institutional investors such as university endowments and pension funds have warmed up to placing their money in private equity and buyout firms—previously considered nontraditional investment venues. While all the buzz and momentum seem to concentrate around the buyout funds, home-grown venture capitalists, most of whom operate with mere tens—not hundreds—of millions of dollars, are forced to look for new ways of keeping their businesses vibrant and interesting to the outside world. If 2005 was marked by the increasing willingness of venture capitalists to fund early-stage businesses (a niche historically reserved for angel investors), that trend continued in 2006, along with more signs of overcrowding. Tennessee venture capital firms are admitting that they have to go outside of the state to look for everything from funding to investment prospects. At the same time, New York and other out-of-state VCs, which not so long ago wouldn't leave their respective neighborhoods, are increasingly parachuting into Tennessee—and especially Nashville—to look for health care deals, says John Gerber of Private Capital Advisors. Facing competition, several Tennessee VCs decided to settle with raising smaller funds in 2006, while no new venture capital firms entered the market. At least 10 venture firms in the state are still intent on raising new funds, but many admit that it remains to be seen how large institutional investors will take to their diminished size. Perhaps out of similar concerns, Coleman Swenson Booth of Franklin appears on the fence about raising a fund this year, and has joined forces with another local firm, SSM Ventures. Full of new trends but no fresh faces among the established cadre of Tennessee private equity and venture firms, 2006 was a busy year. Here are the highlights.
Clayton Associates
Out-of-state players may be increasingly active in Nashville, but that does not mean that local firms can't join in on the action. When national private equity firm Thoma Cressey Equity Partners of Chicago backed Haven Behavioral Healthcare last July, Clayton Associates was part of the deal. It was familiar territory for Clayton: both Haven's CEO Vern Westrich and CFO Page Barnes previously ran the behavioral health division of Ardent Health Services, in which Clayton had a stake. (That division was sold in 2005 to Psychiatric Solutions.) Also of note for Clayton, an 11-year-old private equity firm in Franklin that invests in early-stage growth companies and real estate, is the placement of its co-founder Bill Cook in charge of negotiating private-equity investments and due diligence at ConduIT Corp. In the meantime, Clayton has not finished raising its fifth fund. Its existing $100 million portfolio, spread across four funds, includes investment counseling outfit Balentine & Co., hospital chain IASIS Healthcare and Psychiatric Solutions. The firm continues to favor health care services and technology firms as investment targets, but is not averse to communications, health sciences and biotech deals. During the past decade, it has participated in 70 private equity transactions—not a bad track record given that its founders initially eyed their creation as a consulting shop. As a further validation of Clayton's efforts, corporate heavyweight Ingram Industries recently bought a minority stake in the private equity firm, and Ingram's chief John Ingram now sits on the Clayton Associates board.
Out-of-state players may be increasingly active in Nashville, but that does not mean that local firms can't join in on the action. When national private equity firm Thoma Cressey Equity Partners of Chicago backed Haven Behavioral Healthcare last July, Clayton Associates was part of the deal. It was familiar territory for Clayton: both Haven's CEO Vern Westrich and CFO Page Barnes previously ran the behavioral health division of Ardent Health Services, in which Clayton had a stake. (That division was sold in 2005 to Psychiatric Solutions.) Also of note for Clayton, an 11-year-old private equity firm in Franklin that invests in early-stage growth companies and real estate, is the placement of its co-founder Bill Cook in charge of negotiating private-equity investments and due diligence at ConduIT Corp. In the meantime, Clayton has not finished raising its fifth fund. Its existing $100 million portfolio, spread across four funds, includes investment counseling outfit Balentine & Co., hospital chain IASIS Healthcare and Psychiatric Solutions. The firm continues to favor health care services and technology firms as investment targets, but is not averse to communications, health sciences and biotech deals. During the past decade, it has participated in 70 private equity transactions—not a bad track record given that its founders initially eyed their creation as a consulting shop. As a further validation of Clayton's efforts, corporate heavyweight Ingram Industries recently bought a minority stake in the private equity firm, and Ingram's chief John Ingram now sits on the Clayton Associates board.
Coleman Swenson Booth and SSM Partners
On April 2, private equity firm SSM Partners announced adding Larry Coleman and David Swenson as venture partners, to focus on health care services and IT investments. While Coleman was quick to point out that it was not a merger and that Coleman Swenson Booth continued as a stand-alone venture capital fund, SSM's release stated that "Dr. Coleman and Mr. Swenson will be integrally involved in the sourcing, evaluation and management of health care investments for SSM." Coleman says he and Swenson are keeping their existing funds with 17 portfolio investments, of which only one—SGx Pharmaceuticals—is not yet profitable. ("It's a biotech company, which typically takes much longer to reach profitability.") Another investment, Elder Health, which specializes in personalized care to nursing home residents, appears on track to becoming a $1 billion company. Only a few years ago, such a company would have been ripe for an IPO, but Coleman observes that "in the current regulatory environment [Elder Health is] something you can't take public even if you want to." So for the last two years, the duo sold its ripe companies to financial buyers who take them further up—an exit that Coleman says works very well. It helps that "the multiples they are paying are as good as you could have gotten in an IPO." In the instance of Passport Health Communications (a deal in which Coleman Swenson Booth is involved hand-in-hand with SSM Partners), the sale of the company landed 11 times EBITDA. So, unless it's an IT company, which tend to have strong recurring revenues, Coleman says that the IPO market is pretty much dead for small companies. That leaves venture funds to scour the earth for strategic buyers or private entities who want to take those companies further, perhaps even public somewhere down the road. Regarding the prospects of future fundraising at Coleman Swenson Booth, Coleman is still on the fence: "Dave and I have been at it for 25 years. We haven't made up our minds yet of whether to raise another fund or apply this expertise with other groups." He adds that firms like Coleman Swenson are better off doing smaller deals, but the question of whether institutional investors take a liking to smaller funds remains unanswered.<
On April 2, private equity firm SSM Partners announced adding Larry Coleman and David Swenson as venture partners, to focus on health care services and IT investments. While Coleman was quick to point out that it was not a merger and that Coleman Swenson Booth continued as a stand-alone venture capital fund, SSM's release stated that "Dr. Coleman and Mr. Swenson will be integrally involved in the sourcing, evaluation and management of health care investments for SSM." Coleman says he and Swenson are keeping their existing funds with 17 portfolio investments, of which only one—SGx Pharmaceuticals—is not yet profitable. ("It's a biotech company, which typically takes much longer to reach profitability.") Another investment, Elder Health, which specializes in personalized care to nursing home residents, appears on track to becoming a $1 billion company. Only a few years ago, such a company would have been ripe for an IPO, but Coleman observes that "in the current regulatory environment [Elder Health is] something you can't take public even if you want to." So for the last two years, the duo sold its ripe companies to financial buyers who take them further up—an exit that Coleman says works very well. It helps that "the multiples they are paying are as good as you could have gotten in an IPO." In the instance of Passport Health Communications (a deal in which Coleman Swenson Booth is involved hand-in-hand with SSM Partners), the sale of the company landed 11 times EBITDA. So, unless it's an IT company, which tend to have strong recurring revenues, Coleman says that the IPO market is pretty much dead for small companies. That leaves venture funds to scour the earth for strategic buyers or private entities who want to take those companies further, perhaps even public somewhere down the road. Regarding the prospects of future fundraising at Coleman Swenson Booth, Coleman is still on the fence: "Dave and I have been at it for 25 years. We haven't made up our minds yet of whether to raise another fund or apply this expertise with other groups." He adds that firms like Coleman Swenson are better off doing smaller deals, but the question of whether institutional investors take a liking to smaller funds remains unanswered.<
Council Ventures
Gary Peat, founder of this venture capital firm targeting early-stage technology companies has a bone to pick with PriceWaterhouseCoopers' annual Money Tree Report, which documented 14 venture deals in Tennessee with a total of $97 million invested during 2006. Those findings caused some skeptics to doubt the vibrancy of Tennessee-bred venture capital, but Peat disagrees. "I don't see a dramatic decline, or a big increase in traditional pools of private equity," he says. "If 2006 isn't as big as 2005, I'll eat my hat."
Gary Peat, founder of this venture capital firm targeting early-stage technology companies has a bone to pick with PriceWaterhouseCoopers' annual Money Tree Report, which documented 14 venture deals in Tennessee with a total of $97 million invested during 2006. Those findings caused some skeptics to doubt the vibrancy of Tennessee-bred venture capital, but Peat disagrees. "I don't see a dramatic decline, or a big increase in traditional pools of private equity," he says. "If 2006 isn't as big as 2005, I'll eat my hat."
Peat's concern is that the Money Tree Report doesn't take into account all the done deals in the state, because it is simply impossible. "There's a fair amount of sophisticated activity that doesn't get reported by Money Tree and the like," Peat says. "Think about how many entrepreneurs there are in Nashville who over the years made hundreds of millions of dollars, how many family offices there are, and hugely successful companies that benefited from that." On the subjects of benefits, Peat notes that his firm cashed out of California-based data protection firm EVault, which sold last December to publicly traded Seagate Technologies for $185 million: "We did exceptionally well for our investors. EVault is a poster child for our concept." Others benefiting from EVault's sale include Massey Burch Capital Corp, River City Capital Funds of Cincinnati, Toronto's B.E.S.T. Fund, and former EVault chairman, Chip Lacey, who used to run Ingram Micro.
Delta Capital Management
Leading a venture capital firm with investment interests similar to those of Clayton Associates, Delta Capital chief Don Mundie made a strategic—and a very telling—decision last year by relocating the firm from Memphis, where it was founded in 1992, to Nashville. Mundie, who plans to retire from the fund soon after the move, says the decision was spurred by the need to be closer to Delta's Midstate investments, of which he has just two: Franklin-based pesticide maker EcoSmart Technologies, which recently raised $35 million, and managed health care company Windsor Health Group. Presumably, Delta's relocation also has to do with gaining access to a wider pool of investment prospects in Nashville's health care industry. Now run by Mundie's heir apparent, Mike Smith, Delta's portfolio ($90 million under management, assembled from institutional and private investors) consists of 25 companies, including Chattanooga's Smart Furniture and appraisal firm Valocity Corp. of Memphis. Aside from relocation hassles, Mundie has been trying to close Delta's new $50 million fund by the end of the first quarter—a fund he says will target a dozen or so companies in health care, IT, logistics, telecom and software sectors.
Leading a venture capital firm with investment interests similar to those of Clayton Associates, Delta Capital chief Don Mundie made a strategic—and a very telling—decision last year by relocating the firm from Memphis, where it was founded in 1992, to Nashville. Mundie, who plans to retire from the fund soon after the move, says the decision was spurred by the need to be closer to Delta's Midstate investments, of which he has just two: Franklin-based pesticide maker EcoSmart Technologies, which recently raised $35 million, and managed health care company Windsor Health Group. Presumably, Delta's relocation also has to do with gaining access to a wider pool of investment prospects in Nashville's health care industry. Now run by Mundie's heir apparent, Mike Smith, Delta's portfolio ($90 million under management, assembled from institutional and private investors) consists of 25 companies, including Chattanooga's Smart Furniture and appraisal firm Valocity Corp. of Memphis. Aside from relocation hassles, Mundie has been trying to close Delta's new $50 million fund by the end of the first quarter—a fund he says will target a dozen or so companies in health care, IT, logistics, telecom and software sectors.
Gen Cap America
Over at Gen Cap America, which is in the second year of investing its $100 million Southvest V fund, president, CEO and founder Barney Byrd is happy to share the spotlight that buyout firms have been experiencing nationally. "We got more funding during the past year— much more from several state pension funds than before," he says. "It's a result of a longer track record of success and recognition of the buyout market in general." Operating under the slogan "Private Equity for Business," Gen Cap America has carved out a niche for itself in deals that fall under one of the four categories: management buyout, recapitalization, corporate divestiture or family succession. Early this year, the firm acquired Metro Boiler Tube Co. of Ringold, Ga., and bought out Florida-based custom boat trailer company Myco Trailers. Comparing his market niche to megadeals like the HCA purchase by Merrill Lynch, Bain and KKR, Byrd says that smaller businesses with $5 million to $100 million in revenue can be bought for better pricing multiples—four or five times cash flow, versus 10 times cash flow for large companies. Gen Cap America has cut its teeth on small-cap transactions since the mid-1980s, and Byrd is intent on keeping it that way. "We're on the front end of seeing more private equity deals in the future, especially involving companies with slow earnings," he says, chiming in with experts across the country on the effect of Sarbanes-Oxley—"lots of legal issues, so being private can look attractive." During the past year, Gen Cap America exited out of four companies, resulting in $100 million in proceeds. Those deals included Tennessee Mat and Dayton Parts. Expecting a heavier workload in the years ahead, Byrd made two hires last year, bringing in Chris Godwin from Chicago private equity firm Draupnir and Hayes Bryant of UBS Investment Bank in New York—Both joined Gen Cap America as vice presidents.
Over at Gen Cap America, which is in the second year of investing its $100 million Southvest V fund, president, CEO and founder Barney Byrd is happy to share the spotlight that buyout firms have been experiencing nationally. "We got more funding during the past year— much more from several state pension funds than before," he says. "It's a result of a longer track record of success and recognition of the buyout market in general." Operating under the slogan "Private Equity for Business," Gen Cap America has carved out a niche for itself in deals that fall under one of the four categories: management buyout, recapitalization, corporate divestiture or family succession. Early this year, the firm acquired Metro Boiler Tube Co. of Ringold, Ga., and bought out Florida-based custom boat trailer company Myco Trailers. Comparing his market niche to megadeals like the HCA purchase by Merrill Lynch, Bain and KKR, Byrd says that smaller businesses with $5 million to $100 million in revenue can be bought for better pricing multiples—four or five times cash flow, versus 10 times cash flow for large companies. Gen Cap America has cut its teeth on small-cap transactions since the mid-1980s, and Byrd is intent on keeping it that way. "We're on the front end of seeing more private equity deals in the future, especially involving companies with slow earnings," he says, chiming in with experts across the country on the effect of Sarbanes-Oxley—"lots of legal issues, so being private can look attractive." During the past year, Gen Cap America exited out of four companies, resulting in $100 million in proceeds. Those deals included Tennessee Mat and Dayton Parts. Expecting a heavier workload in the years ahead, Byrd made two hires last year, bringing in Chris Godwin from Chicago private equity firm Draupnir and Hayes Bryant of UBS Investment Bank in New York—Both joined Gen Cap America as vice presidents.
MB Venture Partners
Gary Stevenson, the firm's principal, has at least two reasons to think that 2006 "has been a terrific year in life sciences in Tennessee." Those reasons are the initial public offerings of GTx in Memphis and Nashville's BioMimetic Pharmaceuticals—the first noteworthy exits for the venture capital firm since it was formed in 2002 with the money of Memphis business titan and AutoZone founder Pitt Hyde. "The IPO of BioMimetic was a highly visible medical device/biotechnology success in our state," Stevenson says. MB Venture's focus is on medical device and biotech companies in all stages of development. One of its early-stage investments, Protein Discovery of Knoxville, has attracted capital from throughout the state—a sign of cooperation and hope for the biotech industry in the state. Trying to further entrench Memphis as the place for musculoskeletal research in the national psyche, MB Venture hosts an annual conference on the subject. Last year, the conference attracted some 220 folks, including high-profile panelists Rich Ferrari of DeNovo Ventures in California and Jeff Barnes of Oxford Bioscience Partners in Boston. "Some of them have never been here before to prospect for opportunities," Stevenson says. Of the funds' ongoing efforts, Stevenson says, "We're seeing the best deal flow we've ever seen."
Gary Stevenson, the firm's principal, has at least two reasons to think that 2006 "has been a terrific year in life sciences in Tennessee." Those reasons are the initial public offerings of GTx in Memphis and Nashville's BioMimetic Pharmaceuticals—the first noteworthy exits for the venture capital firm since it was formed in 2002 with the money of Memphis business titan and AutoZone founder Pitt Hyde. "The IPO of BioMimetic was a highly visible medical device/biotechnology success in our state," Stevenson says. MB Venture's focus is on medical device and biotech companies in all stages of development. One of its early-stage investments, Protein Discovery of Knoxville, has attracted capital from throughout the state—a sign of cooperation and hope for the biotech industry in the state. Trying to further entrench Memphis as the place for musculoskeletal research in the national psyche, MB Venture hosts an annual conference on the subject. Last year, the conference attracted some 220 folks, including high-profile panelists Rich Ferrari of DeNovo Ventures in California and Jeff Barnes of Oxford Bioscience Partners in Boston. "Some of them have never been here before to prospect for opportunities," Stevenson says. Of the funds' ongoing efforts, Stevenson says, "We're seeing the best deal flow we've ever seen."
Pharos Capital
Another private equity firm that has been blowing and going in the past year is Pharos Capital. In January, it took part in recapitalization of South Florida outpatient health care services provider MCCI Holdings (along with Goldman Sachs Urban Investment Group and GE Healthcare Financial Services). Last year's highlights include leading the $30.5 million preferred equity placement into Pioneer Surgical Technology of Michigan; providing a $60 million financing to smartphone content firm Handango along with SSM Partners and four other firms; as well as leading a $26 million Series E round, along with Fujitsu Siemens Computers, for Massachusetts technology company Egenera Inc., which was conceived in 2000 by former technology chief of Goldman Sachs. Also of note, Pharos' longtime associate Anna Kovalkova, who joined the firm in 1998, was promoted last summer to vice president in the Nashville office.
Another private equity firm that has been blowing and going in the past year is Pharos Capital. In January, it took part in recapitalization of South Florida outpatient health care services provider MCCI Holdings (along with Goldman Sachs Urban Investment Group and GE Healthcare Financial Services). Last year's highlights include leading the $30.5 million preferred equity placement into Pioneer Surgical Technology of Michigan; providing a $60 million financing to smartphone content firm Handango along with SSM Partners and four other firms; as well as leading a $26 million Series E round, along with Fujitsu Siemens Computers, for Massachusetts technology company Egenera Inc., which was conceived in 2000 by former technology chief of Goldman Sachs. Also of note, Pharos' longtime associate Anna Kovalkova, who joined the firm in 1998, was promoted last summer to vice president in the Nashville office.
Southern Appalachian Fund
As of press time, Grady Vanderhoofven and company have stayed busy as lead investor in Tricycle, Chattanooga-based maker of simulated carpet samples and a local technology darling. This undisclosed infusion was done in partnership with Nashville Capital Network (NCN), an angel group which has been building up its name around the state by putting investors in touch with business plans in need of small financings. This time, NCN is handling half of the investment in Tricycle, having assembled a respectable cache of institutional investors, according to Sid Chambless, NCN's tireless leader and Vanderbilt Owen School alum. According to sources in East Tennessee money circles, Tricycle has reached break-even cashflow, having received 10 times the revenue compared to 2004.
As of press time, Grady Vanderhoofven and company have stayed busy as lead investor in Tricycle, Chattanooga-based maker of simulated carpet samples and a local technology darling. This undisclosed infusion was done in partnership with Nashville Capital Network (NCN), an angel group which has been building up its name around the state by putting investors in touch with business plans in need of small financings. This time, NCN is handling half of the investment in Tricycle, having assembled a respectable cache of institutional investors, according to Sid Chambless, NCN's tireless leader and Vanderbilt Owen School alum. According to sources in East Tennessee money circles, Tricycle has reached break-even cashflow, having received 10 times the revenue compared to 2004.
Investment Banks
Tennessee investment bankers still had their hands full with deals in 2006, but some began pondering their collective future more so than ever before—a future that promises a slowdown in business activity. To an untrained eye, the market could not have looked better. Awash in mergers and acquisitions, primarily because valuations are attractive to sellers and people raising capital in Tennessee, underwriters are still able to make a pretty penny on commissions. "Lenders are very aggressive right now, and we still have not seen the slowdown as it happened in the housing market," says Tom Wylly of investment bank Brentwood Capital Advisors. But the playing field is becoming increasingly competitive, especially for the firms looking for commissions from small- and medium-size deals. Just as in the venture capital business, overcrowding is one of the first challenges mentioned by investment bankers polled for this article. While 2004/2005 saw only one player strike out—Herenton Capital Management of Memphis shut down its bank to focus solely on money management—the following year at least three outfits either decided to close offices in Tennessee or ditch the banking business entirely. FTN Financial, for instance, has been slowly downsizing its New York investment banking group Alterity Partners after shutting down its Nashville office in late 2005. FTN's banking headcount in New York has declined from 15 to five in less than two years. Chuck Byrge, who left FTN to form West End Capital Partners and almost immediately thereafter merged it with Harpeth Capital in Nashville, now says that his parent company is weighing the pros and cons of combining its consulting and investment banking functions. Jefferies & Co. is closing down its banking operation in Nashville as its longtime leader, Catherine Gemmato-Smith nears retirement, according to several sources in the industry. SunTrust Robinson Humphrey's Nashville office dodged a bullet last year as Morgan Joseph hired away Gordon Pollock as managing director, citing a desire to boost its banking presence. After almost signing off on the closure of its Nashville investment banking operation, SunTrust decided to keep the branch for the time being, but shifted its focus from education to health care. Still, given the amount of capital waiting to be invested, one Tennessee investment banker says "if you're not busy now, you've got to be doing something wrong." Brentwood Capital's Wylly agrees with a note of caution: "All eight cylinders are clicking in the market. The question is, ‘How long is it going to last?'"
Avondale Partners
In 12 to 18 months, the bear market is possible, although not imminent, says Jeff Nahley, head of investment banking at Avondale. This boutique firm that also has equity research, sales and trading divisions, participated in a bullish $2.5 billion worth of transactions last year, compared with $2 billion in 2005. "We hit our stride," sums up Nahley, observing the market headwinds from the seventh floor of One American Center in Nashville. Last fall, his firm was a financial advisor to Advocat of Brentwood amid restructuring of its preferred stock and subordinated debt held by Omega Healthcare Investors. Among other prominent clients, Avondale advised Ascent Behavioral Health, Goldleaf Financial, and HealthSouth in the sale of its Cedar Court Rehab Hospital in Australia to Epworth Foundation and ING Real Estate. In private placements and debt transactions, Avondale's highlights of the past year include working on $35 million of senior credit facilities for CV Holdings in New York, as well as handling $5 million of senior and mezzanine debt for 8e6 Technologies of California. A large chunk ($1.3 billion) of Avondale's transaction work was in the public equity arena. The firm participated in Mueller Water Products' $460 million IPO, handled follow-on offerings for Providence Service Corp. ($66 million) and the GEO Group ($106 million). During its six years of operation, Avondale has spread its activity to nearly every state in the union, with the exception of West Virginia, New Mexico, Arkansas, Maine and a handful of other states whose equity markets are undoubtedly waiting to be conquered. Being in the middle of the country continues to be a good fit for the firm. Nahley dares any Wall Street outfit to beat Avondale's operating costs: "If you're in New York, the cost structure will eat you alive." (An early sign of the cost-structure squeeze is the recent merger between California's Think Equity and UK-based Panmure Gordon & Co.) Aside from negotiating rental rates, what Nahley is most proud of is the ability of his boutique bank to be "transaction-agnostic." "We've had 15 deals in each bucket—advised public companies, sold private businesses, been on the cover of deals, did IPO and follow-on investments, as well as private fundraising."
In 12 to 18 months, the bear market is possible, although not imminent, says Jeff Nahley, head of investment banking at Avondale. This boutique firm that also has equity research, sales and trading divisions, participated in a bullish $2.5 billion worth of transactions last year, compared with $2 billion in 2005. "We hit our stride," sums up Nahley, observing the market headwinds from the seventh floor of One American Center in Nashville. Last fall, his firm was a financial advisor to Advocat of Brentwood amid restructuring of its preferred stock and subordinated debt held by Omega Healthcare Investors. Among other prominent clients, Avondale advised Ascent Behavioral Health, Goldleaf Financial, and HealthSouth in the sale of its Cedar Court Rehab Hospital in Australia to Epworth Foundation and ING Real Estate. In private placements and debt transactions, Avondale's highlights of the past year include working on $35 million of senior credit facilities for CV Holdings in New York, as well as handling $5 million of senior and mezzanine debt for 8e6 Technologies of California. A large chunk ($1.3 billion) of Avondale's transaction work was in the public equity arena. The firm participated in Mueller Water Products' $460 million IPO, handled follow-on offerings for Providence Service Corp. ($66 million) and the GEO Group ($106 million). During its six years of operation, Avondale has spread its activity to nearly every state in the union, with the exception of West Virginia, New Mexico, Arkansas, Maine and a handful of other states whose equity markets are undoubtedly waiting to be conquered. Being in the middle of the country continues to be a good fit for the firm. Nahley dares any Wall Street outfit to beat Avondale's operating costs: "If you're in New York, the cost structure will eat you alive." (An early sign of the cost-structure squeeze is the recent merger between California's Think Equity and UK-based Panmure Gordon & Co.) Aside from negotiating rental rates, what Nahley is most proud of is the ability of his boutique bank to be "transaction-agnostic." "We've had 15 deals in each bucket—advised public companies, sold private businesses, been on the cover of deals, did IPO and follow-on investments, as well as private fundraising."
That experience, he says, coupled with low operating costs, allows Nahley and a staff of 22 to face bravely the prospect of a market downturn. In what he calls an "intensely competitive environment," Nahley is convinced that Avondale's status as a self-funded company will help it prevail in the tough times ahead. Going on seven years with no turnover in the shareholder ranks, Avondale must be doing something right.
Brentwood Capital Advisors
Tom Wylly's seven-person shop was involved in four deals in the past year. It handled the acquisition of Ceridian by Michigan-based health coaching company Leade Health, assisted in the sale of Passport Health Communications, and was exclusive financial advisor to the board of Universal Tax Systems during its $80 million recapitalization. The fourth deal, Wylly says, is confidential. If the deal count is any measure of longevity, BCA has been on a steady, four-deals-a-year pace since 2004. (BCA handled seven transactions in the year of its formation in 2002, followed up by six deals in '03.) According to Wylly, his company is pursuing six assignments this year, and he hopes that everyone is as busy as he is.
Tom Wylly's seven-person shop was involved in four deals in the past year. It handled the acquisition of Ceridian by Michigan-based health coaching company Leade Health, assisted in the sale of Passport Health Communications, and was exclusive financial advisor to the board of Universal Tax Systems during its $80 million recapitalization. The fourth deal, Wylly says, is confidential. If the deal count is any measure of longevity, BCA has been on a steady, four-deals-a-year pace since 2004. (BCA handled seven transactions in the year of its formation in 2002, followed up by six deals in '03.) According to Wylly, his company is pursuing six assignments this year, and he hopes that everyone is as busy as he is.
Decosimo
Already established as a prominent accounting and international consulting firm, Decosimo has been retooling its investment banking division for future growth. Industry sources say that the firm's investment banking, which has been associated with Brown Associates, will emerge by the end of this year under a new name in order to more fully serve its clients.
Already established as a prominent accounting and international consulting firm, Decosimo has been retooling its investment banking division for future growth. Industry sources say that the firm's investment banking, which has been associated with Brown Associates, will emerge by the end of this year under a new name in order to more fully serve its clients.
Harpeth Capital
Harpeth Capital's chief investment officer Chuck Byrge has been more reserved about the specifics of his business lately. Having advised companies in two M&A deals and two capital-raising transactions last year, Byrge says Harpeth Capital prefers to be "very quiet" about what it's up to. Seeking middle-market transactions in health care and information technology, Harpeth Capital has not listed any more engagements since the ones that appeared in last year's report, which gives observers a reason to believe that the firm is moving closer to consulting function. Byrge confirms that move, albeit in a round-about way: "Combining consulting with investment banking could be an interesting model." To boost its name recognition, Harpeth Capital created an all-star advisory board last March, which consists of William Andrews, chairman of Corrections Corporation of America, Jim Bradford, dean of Vanderbilt University's Owen Graduate School of Management, Marty Dickens, Tennessee president of AT&T, as well as business titan and Harpeth investor Clayton McWhorter, among others. Attorney Sam Bartholomew, who is also an investor in Harpeth, chairs the advisory board. And to solidify its name outside of Tennessee, Harpeth's senior executive Turney Stevens joined the board of New York-based Kohlberg Capital Corp., a middle-market investment firm majority-owned by James A. Kohlberg, son of KKR co-founder Jerome Kohlberg Jr.
Harpeth Capital's chief investment officer Chuck Byrge has been more reserved about the specifics of his business lately. Having advised companies in two M&A deals and two capital-raising transactions last year, Byrge says Harpeth Capital prefers to be "very quiet" about what it's up to. Seeking middle-market transactions in health care and information technology, Harpeth Capital has not listed any more engagements since the ones that appeared in last year's report, which gives observers a reason to believe that the firm is moving closer to consulting function. Byrge confirms that move, albeit in a round-about way: "Combining consulting with investment banking could be an interesting model." To boost its name recognition, Harpeth Capital created an all-star advisory board last March, which consists of William Andrews, chairman of Corrections Corporation of America, Jim Bradford, dean of Vanderbilt University's Owen Graduate School of Management, Marty Dickens, Tennessee president of AT&T, as well as business titan and Harpeth investor Clayton McWhorter, among others. Attorney Sam Bartholomew, who is also an investor in Harpeth, chairs the advisory board. And to solidify its name outside of Tennessee, Harpeth's senior executive Turney Stevens joined the board of New York-based Kohlberg Capital Corp., a middle-market investment firm majority-owned by James A. Kohlberg, son of KKR co-founder Jerome Kohlberg Jr.
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