New owners hope that being out from under a struggling parent will help the boutique attract both employees and customers
By Ken Tarbous
April 23, 2010
Just weeks after four bankers purchased their firm from CIT Group, dealmakers at Edgeview Partners say their independence will help them focus more closely on advising clients and they'll be adding staff.
The atmosphere in Edgeview's Charlotte offices has changed since the "reacquisition," said Bill Morrissett, a co-founder of the middle-market firm and one of its new owners. "A real sense of passion, a sense of mission" that filled the offices in the pre-CIT days has returned.
Morrissett said that Edgeview's professional staff totals in the mid-20s and should reach 30 by yearend as his firm brings on analysts fresh out of college and associates out of business school. As the M&A market strengthens and the firm grows, senior hires will be made, he said.
(In 2007, the firm had between 45 and 50 bankers; the credit crisis forced it to cut staff, and some professionals left on their own.)
Since the reacquisition was announced April 5, Edgeview has received five invitations to compete for business. That may suggest the market views the boutique differently now that it is independent.
Within a year after purchasing Edgeview in July 2007, CIT was swamped by the credit crisis. Last year, the specialty lender landed in bankruptcy court — producing the largest prepackaged court workout in U.S. corporate history.
Bringing Edgeview under the CIT umbrella was the brainchild of Jeffrey Peek, then the lender's chief executive. Initially, the synergies were evident; Edgeview would put together deals, and CIT would help finance them. That got tougher when CIT's own balance sheet deteriorated.
"It became extraordinarily problematic for us to try to conduct our business with clients with that [CIT's credit problems] as the backdrop," said Morrissett, who reacquired Edgeview along with David Patterson, another co-founder; Ted Garner, who joined Edgeview as a partner in 2002; and John Tye, who joined in 2003. (The price was not made public.)
CIT has emerged from bankruptcy, and former Merrill Lynch CEO John Thain now runs it. Even before the bankruptcy process was started in November 2009, Edgeview wanted to spring itself from the lending company.
"We simply felt that we needed to separate ourselves from CIT, not because of any broad generalities surrounding CIT, but very specifically because of the issues CIT itself was facing and how that was impacting and was likely to continue to impact our business," Morrissett, who had left Edgeview last fall, said in a telephone interview with IDD this week.
Edgeview's bankers built relationships with individual bankers at CIT, especially the leverage finance professionals, he said, and he believes the individuals will likely work with one another again on future transactions.
The boutique has ambitious plans for the future, but they are tempered by a cautious view of the state of the marketplace, given the M&A activity levels of the past several years. In 2006, the value of U.S. deals with enterprise value of $300 million or less totaled $153 billion, according to Thomson Reuters. The value of such activity fell 2.6% in 2007, to $149 billion. It fell another 20.8% in 2008, to $118 billion, and 41.5% last year, to $69 billion.
A large percentage of Edgeview assignments involve advising firms that are up for sale. It is targeting aerospace and defense, building products, business services and energy services companies. Its bankers also advise firms in areas such as applied technology and transportation and logistics.
Edgeview has no immediate plans to grow beyond its Charlotte office, but Morrissett leaves open the possibility of other locations eventually.
The boutique traces its roots back to Bowles Hollowell Connor, where the partners worked in the 1990s on a broad range of "generalist" mergers and acquisitions. First Union purchased Bowles Hollowell in 1998, and Edgeview was founded three years later.
Raynard Benvenuti, managing director at Greenbriar Equity Group, said Morrissett's return is a good sign for the firm. "As long as Bill Morrissett and the people I know are there, I would depend upon that team, and I have confidence in them." In 2006, Benvenuti was the CEO of Stellex Aerostructures, then a Carlyle Group company, when Edgeview advised Carlyle on Stellex's sale to GKN PLC.
Edgeview also earned praise from private-equity professionals for its ability to get high valuations for companies it is selling. In some cases, firms purchasing companies advised by Edgeview brought it on as an adviser for subsequent deals.
"They have always done such a good job selling companies. They got such good values that we always had a hard time buying something from them. It's easier to engage them to sell things for you than to buy from them," said Sam Shimer, a partner at JHW Greentree Capital, which hired Edgeview to advise on the sale of its portfolio company Jan-Pro Holdings to a group led by Webster Capital.
Shimer and other market participants said the association with CIT was immaterial for Edgeview clients, since CIT's ability to finance deals wasn't that much of a concern for the boutique's sell-side clients.
"CIT never got involved in financing any of the transactions that Edgeview was involved with for us," said Shimer. "So there was no benefit of that relationship. There was nothing incremental to us from CIT."
Edgeview had its most successful year in 2006, when it closed nearly 25 transactions with $2.5 billion of aggregate enterprise value. According to former employees, morale inside the boutique began to sink within six months after CIT purchased the business. When credit conditions worsened and CIT's financial health became more precarious, some would-be clients were wary of engaging Edgeview for advisory work, the former employees said, because they worried that problems at CIT could scotch potential deals.
"Frankly, given some of CIT's economic travails in the last year, that may have made me hesitant to use them," said one market participant who has engaged Edgeview for advisory work in the past and asked not to be named. "You're not going to want to kick off a sale process — it's a six- to 12-month process, soup to nuts — you have a hard time going with a group that might be part of a parent that's economically unstable."
