Six Degrees of Heller
Kevin Bacon may be the lynchpin for connections in Hollywood, but for Midwest M&A, many can trace their roots to Heller Financial
January 27, 2012
If anyone doubts that in M&A, who you know matters as much as what you know, consider the case of Heller Financial. The Chicago finance firm rose to prominence in the 1980s and 1990s by focusing its sights squarely on the burgeoning middle market and by nurturing a deep and talented bench. Not only did the firm score a purchase by GE Capital for $5.3 billion in cash in 2001, but it also scouted and trained a generation of dealmakers. Today, 700-plus Heller former teammates have dispersed to hundreds of firms, where their common culture and collaboration continue to permeate every aspect of dealmaking in the Midwest and beyond.
Heller Financial was born in 1985, out of the phoenix's ashes of Walter E. Heller, which had been founded in 1919 and was acquired by Fuji Bank in 1984. Fuji poached a pair of executives from GE, Norm Blake and Bob Koe, to run the new firm, christened Heller Financial. Blake and Koe quickly changed the firm's focus from a leasing and asset-based commercial real estate lending company to a broader lending institution to serve the middle market - which was becoming increasingly important to the private equity community as middle market firms and divisions started to sprout.
"There was a lot of talk about the larger firms at that time, the KKRs and Fortsmann Littles, but there was real opportunity in the middle market," says Charlie Hubner, a managing principal at RCP Advisors, who had been hired at Heller to run its capital markets division. "Having a laser focus on the middle market distinguished the firm. We weren't trying to be everything to everyone anymore. We wanted to own the market."
The point wasn't lost on GE Capital. "They have built a franchise around the small to middle-market customer, companies with revenues from $5 million to $250 million," said GE Capital CEO Dennis Nayden, in a conference call announcing the acquisition. "That is the fastest growth market in the world.''
In the early 1990s the leverage buyout industry was beginning to boom. In the early 80s, people were skeptical of private equity, largely because the buyouts that had made headlines were mainly unsolicited, but by the end of the decade, the industry started to earn respectability. However, all the deals at that point had been large cap. Looking for pockets of growth and inefficiencies to take advantage of, PE professionals started to focus on the middle market. Black and Koe had the foresight to see this coming.
In its quest to be a top lender in the middle market, Heller launched many new product lines, including an energy investment banking division and a cash lending business, which was a new concept at the time. To run these news products, the company sought out highly creative, energetic and entrepreneurial talent. Additionally, the bank was not afraid to promote young, ambitious professionals from within.
Today, many of the folks who flowed through the once untouchable firm became the next generation of top middle-market dealmakers. What's more, many middle-market leaders today credit part of their success to the time spent at Heller, the relationships they formed there and have since nurtured.
For example, the founding team at Antares Capital, which was acquired by GE Capital in 2005, met while working together at Heller in the early 1990s. In 1996, 12 professionals left together and founded the new firm. Most of that original team still works together at GE Antares Capital. "It's fun to think about our time at Heller. We were in the formative years of our careers and it bound us closely. Relationships are built on common ground and experiences, which we all had. Here I am 15 years later still working with 11 of the 12 guys I started with," says David Brackett, a senior managing director with GE Antares Capital.
Although most ex-Heller employees aren't working together at the same firm, many collaborate regularly. For example, Brian Demkowicz, who worked at Heller out of college for eight years and later launched Huron Capital, a lower middle-market, private equity firm, still works with many of his former colleagues. Last July, Huron closed a deal to recap TouchPoint Print Solutions, a document management and printing business. The lenders on the deal were GE Antares as well as NXT Capital. What's more, RCP Advisors, as well as BMO Harris Bank, are limited partners in Huron's funds.
