Living Legacy

There are certain firms that become a breeding ground for entrepreneurs and consequently new firms. When Bowles Hollowell Conner & Co. (known as BHC) opened its doors in 1975, the firm was just that. Firm founders Erskine Bowles (who later became President Bill Clinton's White House chief of staff), Thomas Hollowell and Charles Conner had the foresight to see that the M&A market was growing - not just with larger deals, but rather the opposite. An increasing number of smaller deals were proliferating, and Wall Street didn't seem to care much about them. In the mid-1980s, there were only about 25 middle-market private equity funds. Today, there are 2,500. BHC seized on the opportunity and created the first boutique investment bank dedicated to the middle market. The firm specialized in advising companies with annual revenue of between $30 million and $500 million and did so with superb service. Looking back, some argue that BHC's high-level service was better than that of its much larger bulge-bracket brethren.

During the process of building a legendary investment bank, the founders hired scores of professionals who had the entrepreneurial itch. Indeed, the founders of BHC had a knack for hiring strong talent. In 1993, Harvard Business School published a case study about the firm's recruiting process. The majority of the people that worked at the firm realized that BHC focused on its employees, which in turn pushed them to do their best.

"The culture at Bowles Hollowell was different," says Hiter Harris, co-founder of Harris Williams & Co. and a former BHC team member. "The words 'middle' and 'market' hadn't really been put together yet. The firm emulated some of the best banks in New York, but it was also innovative. It was based in Charlotte, versus New York, and the founders really focused on the people. Everyone there was learning," Harris adds.

In 1998, BHC was acquired by First Union, and then in 2001 Wachovia bought First Union. In the end, some of BHC's hires left before the bank was acquired by First Union, and others left after. Many went on to launch successful middle-market investment banking firms. Additionally, scores of associates left the firm to go to work at private equity firms, such as Advent International, the Audax Group, Berkshire Partners, the Carlyle Group LP (Nasdaq: CG) and Olympus Partners. The following is a look at some of the successful firms spawned by BHC and the legacy the bank has left behind.

Harris Williams & Co.

Harris Williams has solidified itself as a go-to firm in the middle market. Co-founders Chris Williams and Hiter Harris (pictured from left to right) both came out of BHC. Friends since Harvard Business School, Harris and Williams were recruited to BHC in 1987. At the time, there were eight professionals working there. It was the first year the firm had actually recruited in a formal way. The firm had just hired Steve Cummings from Kidder Peabody to come on as a fourth partner, and he started the associate and analyst programs and the recruiting process.

"It was about doing exceptional work, but it was also about quality of life and family. It was unique," remembers Williams.

Today, Harris and Williams try to run their shop similarly to how BHC operated. The founders focus on hiring the best talent and keeping them happy. Since Harris Williams & Co.'s founding in 1991, only a handful of people have left the firm. What's more, the firm has now grown to 215 people.

"Our goal was to serve clients well, hire the best talent and enjoy working together. We took these things to heart and knew success would come later if we followed these basics," says Harris. "For Bowles Hollowell and for us, it's about the people. We don't have a lot of assets, and our assets go home at the end of the day. You have to create something special to keep people wanting to work hard."

Adds Williams: "Both firms were founded by people who were entrepreneurial. It drives our culture as it did theirs. These are very important roots. Our experiences there helped us realize that we wanted to be deep in the middle market. We saw more money coming into the asset class from the limited partners and recognized the opportunity."

During the Richmond, Va.-based firm's early years, Harris Williams worked with what were then considered small shops, such as the Riverside Co. and Linsalata Capital. Today, Harris Williams still works with these firms and other private equity firms and major corporations. The firm completed more than 75 M&A transactions in 2012.

"We had very humble beginnings. We shared a computer and office, but the seeds for something great were planted," muses Harris.

Edgeview Partners

Being a North Carolina native, Ted Garner (pictured) was excited at the opportunity of joining BHC, even though it was a lateral move. It was 1993, and Garner was working at Merrill Lynch. "I knew BHC well," he recalls. "It was a great way for me to return to North Carolina and focus my banking skills in an entrepreneurial place," says Garner, who left the bank in 2001 along with Bill Morrissett, who was one of the first analysts hired at BHC in 1986.

"After four years following the BHC acquisition by First Union and its subsequent merger with Wachovia and the ups and downs of being a boutique within a large corporate bank, we started losing our focus. At the end of our employment agreements, we decided to embark on a new path," says Garner, who was a partner at BHC and led the automotive and transportation group.

In 2001, Edgeview was born. Both Morrissett and Garner left BHC to work at the new firm. Edgeview's founders, Matthew Salisbury and Drew Quartapella, eventually sold Edgeview to CIT Group Inc. Salisbury and Quartapella went on to found BlackArch Partners.

Today, Charlotte, N.C.-based Edgeview touts 42 employees and seven partners. The firm closed 20 deals in 2012 and typically works with companies ranging in enterprise value from $25 million to $500 million. "We have a real focus on the client and being responsive to the client, regardless of the transaction size," says Garner. "We learned dedication to the client at BHC. We also have a real dedication to training and developing our people, and I would put our people up against any bulge-bracket firm."

When remembering his days at BHC, it was the firm's dedication and belief in its employees that Garner finds remarkable. "People were fundamentally allowed to create client opportunities. Bill and I formed the first two industry groups. There hadn't been any. Everything you did there made a difference. Your contribution mattered. I was coming from Merrill Lynch, and I had a fantastic experience there, but sometimes it was hard to feel like you could make a difference. I learned a tremendous amount in the Bowles environment and had fun doing it," says Garner.

BlackArch Partners

Matthew Salisbury started at BHC in 1994 after a stint at JP Morgan in New York. Salisbury stayed with BHC after its acquisition by First Union in 1998 and then later with Wachovia after the transaction in 2001. It was at this point that Salisbury and Quartapella, also a BHC alumnus, left Wachovia and launched middle-market advisory shop Edgeview Partners.

In 2007, Salisbury and Quartapella sold Edgeview to CIT. In 2010, the pair formed BlackArch Partners with BHC alum Kelly Katterhagen (pictured). Katterhagen worked at BHC from 1990 to 1997, and provided strategic advice to Edgeview Partners in its initial years and then reconnected with her old BHC gang in 2010. By the summer of 2012, another BHC alum, Michael Howley, joined the BlackArch platform as a managing director. Howley was at BHC and its subsequent firms from 1995 through 2008 when he left to pursue private equity investing. The firm's fourth founder, Bram Hall, never worked at BHC, but was a veteran of BHC spinoff, Harris Williams.

"It was two years after the acquisition that they dissolved the name of Bowles Hollowell and Conner and folded the firm into First Union. That was a harbinger of a very different approach to what we had been doing at Bowles Hollowell," says Salisbury, a managing director at BlackArch and former managing director at BHC. Salisbury led BHC's consumer products M&A group.

It was after the acquisition by Wachovia that BHC's magic had faded for this group. In 1998, when First Union purchased the BHC, the business remained unchanged for the most part. First Union was the sixth largest bank in the country but didn't have an investment banking presence. "First Union bought the business to jump start their investment banking efforts. They needed a group like ours to migrate into the organization in order to have an impact, but in the end just adding a middle-market sell- side shop was not going to move the needle," says Salisbury, who started to miss the culture of BHC.

Katterhagen left her position at BHC, as a director responsible for managing M&A transactions, right before the First Union acquisition to form her own company, IOA Corp., at which she provided advisory services to privately-held companies. IOA was ultimately wound down and no longer is operational. Katterhagen also missed the culture at BHC and is amazed at what BHC had accomplished and wanted to get back to those roots.

"It was an interesting time working at Bowles Hollowell. The private equity world was in the early stages, and we had the right strategy. Bowles Hollowell saw the value in providing services to middle-market companies when not too many did at the time," remembers Katterhagen.

Howley adds: "It was a unique culture, and we were every bit as good as the large Wall Street firms, but it was different. There was a real sense we were building something special, and it was very appealing."

Founded in 2010 with a team of eight, today Charlotte-based BlackArch has grown to 30 people and recently moved in to a new space, which will accommodate 65 people. Additionally, the firm was able to close about $3 billion worth of transactions over the last 24 months. BlackArch has well over $1 billion in engagements pending.

The BlackArch team is definitely using the lessons learned at BHC. "The comradery was strong and we attracted great people. It was a meritocracy, not face time, and you could make decisions quickly and efficiently. That's the foundation of BlackArch today," says Salisbury. "We have great people with strong talent and we deliver on what's best for the client."

"We take innovation seriously. There are a number of firms that have grown out of Bowles that focus on sell-side M&A. We looked at what made us successful there. We hired the best people, had strong conviction and created value for firms that were looking for a high level of service," says Katterhagen. "We are doing that and more at BlackArch."

Fidus Partners

Ed Imbrogno started at BHC in 1985 as the first associate ever recruited to the firm. At that time there were only four partners. Imbrogno and his current partners, John Grigg, John Ross and Stephen Dockery, met while working at BHC and in late 2004, Grigg, Ross and Imbrogno left Wachovia and launched Fidus Partners in 2005. Dockery left Wachovia and joined Fidus in 2006. Founding BHC partner Tom Hollowell remains associated with Fidus as a member of the firm's advisory board.

Ross is pleased when he remembers the time he spent at the venerable firm. "It was a phenomenal place to work. There was a focus on being the absolute best M&A firm that existed anywhere, and we were always looking out for the best interest of our client. The founders at Bowles were also committed to making us the best bankers we could be. It was very important at Bowles to treat people both within and outside the organization well. They wanted to do the right thing day in and day out," remembers Ross, who graduated from business school in 1993 and moved to Charlotte to join the firm, which had grown to about 40 employees by the time he joined.

At Fidus, treating people well is the legacy that lives on from the BHC days. "You treat people well, and it's incredible what you can do. After the acquisitions, BHC got larger and it was harder to live up to those standards. At Fidus, we have a sustainable model. It's okay to be smaller than some of our competitors, but we are committed to being the best and treating people well," says Ross.

Fidus has two offices, one in Charlotte and one in New York, and about 24 employees on the M&A advisory team. Ross runs the New York office. Additionally, in 2007, the partners helped launch a mezzanine finance company that helps clients finance transactions, now a publicly-traded business development company that is managed separately and based in Chicago.

"At Fidus, we wanted to build a firm that had the same mission and goals of providing high-quality work and not be distracted by other activities, which commonly happens at larger firms," says John Grigg, who graduated from business school in 1987 and worked at Merrill Lynch for three years prior to returning to his hometown of Charlotte to join BHC. "We don't like the bureaucracy that happens at larger institutions. We want to focus on the deals."