desco goes deal hunting with private equity cash-BUSINESS FIRST
Friday, April 16, 2010
Business First of Columbus - by Adrian Burns
An affiliate of a low-profile industrial holding company is going shopping with at least $50 million to spend. Columbus-based Desco Corp., which holds a dozen industrial businesses acquired since it was founded in 1966, has capitalized a new effort that will hunt for investments across much of the nation. The private company hired Andrew Bohutinsky to run Desco Capital, and has chipped in more than $50 million for the venture to spend on ownership stakes in businesses with annual earnings of up to $10 million, the company said.
With bank credit still tight and plenty of companies battered by the recession, Bohutinsky said, it is an opportune time to aggressively hunt for investments.
“The things that distinguish us are our speed and flexibility,” he said. “We can move very quickly and can close deals where we don’t need financing, which we know is attractive to sellers.”
Founded more than 40 years ago by Al Siemer, who still owns the company, Desco Corp. has assembled a portfolio of 12 U.S.-based manufacturing and industrial technology businesses with more than 800 workers. But while Desco has been open to picking up companies that fit its portfolio and it could closely manage, Desco Capital is likely to take a broader approach, Bohutinsky said.
“We’re still looking for things that complement what we have now,” he said, “but now we’re looking for new platforms that could be complementary or different business that don’t have any relation to things we have in the portfolio already.”
Bohutinsky said deals could include acquisitions, minority or majority stakes, investments in troubled companies or in businesses that are on solid footing but could become more profitable with a capital infusion. It plans to look mainly east of the Rocky Mountains for investment opportunities.
“We’re willing to look at things that are out of favor to a lot of people right now, and a lot of industries are out of favor now,” he said. “We’re not looking to be a quick flipper and move on to the next thing. We’re looking to build long-term value of companies.”
The private equity pool was funded chiefly by Desco Corp., with a contribution by Bohutinsky. It isn’t looking for outside investors.
Room to Grow
The mergers and acquisitions market is favorable for investors with cash on hand, said Scott Chapman, a partner with Columbus’ Copper Run Capital LLC, which specializes in brokering sales of businesses and has worked with Desco.
“The credit market has taken buyers who require debt out of play,” he said. “It’s great pickings for cash-strong companies.”
Desco benefits from its autonomy, Chapman said. With only Siemer and Bohutinsky in charge, there is no meddling from outside investors or others who can slow or derail deals, he said.
“If you look over time, the most successful investors are always one guy,” Chapman said. “That’s why Al has been so successful.”
Such factors, coupled with a corps of Desco executives with strong business management acumen, bode well for Desco Capital, Chapman said.
Bohutinsky, who is married to Siemer’s daughter, Elizabeth, said they aren’t ruling out outside investors in the future.
“Down the road, in the next few years, once we make several acquisitions and the wheels are turning, we very well could seek new investors,” he said.
Such a change isn’t uncommon, Chapman said. A company run by one savvy owner or family dynasty usually winds up diversifying its portfolio and bringing in investors as it seeks continued growth and the founder ages and recedes from the business picture, he said.
With little “old money” in Columbus, the city has seen few private equity shops that take outside cash because much of the area’s wealth is held and invested by those who created it, Chapman said. But it is likely more of those family investment enterprises will become private equity shops taking outside investments as they seek bigger portfolios and improved returns, he said.
- Business: Holding company for 12 manufacturing and industrial technology companies. Launched Desco Capital with a $50 million infusion to acquire companies with up to $10 million in annual earnings.
- Based: Columbus
- Employees: More than 800
- Area employees: 17
- 2009 revenue: $175 million
- Name origin: Derived from Al Siemer’s children – ‘David and Elizabeth’s company’
- Companies owned: Automatic Timing & Controls, Belgas, Bellofram Corp., Marsh Bellofram, Marsh Bellofram China, Marsh Instruments, MDT Software, Medical Indicators, Republic Door and Frames, Tek-Air Systems, Thermo-Couple Products, Windsor Door
- Web site: descocorporation.com
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