By Maria Saporta
Friday, October 8, 2010
They call themselves the “three amigos” — Pete Correll, Gerry Benjamin and David Crosland.
Three years ago, Correll, the retired CEO of Georgia-Pacific, teamed up with Benjamin, an investment manager, and Crosland, formerly with investment firm Arcapita Inc., to form a private investment firm called Atlanta Equity LLC.
They raised $109 million from about 70 investors, mostly from Atlanta, and have invested in or bought five diverse companies. Atlanta Equity has invested about 70 percent of its initial fund. It expects to buy a couple of other companies in the next year, and that basically will tap out the fund.
So the three amigos are looking ahead.
“We are planning on raising our second fund in the third quarter of 2011,” said Benjamin, the firm’s managing partner. “The next fund would be about $200 million.”
Atlanta Equity has just completed its latest investment, VidSys Inc., a provider of “physical security information management” software. The company’s software helps facilitate the monitoring and control of a wide variety of security devices, including video cameras, entry control systems, alarms and sensors for fires or chemicals.
As companies and institutions become more security-conscious, VidSys technology is being used in government buildings, transit systems, corporate headquarters (such as the 40 buildings at Apple Inc.’s headquarters in California) and other sensitive areas.
“Atlanta Equity invested $7 million with the opportunity to invest another $3 million,” Crosland said.
The private equity took a 27 percent ownership stake in the company, its first investment where it doesn’t own a controlling share. But the partners believe the growth opportunities for VidSys, which is based just outside of Washington, D.C., are strong.
It is the latest of five deals that Atlanta Equity has made in its three-year history. According to Crosland, the firm receives about 300 proposals each year. Of those, it closely examines about 20 of them, and only a couple actually develop into deals.
Correll said the premise of Atlanta Equity has been proven. First, the partners believed there was a shortage of private equity in Atlanta. Second, the firm believed that its partners and investors also could invest sweat equity in the companies.
“If all we brought to a deal was money, chances were that we weren’t going to be as successful,” Correll said. “We thought that the three of us, with our diverse backgrounds, could probably bring together sophistication, invest sweat equity, help management teams grow and mature, and have the ability to bring in expertise. Then we would have a chance of earning better-than-average returns.”
But the three partners said it is a bit premature to declare victory.
“We have proven that the concept is sound,” Correll said. “What we haven’t proven is that we can make good money at this.”
Benjamin said Atlanta Equity is planning “two liquidity events” in the next 12 months. Once it has sold its stake in a couple of its portfolio companies, then it will be able to tell whether its been able to double or triple the investment.
Atlanta Equity’s other four portfolio companies are:
— Resolvion, based in Shelton, Conn., is a leader in commercial and consumer collateral recovery and resolution, and its clients are large consumer and commercial lenders. Atlanta Equity bought Resolvion for $7.5 million this past January, and the company will be opening an Atlanta office in the next couple of months. Currently, it has annual revenues of about $10 million and has “high growth potential,” Benjamin said.
— Richmond Cold Storage Co. LLC provides refrigerated warehousing and logistics for major companies, such as Perdue Chicken. It is based in Richmond, Va., and it has a large technology component. Atlanta Equity bought the company in April of 2009 for $15 million. “It’s one of the best financial reporting companies that we have,” Crosland said.
— Empower Software Solutions Inc. is a payroll processing company based in Orlando, Fla. It provides software for payroll tax compliance and human resource functions, such as time schedules and attendance data. Its client base includes retailers and the health-care industry, among others. Atlanta Equity acquired controlling interest in the company for an initial investment of $20 million. It has since invested another $10 million. Correll chairs Empower’s board, which also includes former Florida Gov. Jeb Bush. “It’s our biggest investment,” Correll said, adding that it’s “highly profitable.”
— NRI Construction Inc. was Atlanta Equity’s first investment in May 2008. The general contracting company renovates and rehabs multifamily properties. Atlanta Equity bought two-thirds of the company for $12.5 million. “We bought it right before the bottom fell out,” Correll said. Benjamin added that “it’s been our most challenging investment.” But both partners believe the company’s prospects are improving as the housing market stabilizes.
All in all, Benjamin said that the “three amigos” are “having a ball.” Despite the NRI investment, he said: “Our timing was very good. None of our companies have been highly leveraged.”
Going forward, Benjamin said, Atlanta Equity would like to add a health-care company and a manufacturing firm to its portfolio.
“Our focus is on growth-oriented companies that are not capital intense,” Benjamin said. “We like companies that can scale rapidly and have efficient working capital structures.”
— Staff writer Ben Smith contributed to this report.