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June 2006
Drive & Tenacity in Pursuit of Middle-Market Transactions
By Ellison Clary

“What have I got to lose?” David Vorhoff thought that spring day in 2001 as he dialed the internal Bank of America number for his big boss, Hugh McColl Jr.

He wanted to talk about starting an investment bank, he told the executive who kept McColl’s calendar, for businesses smaller than those Bank of America’s investment bank targeted. Much to his surprise, he was invited to McColl’s 58th floor lair less than ten minutes later.


An Auspicious Start

McColl’s retirement as chairman and chief executive of Bank of America was set for late April. What he would do next wasn’t clear.

“I went up and conceptualized with Mr. McColl,” Vorhoff remembers. “He was very attentive. He asked a number of questions. He was very sensitive to any endeavor that might compete with the Bank of America as opposed to being complementary to the bank.”

That conversation led to others. By September 2001, Vorhoff and several of his friends had forged a partnership that included McColl in a venture called McColl Partners LLC, which often calls itself McColl Partners Investment Bankers. McColl is chairman of the parent organization, McColl Group LLC.

The reaction to forming a new financial entity with the man who built the first nationwide consumer bank was predictable.

“People said, ‘Wow! You’re partnering with Hugh. You’re going to make it,’” Vorhoff laughs as he sits in his office on the 54th floor of the Bank of America Corporate Center.

After struggling with the business downturn that followed the 9-11 terrorist attacks, McColl Partners certainly is making it.

“We’ve had remarkable growth,” Vorhoff says. “We don’t disclose revenue figures, but we think in the first quarter of 2006 we will generate 65 percent of the revenue we did in all of last year.” That 2005 figure was up 70 percent from 2004, a year in which revenues jumped 65 percent from 2003.

McColl Partners is currently wrapping up a deal in the $1.5 billion range for a South Carolina entrepreneur to buy Hudson’s Bay, the oldest corporation in North America. Hudson’s Bay operates Canada’s largest department store chain. The deal, which took about 18 months, is not typical for the firm.

Neither is the $245 million transaction that McColl Partners facilitated for Colombian cement company Argos to acquire Conex Concrete Express of Texas. It’s thought to be the largest ever acquisition by a Colombian firm in the United States.

The average transaction for McColl Partners in 2005 was $50 million to $60 million, Vorhoff says. Fully 80 percent of McColl Partners’ deals range from $20 million to $100 million.

The firm confines its activities to mergers and acquisitions both sell side and buy side; raising private capital; and valuation assignments. It performs these functions for firms Vorhoff classifies in the lower middle market, whether they are divisions of public companies, private equity groups or family-owned businesses. Typically, these companies range from $15 million to $25 million in annual revenue up to $175 million to $200 million in annual revenue. They’re often too small to warrant the attention of Wall Street’s top firms such as Bank of America, Wachovia, Goldman Sachs and Merrill Lynch.

McColl Partners’ expertise extends to areas as diverse as building products, health care, consumer products, defense and aerospace, food and beverage, and technology.

McColl Partners works with clients throughout the region, the country and the world, complementing, rather than competing with, big institutions. Bank of America, for instance, has referred small deals to the start-up firm housed in 16,000 square feet in its headquarters building.


Investing in a Vision

Vorhoff’s office view encompasses a wide expanse of Charlotte’s east, south and west. On a clear day, it offers glimpses of the Blue Ridge Mountains, mimicking the far-reaching vision he and his longtime friend Eric Andreozzi had for their own investment bank.

As a director at Bowles Hollowell Conner/First Union Securities, Andreozzi knew Vorhoff from earlier days when both were at Bank of America. The pair periodically lunched together and played “What if,” sharing the sentiment that investment banking consolidation was eliminating most firms serving smaller companies.

In his two decades with Bank of America, Vorhoff worked up to managing director of the Banc of America Securities Health Care Group, but he knew most of the investment bank’s operations were slowly moving from Charlotte to New York City. The 50-year-old father of four knew he wanted to stay in the Queen City. His ambition to start an investment bank grew stronger.

After securing necessary regulatory approvals, Vorhoff, Andreozzi and several other partners opened their doors in two borrowed offices furnished chiefly with a folding card table. But what they lacked in accoutrements they made up for by having McColl as a partner.

Andreozzi admits that he was pleasantly surprised as he befriended McColl, who is often depicted in the media as hard charging, tough and single-minded.

“When you get to know him, you realize he’s an amazing person,” Andreozzi says. “He’s willing to go to great lengths for people he cares about.”

At 70, McColl continues to labor long and hard.

“I can ask him, ‘Would you go with us to Spartanburg and call on a manufacturing company that’s thinking about selling,’” says Vorhoff. “He’ll say, ‘Great. Let’s go.’ He is wired to win. Some people are born to be entrepreneurs and to enjoy the business of business. That’s where Hugh fits. He’s inspiring.”

McColl Partners now employs about 40 associates who often clock long hours. The firm has dinner delivered each weeknight and it isn’t unusual to see a dozen or so people working on a Saturday. To relieve tension, there’s a Foosball table in the break room, donated by some younger analysts who are now firm alumni.

At 39, Andreozzi is among the older members of the firm. He and Vorhoff agree that everyone, particularly the younger workers, find energy in McColl’s verve for crafting a deal. Justin Cunningham joined McColl Partners just over two years ago, fresh from the University of North Carolina at Chapel Hill, and he confirms the assessment.

“It’s amazing how much Mr. McColl hangs out with us,” says Cunningham, an analyst originally from Salisbury. “He tells you to try to get as many experiences as you can, pursue whatever you want. That kind of leadership makes you want to stay.”


Harnessing Associates’ Energy

McColl quickly acknowledges the pleasure he derives from the company that bears his name.

“When I worked for Bank of America, I drew a lot of energy from my associates,” he says. “I have very young and interesting associates here and I get a lot of energy from them, too.”

His work reminds him of his early days in the national division of Bank of America predecessors American Commercial Bank and NCNB, McColl says, when he called on middle-sized companies.

“I’ve come full circle,” McColl says with a smile. “I’ve been extremely pleased at how well we’ve done and how quickly we’ve gotten there. That’s a tribute to my partners’ drive and tenacity. I knew they were good people.”

McColl pursues other business ventures, including a Charlotte art gallery that bears his name. He works at McColl Partners mostly on Tuesdays, Wednesdays and Thursdays. He says he’ll continue until he feels he can’t make a contribution.

Speaking of McColl’s passion for art, Vorhoff points to the painting of a Bourbon Street scene hanging in his office. In it, there’s a 1950s Cadillac among the strollers and a building with a white tower at its zenith looms in the skyline. A New Orleans icon, it perches atop the high-rise offices of Hibernia Bank, where Vorhoff’s father fashioned a lengthy career. McColl, an avid art collector, spotted the work in a California gallery.

“Vorhoff,” he admonished upon his return. “You should buy that painting.”


Directing Their Destiny

Nothing surpasses the thrill of pursuing prospects and serving clients’ financial needs for McColl, Vorhoff, Andreozzi and the other personnel of McColl Partners. By design, they control the process themselves.

A big reason the founding partners limited the firm’s menu of services is that the advisory business doesn’t require huge capital investment.

“If you do sales and trading, you need a lot of money,” Vorhoff explains. “You’ve got to have capital. The founding partners said we’d rather take little or no salary than raise outside capital. We probably gave up some growth opportunities initially, but the partners own 100 percent of the firm. We make decisions totally focused on what’s best for the firm, not necessarily on how to get an outside investor a return.”

This approach helps McColl Partners maintain a competitive edge. Competition comes from regional players such as William Blair & Company in the Midwest, Harris Williams & Company, which is owned by Pittsburgh-based PNC Financial Services Group; and SunTrust Robinson Humphrey Capital Markets in the Southeast. Like McColl Partners, they’re focused on the middle market.

As for the future, Vorhoff is confident the firm will continue to grow, although he’s not sure of a timetable.

“We have no formal growth goal,” Vorhoff says. “We have a very unique group of like-minded partners. We have a lot of ‘type A’ personalities. We all want to win and we all have this innate desire to get better every day.”

Vorhoff praises the quality of the partners and other associates McColl Partners has attracted. The older associates have strong financial backgrounds and the younger hires include Morehead Scholars from the University of North Carolina, along with several Davidson and University of Virginia grads among others.

“People who talk to us feel good about the level of individuals that work on a transaction,” Vorhoff says. “We have the experience and the hustle factor. A director of business development has just joined the firm. That’s a big move for us.”

Andreozzi, too, is certain of growth and can envision a second office “sometime.” Meanwhile, he wants the firm to continue expanding its client base.

What excites Andreozzi, he says, is working on transactions for strong business owners who are smart enough to realize they need help in a situation, such as selling what they’ve built.

“When you really help a good   person, a business leader, it’s unbelievably fulfilling,” he says. “You know you’re doing something for them that in most cases is a life-changing event.”

Andreozzi is convinced the firm is on the right path.

“I don’t think I’d change a thing,” he says with conviction. “We’ve beaten all our expectations and our partnership is as good as I could have imagined it would be. We’re thrilled.”

Ellison Clary is a Charlotte-based freelance writer.
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