in a large number of transactions
across a wide spectrum of industries
A surge in mergers and acquisitions involving privately held companies has propelled the growth of young Farlie Turner & Co. The two-year-old investment banking firm in Fort Lauderdale taps South Florida-based private equity funds, and specializes in mid-market deals.
“Between Miami and Palm Beach, there is upwards of $5 billion under management, not all of which is being invested in South Florida,” says Michael F. Turner, who started Farlie Turner with his business partner Craig L. Farlie in February 2004. “Across five or six private equity funds that are managing that amount of money, the decision makers are here,” he adds.
Farlie and Turner say they have avoided head-on competition with Wall Street by focusing on companies valued up to $50 million, typically working on the sell side.
“We think our bread and butter over the long term is going to be $50 million, on average, in enterprise value,” Turner says. “That said, we’ve got two deals in the pipeline that we are relatively close to bringing to market that are significantly larger than that.”
Local firms are turning to Farlie Turner for their deals. For instance, Venture capital and private equity firm HIG Capital Management Inc., which has its main office in Miami, hired the investment bank to manage the sale of a division of a Houston-based company HIG invested in, Total Safety US Inc.
The partners say many deals involved sales of local businesses, such as the recent $10 million sale of Miami-based Tallard Technologies Inc. An information technology equipment distributor operating in Mexico, Venezuela and Chile, with annual revenue of about $100 million, Tallard retained Farlie Turner as its exclusive adviser in its sale to São Paulo, Brazil-based Itautec SA, an IT equipment manufacturer and service provider.
“The business universe down here is largely comprised of private companies, versus public,” Turner says of the tri-county mix, and “business is great. The majority of our business right now is mergers and acquisitions”
A growing small business with an office in the Las Olas district of Fort Lauderdale, Farlie Turner had five employees, including its two principals, and was looking to hire two more before Fall. The firm has advised on transactions worth more than $250 million since February 2004, and Farlie and Turner expect to close an additional $500 million in deals during 2006.
Farlie, 39, and Turner, 41, met in 2002 through mutual friend Trey Buchholz, son of Butch Buchholz — chairman of Miami’s NASDAQ-100 Open professional tennis tournament.
Then, Turner was a principal with Boca Raton-based Brockway Moran & Partners, a private-equity fund with $600 million under management, invested mainly in growing middle-market companies. Prior to his three-year tenure at Brockway Moran, Turner worked for a unit of First Union (now Wachovia) Securities Inc. in Charlotte, N.C.
In the mid-1990s, Farlie led a team at Fort Lauderdale-based Republic Industries Inc. which oversaw acquisitions of several hundred privately held auto dealerships and garbage haulers. The company, co-founded by H. Wayne Huizenga, split into two public companies: waste firm Republic Services Inc. and auto retailer AutoNation inc. Before that, Farlie was an executive at Huizenga’s Blockbuster Entertainment video rental chain.
Farlie left Republic in 1998 to help start a commercial printer, PrintSource USA Inc., which acquired 11 companies in two years, growing to $70 million of annual revenue. He was co-CEO of PrintSource until 2001.
The start-up of Farlie Turner and its affiliate Bayshore Partners LLC, a registered securities broker-dealer, appears well timed, too, coming when loan money to fund M&A deals has been ample.
“Banks are willing to lend lots of money to these private equity firms to close acquisitions,” Turner says, and that is “having the effect of driving up purchase prices and attracting sellers to the marketplace.”
With all that private equity money floating around, even Farlie Turner’s average-size deals can attract outsized competition from regional investment banking firms as well as smaller, boutique firms.
“They’re not all alone. A lot of us are very happy to sell businesses with $50 million of enterprise value,” says Michael Kollender, executive vice president and director of investment banking for Ryan Beck Inc., a unit of Fort Lauderdale-based BankAtlantic Bancorp. Inc.
“At $50 million, you stay under the radar of the largest Wall Street firms, but you don’t stay under the radar of many of the regional firms like ours, as well as all of the boutiques, so it is a competitive spot,” Kollender says.
Nevertheless, investment banks still have plenty of mergers and acquisitions of all sizes to facilitate, Kollender says. “It has been a very strong M&A environment, and the private equity firms have been incredibly active.”
Farlie and Turner believe they will get their “fair share” of merger and acquisition deals even in a down market. They also say that a drop in M&A fees could be cushioned by fees from other services they sell, including private placements of securities and financial advice. How well the firm will fare may depend on the depth of a decline in mergers and acquisitions that Farlie and Turner anticipate.
“It will come to an end at some point; the M & A business is notoriously cyclical,” Farlie says. “We tell clients that if they are thinking about exiting or selling a portion of their business over the next three to five years, now is the time to do it.” — Mike Seemuth