NEW YORK — Financo Inc. is no longer just the Gilbert W. Harrison show.
After starting up the advisory banking firm 41 years ago and building a big profile within the fashion and retail industries, Harrison has brought in two partners, John A. Berg and Colin S.A. Welch. Berg has become Financo’s chief executive officer. Welch has become the president and chief operating officer, while Harrison continues as chairman.
It’s the first time Harrison has let in investors, reflecting a desire to broaden the scope of Financo and a willingness to share the limelight and ownership. Berg and Welch have invested money in the business, though none of the three executives holds a majority stake. They compose the three-man Financo board.
Berg has 25 years experience working for banks and private equity. For about half his career, he ran the retail and consumer products group at Montgomery Securities and was senior managing director and head of the retail and consumer group for Bank of America. He most recently served as a general partner at Weston Presidio Capital, a private equity firm managing over $3 billion in capital, where he focused on consumer investments. At Montgomery Securities, he was instrumental in orchestrating the Abercrombie & Fitch spin-off from Limited Brands, merging Eagle Hardware into Lowe’s, taking Staples public, and launching Urban Outfitters’ initial public offering. During his career, he has also advised Saks Inc., Dollar Tree, Wolverine Worldwide, Columbia Sportswear and Williams-Sonoma.
“I think John brings a whole new dimension to the firm. I’ve known him. He’s known Colin. Both Colin and John are putting capital into the business and this is very important as we build Financo to the next stage,” Harrison said in an interview at the company’s new headquarters at 600 Madison Avenue between 57th and 58th Streets, where there’s extra room for additional personnel in the future.
Asked who in the troika reports to whom, Harrison said: “It’s a true partnership as opposed to hiring somebody to work here.”
Welch joined Financo originally as ceo in July 2011, but Harrison said management was reorganized so it’s “in alignment” with the capital structure and with Berg coming on board.
At Financo, Welch was involved in the Wacoal Holdings Corp. deal to buy U.K.-based Eveden Group this year. Earlier, he worked at Credit Suisse Securities Europe as managing director and head of Europe, Middle East and Africa retail and luxury goods investment banking. Before that, he was managing director and cohead of consumer and retail investment banking, Europe and the Middle East at Lehman Bros. Europe Limited. He was a senior member of the retail sector investment banking team in North America at J.P. Morgan and held investment banking jobs at Banc of America Securities and Montgomery Securities. Welch began his career as a buyer at Neiman Marcus.
Easing on the reins is a big concession for Harrison, considering his outsized personality and four decades in charge at Financo. He founded the company in 1971 and has since orchestrated hundreds of mergers, acquisitions and divestitures in the retail, apparel, footwear, cosmetics and other merchandising-related sectors. Financo’s sweet spot has been mid-market transactions from $50 million to $750 million range. Harrison would not disclose Financo’s revenues, but they are believed to be in the $12 million to $30 million range, depending on the year. Financo closed 10 fee-based transactions in 2011, and in 2012 so far, four transactions were closed and there are about 25 “active mandates” with retained clients who include Fifth & Pacific, Cherokee and The Container Store.
In some recent deals, Financo advised Swank on its sale to Randa, Perfumania on its merger with Parlux Fragrances, All Saints on its sale to Lion Capital and Goode Partners, Rafaella on its sale to Perry Ellis International, Stuart Weitzman on its sale to the Jones Group Inc. and Cipriani Accessories on its sale to Li & Fung.
“I’m not retiring,” Harrison said. “I love what I do. But at 71 I am smart enough to know it’s not just a Gilbert Harrison firm anymore. I am not going to be running around the world when I’m 86 or 87. I like what I am doing and I want to build something that is lasting. It’s time to advance Financo from a sole proprietorship to an investment bank with real partners so we can continue to grow.”
Asked if he would be spending fewer hours at work, Harrison said, “Time will tell.” He added that he will continue to develop new clients and work with existing clients. Harrison also been active in several industry associations and charities, including serving as chairman emeritus of The Educational Foundation of the Fashion Institute of Technology. He’ll be staging another Financo Forum next January at the Harmonie Club, where he typically gets panelists and audience members charged up debating industry issues.
“I wouldn’t be joining this firm if Gilbert was going away. He’s got gravitas, a reputation and a network,” said the 50-year-old Berg, who will be focused on mapping the strategic direction, deploying capital, and on the day-to-day business operations.
He outlined four avenues for Financo’s growth: building on the core retail and consumer M&A business by adding senior and junior bankers; commencing coverage of restaurants, health and beauty care and other sectors that Financo hasn’t been involved in before; adding advisory services such as restructuring, and developing private equity capability to shape Financo into a “true” merchant bank. The company currently has 20 professionals and a support team of eight. Recently, two vice presidents were named, Colin O’Neil and Bret Lowry. Both are involved in M&A work.
According to the Financo executives, further pumping up the staff shouldn’t be difficult. “If you look at large investment banks today, many bankers there are not happy with the direction,” Berg said. “The compensation has been severely hurt. There are regulatory changes, and macro-economic changes. There’s so much dislocation on Wall Street. Talent is available today and there will be more going forward. In the past, it’s been hard to get.”
Welch, who is 41, will be managing Financo’s North American and European investment banking operations. In addition to his president and chief operating officer titles, he’s become ceo of Financo’s six-year-old London-based European operations. Welch currently spends about a month per calendar quarter in London, where the team is expected to grow significantly.
“Financo is a brand underutilized in Europe,” said Welch who, among other assignments, worked on selling Tommy Hilfiger to Philips Van Heusen and earlier to Apax. “There are lots of ingredients that make for a rich M&A market in Europe,” Welch said, citing the large amount of private equity on the continent, the potential for cross-border deals and deals within countries, and family-run businesses that are experiencing liquidity problems and could be ripe for deals.
“What really distinguishes Financo is its real industry knowledge and investment banking capabilities,” Berg said. “Clients want someone who can get the deal done and advise them along the way. They’re looking for investment bankers who can execute transactions and serve as strategic thought partners. That is a competitive advantage.”
“In my opinion,” Welch added, “bigger banks are more transaction-oriented.”
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