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Financo Ramps Up In Tough Economy

NEW YORK — Gilbert Warner Harrison is a deal maker at heart and as aggressive and in-your-face as any investment banker. This year alone, his firm, Financo Inc., arranged the sale of Ellen Tracy to Liz Claiborne, Gloria Vanderbilt to Jones...

NEW YORK — Gilbert Warner Harrison is a deal maker at heart and as aggressive and in-your-face as any investment banker. This year alone, his firm, Financo Inc., arranged the sale of Ellen Tracy to Liz Claiborne, Gloria Vanderbilt to Jones Apparel Group, and eight other merger-and-acquisition deals, representing the buyer or seller “exclusively,” Harrison adds.

Yet he also acknowledges that Financo, which he founded in 1971, “doesn’t have institutional credibility. We definitely consider ourselves an m&a boutique.”

All modesty aside, that boutique firm has grown in size and sophistication in two years, forming financial and consulting services to help companies improve performance, restructure and raise capital, and has tapped talent that’s come available because of Wall Street’s downturn. This year, Financo also deepened its pool of outside consultants to include a dozen well-known retail industry veterans, who are tapped for specialized assignments.

“We’re taking risks in a downturn. Knock on wood, it’s paying off,” said William M. Smith, Financo president, and a former Kidder Peabody managing director.

While adding services increases the revenue stream and, to a degree, buffers the company from dry spells in m&a activity, it also gets Financo better situated to cozy up to corporate management for when m&a activity ripens. For a company like Financo, m&a is where the real money is.

Financo won’t disclose its revenues, but Harrison said he collects a standard minimum retainer fee of $100,000, although it can be as high as $200,000 per m&a client. If a transaction is completed, Financo collects a “success fee” of between 1 and 2 percent of the enterprise value [equity plus debt components] with the minimum of $500,000. Typically, Financo is involved in 10 to 20 transactions a year, anywhere from $10 million to $500 million in size, Harrison said. Among Financo’s bigger and most successful deals were selling Marshalls to T.J. Maxx in 1995, and, in 1991, selling McRae’s to Proffitt’s, which became the cornerstone for what is now Saks Inc. Not all Financo deals have been winners, however. A hodgepodge of listless retail chains, including Bonwit Teller and B. Altman, was sold to Australian developer George Herscu, forming a retail group that quickly went bust.

Financo competes with everyone from Goldman Sachs and Morgan Stanley to very small independent brokers and investment bankers, but it does not have research analysts nor does Financo trade securities, avoiding conflicts of interest. With much of the competition cutting back in this economic downturn, the small, but feisty Financo has ramped up.

“In addition to adding three investment bankers for our financial advisory service, we’ve built a restructuring group over the last year so we now have five full-time professionals dedicated to restructuring activities,” Harrison said. Among those joining Financo since 2001: attorney Robert Miller, president of the one-year-old Financo Restructuring Group, who ran the bankruptcy practice at Berlack, Israels & Liberman; Mary Ann Domuracki, director of FRG, with 11 years experience at Ernst & Young and senior management jobs at Danskin, Kasper and Pegasus Apparel; Sean Mathis, FRG director, and former chairman of Allis Chalmers, an industrial manufacturer, and Billy Busko, a director on the m&a team, formerly with Bank of America Securities. The additions bring Financo’s head count to 25 banking and restructuring professionals. In addition, Financo will open an office in London next year for m&a, which will be headed by David Ishag, an investment banker who once worked for Michael Milken.

Another Financo unit, the Mercantile Capital Partners private equity fund for investing in merchandising companies, was formed in 2000. Run by Antoine Treuille and Edward Harrison, Gilbert’s son, it invests $2 million to $10 million in emerging companies, or up to $50 million with other partners. Financo will invest in companies that are beyond the venture stage and are profitable, or have the potential to be within 18 months. It has taken stakes in Tommy Bahama; Dry Ice home furnishings chain catering to the tween, teen and college markets; Partex, a manufacturer of technical sports apparel, and Fresh Direct, an online grocery service. Financo sought a stake in Kate Spade, Laundry and Michael Kors, but was beat out by higher offers. Financo would take a minority or majority position, but insists on board representation.

“The key thing is how forward-minded the company is, and how willing they would be to accept advice, so it’s a real partnership,” Edward Harrison said.

This year, Financo also enlarged its consulting practice, forming a kind of all-star team of experts in different areas of retailing and merchandising, called Financo Global Consulting Group. “It was a loose confederation of consultants before,” Gilbert Harrison said. “Now it’s been expanded to make it an integral part of our business. We’ve formalized the process so our consultants take a more active role working with our client base.”

Newcomers include David Mullen, former chairman of Robinsons-May; Hal Leppo, former Lord & Taylor president and Casual Male chief executive officer: Bernard Andrews, former chief operating officer of Circuit City and Ward’s president; Jim Rosenfeld, former president of CBS Broadcasting; Richard Hauser, former Wanamaker’s ceo and executive vice president at Bloomingdale’s, and Joe Spellman, former executive vice president of Elizabeth Arden.

Other industry veterans that have associated with Financo are retail analyst Maggie Gilliam; former U.S. Shoe president Howard Platt; David Tracy, former J.P. Stevens chairman; Ann Iverson, who once ran Mothercare and Laura Ashley in the U.K. and Kay-Bee Toys in the U.S., and Carl Levine, a former Bloomingdale’s home store executive.

As a consultant: “If you are part of the Financo team, then you have a support structure for research, fieldwork, preparing reports and business modeling,” said Marvin Traub, senior adviser to Financo, and former Bloomingdale’s chairman.

Financo is searching for a luxury goods expert and a McKinsey-type generalist who could serve as managing director to coordinate Financial Global Consulting, and another vice president or director for the m&a practice, as well as one or more managing directors to bring additional investment-banking business to Financo.

As an investment banker, Gilbert Harrison assists in the process of selling a company by first analyzing it and providing an opinion on its value, determining strategically who the company should approach to sell itself to, helping in the initial approach, setting up meetings and providing due diligence. In addition to the sales of Vanderbilt and Tracy, other deals Financo handled this year included the Florsheim sale to the Weyco Group, and Tumi Inc. luggage to Oaktree Capital Management. Gilbert Harrison’s ultimate deal may be when he sells Financo. He did sell it to Lehman Bros. in 1985, but became independent again in 1989. “I don’t think this is an appropriate time to sell,” he said. “Our team likes what it is doing and firmly believes in the company.”

This year, Financo also enlarged its consulting practice, forming a kind of all-star team of experts in different areas of retailing and merchandising, called Financo Global Consulting Group. “It was a loose confederation of consultants before,” Gilbert Harrison said. “Now it’s been expanded to make it an integral part of our business. We’ve formalized the process so our consultants take a more active role working with our client base.”

Newcomers include David Mullen, former chairman of Robinsons-May; Hal Leppo, former Lord & Taylor president and Casual Male chief executive officer: Bernard Andrews, former chief operating officer of Circuit City and Ward’s president; Jim Rosenfeld, former president of CBS Broadcasting; Richard Hauser, former Wanamaker’s ceo and executive vice president at Bloomingdale’s, and Joe Spellman, former executive vice president of Elizabeth Arden.

Other industry veterans that have associated with Financo are retail analyst Maggie Gilliam; former U.S. Shoe president Howard Platt; David Tracy, former J.P. Stevens chairman; Ann Iverson, who once ran Mothercare and Laura Ashley in the U.K. and Kay-Bee Toys in the U.S., and Carl Levine, a former Bloomingdale’s home store executive.

As a consultant: “If you are part of the Financo team, then you have a support structure for research, fieldwork, preparing reports and business modeling,” said Marvin Traub, senior adviser to Financo, and former Bloomingdale’s chairman.

Financo is searching for a luxury goods expert and a McKinsey-type generalist who could serve as managing director to coordinate Financial Global Consulting, and another vice president or director for the m&a practice, as well as one or more managing directors to bring additional investment-banking business to Financo.

As an investment banker, Gilbert Harrison assists in the process of selling a company by first analyzing it and providing an opinion on its value, determining strategically who the company should approach to sell itself to, helping in the initial approach, setting up meetings and providing due diligence. In addition to the sales of Vanderbilt and Tracy, other deals Financo handled this year included the Florsheim sale to the Weyco Group, and Tumi Inc. luggage to Oaktree Capital Management. Gilbert Harrison’s ultimate deal may be when he sells Financo. He did sell it to Lehman Bros. in 1985, but became independent again in 1989. “I don’t think this is an appropriate time to sell,” he said. “Our team likes what it is doing and firmly believes in the company.”