Gilbert W. Harrison, a fixture in the M&A, retailing and fashion circles for decades, is retiring Dec. 31 from Financo Inc., the boutique investment banking firm he established 47 years ago.
Through his outsized personality and assertive manner of pursuing business, Harrison established Financo as a vibrant boutique banking firm with a wide reputation exceeding the size of the company’s annual volume, which sources placed between $20 million and $30 million, depending on the year.
John Berg continues as Financo’s chief executive officer and will leave the title of chairman unfilled at least for the time being. Five years ago, Berg, a seasoned M&A, corporate finance and private equity banker, bought an equity interest in Financo and became ceo, and Harrison began gradually winding down his involvement.
“I agreed with John that I would stay for five years and retire after that. Five years goes very fast,” Harrison said. “When you bring in somebody as chief executive officer, he wants to put his own face on the business. This is the right thing to do for the company as well as for me personally,” Harrison told WWD in an interview at Financo headquarters, 600 Madison Avenue.
Harrison turns 77 on Christmas Day and plans to still work. “I’m not disappearing. I am never going to give up. I am going to do something that is similar but different, fun and that allows me to use my significant resources. I have 11,000 contacts. I have the private e-mails and cell phones of so many chief executives. There is no way I will stop working as long as I am healthy. I was a little sick earlier this year but I am fine. Hopefully, I have longevity.”
Harrison said he’s considering consulting, independent advisory work and private equity. “I have Harrison Group as my holding company and I may do several things under that aegis. There are firms that want me to be a vice chairman or a senior adviser. There are some clients that have asked me to buy something. One asked me to look at a business that could be turned around.” He’ll continue his extensive philanthropic activities and maintain his high profile at industry conferences, including the 28th annual Financo Forum, to be held Jan. 15 which always draws a who’s who of executives and tackles provocative topics.
Asked if he could wind up competing with Financo, Harrison said, “I don’t think so. I have a one-year noncompete and a two-year nonhire,” though Amylou Sarion, his executive assistant for 22 years, will join him in the next phase of his career.
Asked if he retains his stake in Financo, Harrison said, “At this point, the answer is yes.”
Before forming Financo, Harrison was a lawyer. He obtained his juris doctor from The University of Pennsylvania Law School in 1965 and practiced corporate and securities law in New York City and Philadelphia.
In 1971, he was making $25,000 as an attorney at a corporate and securities law firm. “I was six months away from becoming a partner but I saw these young guys doing deals making a $100,000 a pop as brokers. So I decided to leave the law firm and start Financo” in Philadelphia in 1971, along with Stephen Klein, a lawyer he worked with. Lehman Bros. bought the business in 1985 and Harrison bought the business back in 1989, re-establishing its independence.
Harrison estimated that Financo, in providing financial advisory services to the retail, apparel, beauty, home, footwear and consumer sectors, as well as to private equity firms, has done around 1,000 mergers, acquisitions and divestitures. The sweet spot has been in deals from $50 million to $500 million.
One of his biggest and most memorable deals was the sale of Marshalls by the former Melville Corp. to TJX Cos. in 1995 for $550 million. “It created tremendous value for the shareholders of TJX,” Harrison said. “Unfortunately, Melville only wanted cash. They took a small amount of preferred stock. Had they done a full stock deal, the shareholders would have greatly benefited. TJX had a market capitalization of $1.1 billion. Three years later, it had a market capitalization of $7.5 billion, and today it’s close to $50 billion. In the acquisition business, a lot of people say there’s no such thing as a great acquisition, that mergers and acquisitions don’t create value. This created value. This was a great acquisition.”
In the early Eighties, Financo represented Hasbro in buying Milton Bradley. “It enabled Hasbro to become the company it is today, where they are now seriously considering acquiring Mattel.”
As Harrison put it, the first step in a deal-making process involves presenting your qualifications for why a potential client should retain your firm. “Because we are small and independent, many clients want a larger firm. The hardest problem we have at Financo is that our name is not Goldman Sachs or Morgan Stanley. As a result, we have to work harder for business. Every deal we do affects our credibility.
“It’s essential for a banker to understand the client’s motives, for buying or selling…Assuming you get retained, you have to do the due diligence, examining the cash flow and the whole situation of the company, to properly market the company and come up with a list of companies that would buy it, potentially. You put together a memo and go to market.”
Sometimes, he’s dealt with “the frustrations of negotiating a deal that you know makes sense and you can’t get the client to buy into the strategy. What I probably regret the most is the deals we didn’t do but could have.”
There were several, including Home Depot in the Eighties, when founder Bernie Marcus sought to sell the firm thinking it would be tough to grow it as an independent company. “We talked to two firms with their permission and had meetings. One was Sears, Roebuck, at the time a stellar retail company,” Harrison recalled. “They did not think Home Depot was worthy of being bought. We also talked with Joe Antonini, ceo of Kmart, which owned Builder’s Square and frankly he thought Builders Square was a better box and that Home Depot was a has-been.” Builders Square eventually sold, underwent a name change, and disappeared.
Harrison tried to sell Kohl’s when it was private and said Walmart, TJX and Melville were offered deals but declined. Instead, Kohl’s went public.
He also once tried to get Macy’s to buy Bed, Bath & Beyond, and when The Limited was the strongest specialty retailer in the country, its founder and chairman, Leslie H. Wexner, wanted to open Limited shops inside department stores “to be both in and outside of the ‘tent’ as he called it,” Harrison said. “I set up a meeting with Howard Goldfeder, then ceo of Federated, and Les proposed that he put five Limited stores on a test basis into Federated department stores. He would pay to build the space and if after 18 months it didn’t work out, he would pay to put the space back to where it was before. Goldfeder came back and told us that he didn’t have room in any of his stores to test this.”
Harrison estimates about 60 percent of Financo’s deals led to creating stronger companies. “There are always deals that don’t work out as strongly as you want. The fault is when the buyer totally forgets the rational of why a company is selling, or doesn’t recognize that without the entrepreneurs that built the company, the company will not prosper.
Harrison wasn’t about to bolt from Financo right after selling stakes in it, though he did relinquish responsibilities of running it to Berg. That freed him to devote his time to what he loved most: creating, consulting on and consummating deals in the consumer sector. In 2014, Harrison consummated the sale of Jos. A. Bank Clothiers to Men’s Wearhouse, among the more prominent strategic transactions in the apparel retail sector in many years.
Through the transition at Financo, “I’ve allowed our managing directors to build their own relationships with many of the clients I brought in over the years,” Harrison said. “It was important for me for these people to have these relationships and for our clients to have the confidence in them.”
Berg had been in private equity for 10 years when he joined Financo, marking a return to M&A. In the last few years, he’s added Financo offices in London and San Francisco, deepened the teams and expanded the scope of the practice groups, in particular Financo’s beauty group, under the leadership of Vennette Ho. He added in 2017 a healthy living and wellness sector, and next month a consumer health-care services practice gets launched. He said he joined Financo because he saw “a platform, a foundation, we could augment and build upon.”
“John is maniacal about customer service but also about adding real disciplines and strategy, growing the business, building the team and expanding the opportunities,” said a source. “Gilbert is all about the client and the industry he loves and being so focused on winning business and making things happen with his entrepreneurial management style.”
With his final days at Financo nearing, “I feel melancholy. Sad in some ways, proud in some ways,” Harrison said. “I built Financo to be a force in the industry and it’s my hope that our team will continue to allow it to prosper.
“A lot of people have called me smart, but aggressive. In some cases, my aggressiveness, and I’m being very honest, can be extremely helpful to a deal. In other cases, it may not be. It’s pissed some people off. The fact is, that has been my style and I have survived these last 47 years.
“Perhaps one of the reasons why I have been aggressive is because I don’t want to lose a deal. The financial advisory business is my life. I love it. I love closing deals. I love meeting new people all the time. One of the reasons why I left law is that I didn’t like the legal writing parts of the law but loved the negotiations and the people you meet. This is my style.
“People ask all the time, ‘what do you really do?’ What I always say is that in reality, investment banking is a fancy name for high-class salespeople. We’re never more than that.”