NEW YORK — William M. Smith, president of Financo who has been instrumental in broadening the firm’s scope of services, has resigned to become a partner with venture capitalist Christopher Burch to make principal investments in merchandising companies.
This story first appeared in the July 7, 2004 issue of WWD. Subscribe Today.
However, Gilbert W. Harrison, Financo chairman, told WWD Tuesday that he’s narrowed the search for Smith’s successor and expects even more changes soon to build the business, among them, adding investment bankers and consultants. Harrison, founder and chief executive of the 34-year-old Financo, will assume the role of president in the interim.
Smith has been the number two executive at Financo, heading up the mergers and acquisitions practice with Harrison. He sourced and worked on deals alone or with Harrison, and made a major contribution by helping to expand Financo into a more formalized consulting practice and a full suite of financial advisory services, including restructurings and raising capital. Before, Financo focused primarily on arranging M&A deals.
Harrison said he expects to announce Smith’s successor by the end of the summer. He said he’s seeking an executive with investment banking expertise and experience in the merchandising and consumer goods arenas.
“My objective is not simply to replace Bill, but to build Financo to the next level,” Harrison said. “Even before Bill made his decision to leave, I started to contact a number of top-level investment bankers to complement Bill. Our business has never been stronger.”
“When someone leaves a company, it’s a chance to change the modus operandi,” added Antoine Treuille, Financo executive managing director who runs Mercantile Capital Partners, Financo’s private equity affiliate. “We can all be overly afraid of change because we get too comfortable in our ways.”
Harrison said Financo is currently working on 30 transactions and recently concluded two PIPE [private investment in public equities] deals, for Wet Seal and Wilsons Leather, which is innovative for the retail industry. Before, PIPE deals were more commonplace in other sectors, such as health care and biotech. Harrison also said a Financo team is in Dallas to help retailer Gadzooks get out of bankruptcy, but that is not a PIPE situation.
Harrison added it was Smith’s decision to leave and that despite his “strong personality” the two maintained an “amicable” relationship. “He wants to build something on his own,” Harrison said.
The 63-year-old Harrison said recruiting more senior bankers will help to develop a succession plan, but not so much for himself. “I have no intention of ever retiring,” Harrison stated. He said Financo currently has 20 investment bankers, as well as executives handling restructurings, private placements and other activities. Financo also operates Mercantile Capital to invest in emerging businesses, and has a broad pool of consultants working on an assignment basis. He disclosed that Hal Kahn, former Macy’s East ceo; Russell Stravitz, former Brylane ceo, and Arthur Martinez, former Sears, Roebuck ceo, are working with Financo bankers on three financial advisory assignments. Harrison declined to disclose specifics.
Last year, Financo built its team by naming two senior executives for its restructuring practice, Christopher J. Davino and Michael A. O’Hara. Mary Ann Domuracki and Stephen Palley are also key players in Financo’s restructuring practice.
Harrison said he hopes to take Financo public. It’s considered among the largest independent M&A firms, concentrated in retail, apparel, footwear, cosmetics, fragrances, e-commerce and consumer products. Yet it’s still small by Wall Street standards, with $25 million to $30 million in revenues, making a public offering something well into the future. Financo’s only outside shareholder is Peter Ackerman, who was Michael Milken’s number two executive.
While working with Burch, Smith will continue as a senior adviser to Financo. Smith said there will be a transition period so he can finish current assignments. “Financo is well positioned for continued growth and strengthening its management team further,” Smith said. He characterized Burch as a “true entrepreneur” who has invested in a few dozen companies. Burch is the husband of socialite Tory Burch, who designs a collection of sportswear and accessories.
Smith was a managing director at Kidder Peabody and head of its retail and merchandising group before joining Financo in 1996 as managing director. He became its president in 2001.
In his new job, he will work to find retail and merchandising companies to buy, and also to develop a direct-to-consumer business out of China, which would sell apparel and home products and have a mass customization component. “What I’m doing is really not competitive with Financo,” said Smith, though he did note that Mercantile, like Burch, buys into companies.