Overcoming lengthened lifecycles for corporate IT equipment, leasing company Computer Sales International Inc. (CSI) recently secured a private equity infusion from Charlesbank Capital Partners. The investment involved between $25 million and $35 million, and garnered Charlesbank a “large minority position” in CSI.
The two firms were introduced to one another last October by William Blair & Co., which acted as a placement agent on the eventual transaction.
“We weren’t going around specifically looking for a leasing company, but we’d done a lot of financial services in general so we had a good level of comfort in that area,” said Kim Davis, a managing director with Charlesbank Capital. “We knew pretty quickly it was a deal we wanted to do and our enthusiasm showed when nearly half our firm showed up for our meeting with [CSI].”
A key selling point for Charlesbank was low CSI sales force turnover and a sales model that differs from that of many other leasing companies. Not only does CSI own its own equipment, but it also insists on meeting with end-users before closing a deal. In other words, the Boston-based company neither does brokerage work nor deals with faceless customers.
“We were asked by a lot of [potential] investors during the road show why our model wasn’t like our competitors’ models, and we told them it’s because our model has worked,” said Ken Steinback, chairman and chief executive of CSI.
Last year, CSI reported revenue of $577 million, up from $521 million in 2000. The company also reported $649 million in total assets.
While the Charlesbank Capital will be used to expand CSI’s sales efforts, revenue figures in 2002 may be hindered by a slumping economy that has seen companies extend their hold times on IT equipment. While such a situation is decent for CSI’s earnings, it plays a bit of havoc with its volume. Steinback did say, however, that the company has not yet taken any losses from bad credits.
Approximately 85% of CSI’s revenue comes from its leasing business. The rest comes from various subsidiaries, including IT consultant Partec Inc., used Hewlett-Packard equipment dealer Evergreeen Technology Sales Inc. and British equipment reseller McKenzie Hughes Companies Ltd.
As for future private financing, Charlesbank’s Davis said his firm would be willing to invest additional capital if deemed necessary. He does not, however, expect any other private equity firms to be involved.
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