Family office Stephens Group buys Pearlman from Harbour Group

  • Harbour bought Pearlman in 2006
  • Stephens exec had worked on Pearlman investment at Harbour
  • Pearlman develops and distributes branded abrasives

A personnel connection helped Stephens Group, the Little Rock, Arkansas, family office, in its bid to buy Pearlman Group.

Stephens on May 16 said it finalized its buy of Pearlman Enterprises, the Norcross, Georgia, developer and distributor of tools and equipment for making hard surfaces. Terms weren’t disclosed. Antares Capital provided a credit facility to support the acquisition.

Harbour Group, a St. Louis private equity firm that invests in product-oriented businesses, was the seller.

“There’s some familiarity there with Clay,” said Pearlman CEO Dan Davidenko, when asked what made Stephens Group stand out. Clay Hunter, managing director at Stephens Group, previously spent 12 years at Harbour, where Pearlman was among the portfolio companies he oversaw. “He’s very familiar with this business, and he was very involved with acquisitions that took place while we were at Harbour.”

Davidenko joined Pearlman just prior to Harbour’s investment. With the recession coming shortly thereafter, “We rode through the cycle [and] got to a point where it was a great time to look at having a sales process,” he said. As part of that process, which took around six months, Pearlman “spoke with and presented to several private equity companies around the country.”

But in the end, a family office won out. Davidenko said Pearlman was excited about that: “The big benefit that we have here is we’re not part of a fund. Stephens’s ownership of the company can be indefinite; there’s no horizon or sunset there that we’re involved in, so we like that.”

Stephens Group invests the capital of siblings W.R. “Witt” Stephens Jr and Elizabeth S. Campbell, whose father was a prominent financier and political donor.

“Our investment appetite looks like that of a large middle-market private equity fund,” Hunter told Buyouts, “but it’s just so flexible because we’re not a fund, that it can be very broad.”

The firm will typically invest from a couple million to hundreds of millions of dollars equity per deal, Hunter said. The firm does growth equity on the lower end, as well as mature buyouts.

“We think of ourselves as in [the private equity] universe,” Hunter said. “I would say our deal sourcing is as robust as anybody’s in the middle-market private equity space, and we go about it in all of the same ways.”

“We do have more proprietary sources than I was accustomed to seeing in my prior life,” he added.

Hunter said Stephens Group has owned a couple of investments for decades and could hold Pearlman perpetually. This “patient, long-term capital dynamic is becoming more and more prevalent and popular,” he said.

Stephens Group was represented by M&A attorney Steve Baumer of Bryan Cave’s St. Louis office, but it did not use an investment bank. “Stephens Group has very sophisticated personnel; they’re comfortable doing it themselves,” Baumer said. Pearlman was advised on the sale by William Blair.

GranQuartz and Pearl products from Pearlman Group. Photo courtesy of the company.