Golub Associates Stays Flexible –

With deal flow and competition for those deals intensifying, the ability to make decisions quickly in the current market can make or break a transaction. That helps to explain why capital provider Golub Associates makes it a point to get clients an answer in 48 hours.

Headed by Lawrence Golub, previously a managing director with Wasserstein Perella, the nine-year-old firm has had plenty of transactions to consider lately, closing 12 investments over the last 15 months. “On any given week, we are working on 15 transactions, a few of which might be signed up,” says Golub, who looks at every deal before the firm accepts it.

The firm manages more than $200 million of capital, and provides financing for growth, acquisitions, recapitalizations, refinancings and management buyouts. Golub typically invests in privately and publicly held businesses with operating cash flow in excess of $4 million per year and sustainable proprietary positions in their markets.

Typical investments range in size from $3 million to $15 million, with almost one-third of the firm’s recent deals in the consumer products market. Golub does not invest in high technology, biotechnology, pharmaceutical, telecommunications infrastructure, oil and gas exploration, re-lending or passive real estate businesses.

Golub said that because the firm works with SBICs, legally his firm is unable to invest in certain areas. As for other areas – including real estate – Golub says he would rather focus the firm’s attention toward transactions that his firm “understands well, and can help our clients get what they need.”

Multiple Choices

One way to get clients what they need is by being flexible when financing deals. The firm’s principals say this is only natural given who invests in the firm. “When you consider that most of our investors are high-net-worth individuals, combined with the desired economics of the management team, we need to bring more choices to the table,” said Greg Cashman, a principal. “Instead of looking down from a banker’s perspective, we look up from an investor’s perspective. And we have a reputation for getting things done.”

Golub cites the firm’s work in 2001 for Gemini Industries, a York Management portfolio company that designs, imports and manufactures electronics accessories, and typically sells to mass merchants (such as Wal-Mart) under such well-known names as Phillips and Zenith. Gemini purchased the assets of Zenith Accessories in 2001.

“[York] needed several million dollars to refinance the business,” Golub recalls. “We came up with a simple but very creative idea: We invested senior debt, persuaded the bank group to allow us to join, and we took a traditional bank interest rate, and we took warrants that compensated us for the return.

“It was a win-win-win situation,” he continues. “They got to make an acquisition, the existing lenders had to share their collateral, but their investment increased with profits, and it was a win for Golub Associates because we priced it lower than we would have, and it was a fair risk of return, and it would allow us to build relationships with York and Gemini.”

A more recent transaction, which Golub helped finance last year, was Prairie Capital’s recapitalization of Roman Decorating Products, the leading manufacturer of wallpaper paste, primers and strippers, for residential and industrial use.

“Prairie Capital had reached a tentative agreement [for an MBO]. When Prairie came to us seeking mezzanine financing, our firm was able to have a commitment letter signed and delivered in two-and-a-half weeks. I don’t think anyone else could have got a commitment letter in less than three weeks.”

Interestingly enough, Prairie is also a competitor to Golub, as is Allied Capital and American Capital Strategies, the principals said. “Depending on the type of deal we are looking at, there could be different competitors: larger mezz funds, medium-sized mezz funds…but it all depends on the transaction,” Golub says.

Golub’s Experience

Before forming GA, Golub was a managing director of Wasserstein Perella and an officer of Allen & Company Incorporated. A former White House Fellow, he is currently the Treasurer of the White House Fellows Foundation and the President of the Harvard JD-MBA Alumni Association.

Golub draws on that experience when the firm is considering a transaction. “Sometimes I play Devil’s Advocate, in order to ensure that we are seeing all sides of a deal,” said Golub. “And, in addition, it is great training exercise for the firm. Our guys might see a new perspective or a new strategy on how to approach a deal. Perhaps only 50% of the discussion will affect the deal on the table the rest is for the next deal.”

Looking ahead, the firm will maintain its emphasis on efficiency, a strength that will be important in an increasingly active market. “If you do things well, with responsiveness, it works well for both the clients and the firm,” says Clarence Schwab, vice president at Golub.