PNC Financial Services Group Inc. recently agreed to buy Harris Williams & Co., an M&A advisory boutique known for its focus on the middle markets. The deal is expected to close sometime next quarter, with financial terms not being disclosed.
“We’ve known PNC a very good while, because they are one of the top two credit lenders to the middle markets,” said Hiter Harris, co-founder of Harris Williams. “They also offer some mezzanine and treasury services, so this is a very good fit.”
Harris Williams will operate as a unit of PNC, and plans to maintain its Richmond, Va., headquarters and satellite offices in Boston and San Francisco. It also will retain its name, its Cobblestone Advisors subsidiary (focused on the lower middle-markets) and almost all of its 110 employees.
The firm is no stranger to corporate parents, having been acquired in 1996 by Sirrom Capital for approximately $24.5 million in stock. Sirrom was subsequently acquired by The Finnova Group Inc., but Harris Williams bought its way out of the arrangement before Finnova went bankrupt in 2001. It has occasionally flirted with other buyers, but got particularly serious a few months back when it hired Goldman Sachs to explore various options for strategic growth.
“We’ve been Harris Williams for 15 years, and have doubled in size every two or three years,” Harris explained. “We always think strategically about how we can grow, and doing it independently was definitely an option. We didn’t have to do anything here.”
At the same time, PNC was looking to strengthen its middle-markets practice, and the two firms negotiated for approximately two months before the final agreement was signed.
“We were specifically focused on Harris Williams because they are unique in that middle-market M&A is all that they do,” said Amy Vargo, a spokeswoman for PNC.
Last year Harris Williams completed 49 transactions, 40 of them on the sell-side, which represented a 44% increase from 2003. Since 2001, the firm has increased its revenue at a compounded annual growth rate in excess of 80 percent.
Harris Williams is known in the private equity community as a group that knows how to make and keep a relationship. Perhaps the best evidence of this is the fact that since its founding 12 years ago the firm has never had a director or managing director leave the firm.
“They have a little bit of a different approach from other investment banks. They’re more down to earth and they give you better service,” said one private equity pro, who has bought and sold companies with Harris Williams. “You feel important with them. They are here for more than just the money. They are not urban animals.”
The firm boasts a 90% closing ratio and has worked with countless middle market private equity firms, from Charterhouse Group to Texas Pacific Group. “The person you signed on with is always there. There’s no bait and switch,” says another PE pro. “You want to know who to call when you are ready to sell or looking to buy, and with them there’s no confusion. They are responsive, [and] the company has a certain respect for its clients, which is rare.”