Private Equity Firms Help Hurricane Victims –

If it were possible to execute the leveraged buyout of a hurricane and get it to change course, U.S. private equity firms presumably would have sprung to action and let Katrina and Rita dissipate over a lonely patch of ocean. Since such technology doesn’t exist, the private equity community took a variety of paths to help their friends, neighbors, fellow Americans and businesses in the aftermath of Hurricane Katrina.

Not surprisingly, several private equity firms, along with their portfolio companies, were impacted by the hurricane. While the extent of the economic damage is still to be determined, the financial community in New Orleans was far from insulated. Les Alexander, the New Orleans-based president of ACG Louisiana and a managing director with investment banking firm Howard Weil, has been staying in Houston since Hurricane Katrina landed and says that recovering from the storm will be a long-term process. “People haven’t been able to get back to their homes to assess their personal damage,” says Alexander, who lost a neighbor in New Orleans. “Large businesses have had to make large contingency plans to operate out of Baton Rouge, Houston, et cetera. The next step is: how do we get back to the city again? That’s going to be a long-term process.”

Alexander adds that one of the problems for buyout firms he knows is that they’ve been unable to get in touch with their portfolio companies and are still trying to set up stable lines of communication.

Incubator Group Opens Doors

After a couple brainstorming sessions on what they could do to help, partners of The Incubator Group, a Nashville, Tenn.-based private equity firm, decided to look at the different companies in their portfolio and assemble a team to assist the post-hurricane recovery process. The result, says firm founder Shane Messer, was the launch of is a web site that connects those willing to provide housing for victims of Hurricane Katrina with those in need of a place to stay. At last count had 7,261 beds available for those in need. One of the biggest challenges has been letting evacuees know of the service and getting them access to it, as many of those in need do not have access to the Internet. The project is looking for more volunteers to work at storm shelters, help inform evacuees and enter data online.

The Incubator Group developed the web site along with its My Life: My Business project, a Nashville-based provider of business assistance services. The group was able to handpick the employees from its firms that would be best suited to work on this project and ended up with six people, including three partners of The Incubator Group, one CEO and two employees of Made to Order Websites, a Web development firm in Chicago. “This all happened in about 72 hours,” says Messer. “When we decided to do this, our partners took our money and had the site built that we weren’t able to do ourselves. We looked for people with the ability to work under pressure and get things done and someone who just really wanted to help.”

Messer and his partners looked at their efforts initially as a two- to four-week project that could soon be turned over to someone else. “After three or four days we realized it was a larger undertaking, but we felt like it was something we needed to do. We needed to go through all the hurdles.” He says that eventually he and his partners will have to end their work on the project but hope to leave it running for others to operate and expand. “Sometimes your heart can get so caught up in it that you don’t want to let it go.” may end up merging with a larger charitable organization. The Incubator Group has received requests to expand its uses to also provide housing for victims of domestic violence, Messer says. He’s also interested in trying to phase into finding ways to help small businesses recover and get up and running again at no cost and is working with that process right now. He is also on the board of directors of a non-profit organization called Lawyers without Borders, which provides free legal services, and has talked about providing free legal services to help small businesses affected by Hurricane Katrina. “We’re starting to see it grow, and we want to be able to scale it and let it be what it’s purely good at. They’ve really got to take the time to create a process that can be scalable and work on a consistent autonomous basis, otherwise it’s dead,” says Messer.

Palladium And Wise Foods Keep On Truckin’

Like many who watched the devastation of Hurricane Katrina, New York-based buyout firm Palladium Equity Partners was motivated to do what it could. Its founder and managing partner Marcos Rodriguez started talking to a neighbor who was working with the Spirit of America, an American Red Cross mobile kitchen that can produce up to 30,000 hot meals a day and has been stationed outside of New Orleans providing food to hurricane victims and their rescuers.

Rodriguez figured that one of his firm’s portfolio companies, Kennesaw, Ga.-based Wise Foods, was well positioned to help with the relief efforts and could send food to the Red Cross station quickly. Palladium contacted Wise Foods to let them know of the opportunity to help the Red Cross, and the company seized it. Employees volunteered to work over Labor Day weekend and filled a large tractor trailer with food. A driver volunteered to drive it to the Spirit of America Red Cross station and the truck arrived there soon after. The company sent a second truck full of food to a Salvation Army center in the Atlanta area a few days after the first truck arrived in Louisiana. Not to be outdone, the company’s Berwick, Pa.-based plant teamed with its local fire department and collected enough food and other donations to fill a truck that was sent to Louisiana Disaster Relief in New Iberia, La.

Another Palladium portfolio company, Dallas-based restaurant franchise Taco Bueno, also made an effort to help Hurricane Katrina victims. The restaurant has collected cash contributions at all of its restaurant locations. Taco Bueno locations in Texas and Oklahoma have provided food to hurricane victims, while executives at the restaurant’s corporate office pooled resources to help house evacuees at a local hotel. The restaurant made a contribution to the Freedom Flight effort, which flies supplies to and victims from the ravaged areas. It also helps reunite separated family members and has logged more than 15,000 miles of charitable flights, according to Palladium. “We have certainly encouraged all of our portfolio companies and employees to be generous and contribute,” says Pilar Avila, a Palladium vice president.

Lending A Hand To A Deserving LP

But lending a hand to the victims of Hurricane Katrina doesn’t have to involve starting your own web site or making a drive to an affected area. Sometimes the best thing to do is to send capital to a fund or charity that is already there. That’s what Owings Mills, Md.-based fund-of-funds firm Montagu Newhall did. The firm didn’t have to look farther than its own roster of limited partners to find a group worthy of help.

One of the firm’s LPs is the pension fund for the New Orleans Fire Department. New Orleans firefighters worked tirelessly to save lives even as many of them lost their own homes or otherwise suffered during the disaster. “We were trying to figure out the best way to do something,” says General Partner Ashton Newhall. “This just happened to be a group that made it very personal to us.”

Montagu Newhall took up a collection from all of its employees and donated it to the New Orleans Fire Fighters Charity LLC, a fund that helps New Orleans firefighters and their families. The firm made a donation in conjunction with Memphis-based Consulting Services Group (CSG), the placement agent that helped Montagu Newhall obtain the department as a limited partner. Newhall also sent out an email that went to people familiar with the firm, giving them the address to donate to the fund and inviting them to do so. “We believe that in addition to being great clients they are also amazing human beings,” Newhall wrote in the email. “We have watched the television in awe of their super-human efforts as this tragedy has evolved.”

According to Newhall, sometimes sending money to those in need is the best thing someone can do. “Right now money talks,” he says. “One of the best ways short of being out there to help people is to try to give whatever you can. We’ve tried to lead by example.”

Advice On Helping

Shane Messer says that firms ought to look at their relief work as one of their portfolio companies and assemble a team to work on hurricane relief with the same intensity and intelligence as they would to staff a portfolio company. He also says not to be shy about using any and every contact available. “When you’re working on a nonprofit project it’s okay to cross the line and reach across all of your portfolio projects. You can get away with using every single contact you have or are two or three people away from. It’s not like when you’re raising money for yourself.” He adds that private equity professionals should seek to grow their efforts as they would help their portfolio companies grow, with the numbers of people helped as the measure of growth and success.

Palladium’s Avila says that each individual should do something as well. “It’s all about being generous and not just about the corporate initiative but about individuals as well,” she says. “We all have the opportunity to help.”

Buyout and private equity firms, which pride themselves on being an essential part of the country’s economic engine in good times, are ready to help with the recovery effort. “We are also witnessing capitalism at work-getting resources to places they are needed most,” ACG President and Michael Best & Co. Partner Peter Coffey wrote to his fellow ACG members.

“There are people talking about how to bring resources together to help businesses during this period as well as when everybody gets back to New Orleans,” says Lex Alexander. “I’ve seen a lot of sense of community from business professionals wanting to go back and rebuild.”


* New Orleans Fire Fighters Charity, LLC

Americus Real Estate Investments

Attention: Judy Delucca

2211 Norfolk Street

Suite 1150

Houston, Texas 77098

* The Open House Project