Wind Point: Find A Good Captain, Then Buy The Ship –

Follow the leader.

That might be the best way to describe the investment strategy at Wind Point Partners, a Chicago-based private equity firm with more than $1 billion under management. Unlike some of its counterparts, who search vigorously for investments and decide who’s going to run them later, Wind Point does the reverse, developing relationships with experienced CEOs and then matching them with investment opportunities.

While the firm’s companies certainly haven’t been insulated from the economic downturn, having experienced captains at the helm has helped them navigate through the storm. And for Wind Point’s partners, that means they aren’t spending all their time bailing water. “We haven’t had to bring the SWAT team in,” says Rich Kracum, a managing director at the firm, which is currently raising its fifth fund.

Simply put, the firm’s objective is to partner with veteran CEOs in five industries-consumer businesses, industrial manufacturing, food, healthcare and business services-and draw on their expertise and contacts to improve their existing investments and to make future investments. But reaching that goal is no small effort.

Wind Point works with three groups of CEOs, the most obvious one being the CEOs of its existing portfolio companies. It also aligns itself with 32 retired or soon-to-retire CEOs who serve in an advisory role and often take board seats on Wind Point companies. Sometimes they may end up running one of those companies. Select members of Wind Point’s Executive Advisor Partnership include Tom Hodgson, former president and chief operating officer with Abbott Laboratories, and Jack Hoeft, former chairman and chief executive officer of Bantam Doubleday Dell Publishing Group. The EAP group invests with Wind Point in a side-by-side fund.

The third group of executives is what makes Wind Point’s strategy somewhat unique. The firm establishes relationships with potential CEOs, those people it thinks will make good captains for future investments. But rather than pay lip service to these contacts, Wind Point principals and vice presidents take responsibility for them, calling these executives on a weekly basis in order to build strong ties. That work can pay off in a variety of ways. In some cases, an executive may know of a corporate divestiture, thus serving as a matchmaker. In other instances, Wind Point may discover an investment opportunity and consult with one of those executives before pulling the trigger.

Another way Wind Point takes advantage of its executive relationships is by bringing together CEOs from all three groups, as well as it limited partners, to talk about operational and strategic issues. This happens once a year in the fall.

Leveraging That Experience

Kracum points to CEOs like Joe Messner, president of Bushnell Performance Optics, an optical products company best known for its binoculars. When consumer spending dropped in 2001, Bushnell, like many companies, saw its revenue drop. The market was bad enough to force Tasco Worldwide Inc., Bushnell’s largest competitor, into bankruptcy.

But in large part because of Messner’s prior experience with economic downturns-“He’s been looking at P&Ls since the late 1970s,” Kracum says-Bushnell was able to reduce inventory and take other precautions to stop the bleeding.

The net result: Bushnell bought Tasco this past July for $3 million.

Wind Point’s most recent transaction before the Tasco deal was the January acquisition of Ames True Temper, a subsidiary of U.S. Industries Inc. Based in Camp Hill, Pa., Ames is the leading manufacturer of non-motorized lawn and garden tools, wheelbarrows and hose reels in North America. Wind Point tapped Rich Dell, formerly a group president at Newell Rubbermaid Inc., to run Ames.

Wind Point had a relationship with Dell before making the acquisition, and his pre-deal growth projections for the company played a key role in the firm’s successful bid. “Since our projections were significantly above [Ames] management’s, that allowed us to be more aggressive” in going after the company, Kracum says.

Looking ahead, Wind Point expects to maintain its investment pace. True, the market may have bottomed out, and the company has plenty of capital, but some fundamental hurdles remain. For one, the number of active senior lenders has dropped considerably, and quality sellers are often asking too high a price. “There are not enough willing sellers,” explains Jeff Gonyo, a managing director. “The good companies are asking for seven times EBITDA..and that requires a lot of equity.”