Digging In


2006. Chairman and CEO James Reynolds Jr. attributed the growth to an expansion in the services provided to existing clients and the addition of new clients. Its $3.2 billion in senior-managed issues proved to be significant. “We are using these times to get closer to our clients, assisting them with taking advantage of certain opportunities in the market, and understanding as well as exploring additional ways in which we can be a value-added partner,” Reynolds says.

PRIVATE EQUITY: FEELING THE CREDIT CRUNCH
U.S. buyout activity broke records in 2007 for private equity deals, according to Sandy Anglin, a research analyst at Thomson Reuters, mainly because of M&A activity worldwide in the first three quarters of the year. There were $467.2 billion of private equity acquisitions, up from $438.7 billion in 2006. Top industries included media and entertainment, technology, energy and power, real estate, materials, telecommunications, and industrials. But due to the tightened credit markets, Anglin says, Thomson Reuters expects fewer deals to be completed this year. “The availability of cheap and easy financing is limited,” she says.

That tightening of lending conditions prompted Hartford, Connecticut-based Smith Whiley & Co. (No. 9 on the BE PRIVATE EQUITY FIRMS list with $270 million in capital under management) to be more aggressive in managing the company’s portfolio risk. “Our approach is to dig deeper, perform regression analysis on prospective companies, and make sure there is ample liquidity to address any potential capital gaps,” says Gwendolyn Smith Iloani, president and CEO.

The method boosted the firm’s deal activity 20% through March over the same period last year. The firm is securing investors to raise $250 million for a third fund that would invest nationally in small- to medium-sized companies in consumer products, industrial, healthcare, technology, and food and beverage.

Iloani says the challenges facing private equity firms include connecting and effectively working with other providers of capital, such as large commercial banks. “Bank financing typically represents the lion’s share of the capital structure, and when the credit crisis deepens, investors at the bank level tend to pull back and tighten credit,” she says. “This directly impacts a company in that it restricts their ability to grow or manage in a downward or cyclical cycle.”

Samuel Boyd Jr., president and CEO of the National Association of Investment Cos., says over the past 15 years, NAIC members have witnessed two growth trends: a growing number of black-owned private equity firms and an increase in the deal flow for those firms. But Boyd concedes that the amount of capital that firms have raised from institutional investors has not been commensurate with the growth trends.

The effects of the subprime debacle on the financial markets and the erratic movements of the major stock indexes aren’t expected to go away anytime soon. But as the markets change, the CEOs of the BE 100S will adapt — and we will adjust how the companies on our lists are ranked.

Why We Changed Our Rankings
The ever-changing financial markets are reflected in this year’s rankings. To better capture the way


×