Merger By Design - Page 4 of 7

Merger By Design

even though things have improved, Iloani cautions, “The biggest challenge for black-owned private equity firms is to break the glass ceiling when it comes to getting more institutional investors.”

Fairview Capital Partners (No. 1 on the BE PRIVATE EQUITY list with $900 million in capital under management) co-founder Larry Morse also says that the environment for minority venture capital is improving. In fact, Morse says there are a number of initiatives and manager searches underway by public and corporate pension funds that are intended to increase investment activity with emerging managers. “I think this bodes well for minority-owned firms currently on the playing field with a good performance story to tell,” he says. Last year, Fairview Capital increased its capital assets under management from $850 million to $900 million, thanks to the Florida State Board of Administration committing $50 million to the Fairview Ventures II fund.

According to Morse, commitments to all venture capitalists and private equity funds are up modestly, and disbursements by such firms into new deals have also experienced an upward trend over the last half of 2003. “After a period of drought, with very little in the way of distributions from venture capitalists and private equity funds flowing to their institutional investors, we can see appreciable improvement,” says Morse. Perhaps the biggest, or most significant, hurdle to expanding the presence of black-owned private equity firms going forward is creating credible new entrants. Says Morse, “Those who believe that they [want to enter the business] have to decide for themselves whether or not they’re prepared to test the waters.”

Facing stiff competition from larger, mainstream rivals with deeper pockets, black-owned insurance companies were forced to scramble for ways to expand. North Carolina Mutual Life Insurance Co. (No. 1 on the BE INSURANCE COMPANIES list with $175.7 million in assets) is refocusing its operations to meet the changing buying patterns of African Americans. President and CEO James H. Speed Jr. says that last year, the firm spent $500,000 to bring in a new sales force to sell group life insurance to corporations and to sell products directly to individuals through employee benefit plans. Speed believes this approach will help North Carolina Mutual generate up to $10 million in new premiums annually. The company has also launched several new products to help grow premiums.

North Carolina Mutual’s gross premiums grew from $110 million to $139 million, but Speed’s decision to relinquish its student accident business to another insurer earlier this year, at a cost of $55 million, brought the firm’s premiums down to $84 million. Speed’s decision to leave that segment of the business positions the firm for even more growth going forward. Speed’s goal is to grow North Carolina Mutual’s premiums to $200 million by the end of the year. He is currently pursuing an acquisition strategy that he hopes will make the firm one of the nation’s top 150 life insurers by 2006.

To expand into different markets, the Atlanta Life Financial Group (No. 3 on the BE