By Stuart P. Papavassiliou, Senior Editor, ABF Journal

Darren Latimer, CEO, Gibraltar Business Capital

Scott Winicour, COO, Gibraltar Business Capital

It was nearly two years to the day when ABF Journal last spoke with Ron and Scott Winicour of Gibraltar Financial. Back in 2010, the Northbrook, IL –based commercial finance company with its nine-person staff had been in existence for nearly 20 years. In April of that year, the company rebranded itself as Gibraltar Business Capital. While the press release announcing the company’s rebranding was scant in terms of detail, Gibraltar’s COO, Scott Winicour, did go on record as saying, “Gibraltar is exceptionally well capitalized and poised to make a difference in today’s challenging debt markets.”

Fast forward to 2012 when in early March, Gibraltar announced it would acquire Greenfield Commercial Credit. While Winicour’s words in 2010 may have gone unheeded for the most part, they nonetheless proved to be spot on and the commercial finance industry took notice with news of the Greenfield acquisition.

Winicour recalls, “When we last spoke in March 2010, the rebranding of Gibraltar Financial to Gibraltar Business Capital was in the works, but we weren’t quite ready to go public with it. My father Ron was looking to take risk off the table and I was looking to raise capital to keep Gibraltar going.” It was at this juncture that Winicour teamed with his long-time acquaintance Darren Latimer, who since April 2010, has served as the company’s CEO.

Latimer, a Foothill Capital and Wells Fargo Capital Finance veteran joined Gibraltar to impact those businesses that were hit hardest during the years of the credit crisis. Latimer explains, “After the Wachovia/Wells Fargo merger, the business plan had definitely changed and I was looking forward to getting involved in lending to small companies that really needed the capital. So it was then that Scott and I met with Patrick Blandford who by then was managing new investments for our founding equity investor, CCCC Growth Fund We wanted to duplicate the model of the commercial finance companies, which over the years had done a good job lending to small, under-banked or distressed companies. We saw a huge void in the marketplace and wanted to capitalize on the dislocation and fragmentation in the space by developing a very well-capitalized commercial finance business with the ability to move quickly and compete on price and structure. Two years into it, I think we’ve started to accomplish that.”

A Strategy Unfolds … One Step at a Time

Both Winicour and Latimer agree that sticking to the strategy of first, growing loan-by-loan, day-by-day and second, acquiring businesses, put Gibraltar in a strong position to take advantage of the opportunities offered as older sellers are looking to cash out of their businesses as the economy stabilizes.

Such an opportunity came along in the form of Greenfield Commercial Credit in mid-December 2011. Winicour says, “Greenfield was always one of our better-known competitors. We were both going after the same target market and obviously when an opportunity comes along to merge with or acquire a competitor, it’s always exciting. But I remember when Darren and I got the call, we were thrilled because we knew the brand name, we knew the people and we knew it was a great fit.”

Latimer adds, “Our strategy of providing factoring and smaller asset-based loans coupled with being very creative in our structures fit in nicely with their existing model in place over the last 15 years. That was really important. Scott and I looked at a number of acquisitions throughout the country and it was important that Greenfield was in Detroit … we have similar cultures, similar styles. And between the two of us, we are the two dominant players in the Midwest. We chased deals from California to New York, but this one made the most sense because Greenfield and Gibraltar have so much in common. “

Winicour is quick to point out, “Aside from all of that, Greenfield has a very strong sales team … they are experienced and very well respected in the industry. To pick up BDOs the likes of Rene Parra in Houston, Chris Mitchell in Atlanta and Mike Gallagher in Chicago is a great win for us as well.” Latimer notes that the new BDOs have similar levels of experience with Gibraltar’s BDOs: Dave Wanders in Chicago, Maryanne Lenardo in Los Angeles and the team of Sam Cirelli and David Kaplowitz from Northern Lights Partners. Both Cirelli and Kaplowitz serve as senior advisors who refer business to Gibraltar.

Business development officers and geographies notwithstanding, Latimer articulates deeper ties that will serve to bind the two companies together. Both groups are comprised of senior professionals. To Latimer, that makes a real difference. “Other companies we’ve seen are heavy at the bottom with clerical personnel, top heavy with C-management types and soft in the middle. We didn’t want to inherit that type of situation. So culturally from an educational standpoint and from the personnel who are really involved in the hand-to-hand combat of the business, we’re very well aligned.

Secondly, both companies have always been about long-term relationships. That was one thing we noticed when we did our analysis during due diligence … Greenfield had customers going back ten to 12 years. Their customer retention was strong and their focus on retention was just as strong. And lastly, from a branding standpoint, like Gibraltar, they branded themselves as a commercial finance business that can react quickly — a company that wasn’t going to get tangled up in meetings and memos. So culturally, the alignment is really three-pronged.”

The Sum is Greater That Its Parts

And if the cultural similarities and shared values are important, so are the unique competencies and capabilities that both Gibraltar and Greenfield bring to the transaction. Winicour notes, “If you take credit as an example, it’s not so black and white. When we first looked at the Greenfield business, we realized that they didn’t operate the same way we do … and we saw that as an opportunity to expand and grow. Greenfield’s loan losses have been historically well below the industry average and that opened our eyes to new ways of doing things. We’ve quickly signed up a few prospects I don’t think we would have ordinarily brought on. Going forward, this should help us continue with organic growth.”

Latimer agrees. “They have refined some of the way they do things. For example, Greenfield has an in-house lawyer, which is a really nice luxury to have. It helps us move things through really quickly and allows us to work things out a little differently. And, I don’t think many of our competitors have that. They also have really solid senior portfolio managers who know the deals well. So, it’s not about just taking their portfolio and saying ‘thanks.’ It’s very important that we don’t throw out their 15 years of expertise, diligence and the processes they created.”

On the flip side, Winicour explains that the legacy of the Gibraltar Financial staff still remains with Gibraltar Business Capital to this day. “Gibraltar brings a turnkey factoring solution to Greenfield. They’ve always provided factoring but have lately been more geared toward asset-based lending. Now the BDOs have a turnkey factoring solution that they can go to market with … and that’s obviously great for all of us.”

As for Latimer, another distinct and critical advantage is the spirit Gibraltar brings to the Greenfield team. He says, “That business wasn’t in wind-down, but it was in a much more defensive position than it had been in the past. We’ve been a breath of fresh air, so to speak. They are excited about some of the opportunities we’ve brought and some of the ways we approach things differently. They engage with us to find out how we can be a little bit more creative with things like pricing, structure and pre-payment fees. They understand that as a company we want to grow, we want to act quickly and provide both flexible and creative solutions as opportunities come our way.”

Tim Stute, managing director at Milestone Advisors, served as the financial advisor on behalf of Greenfield. He comments, “Gibraltar went out and brought in capital from two family offices in order to rebrand the company as a nationwide ABL and factoring player. As a result of this new capital, they were able to obtain a line of credit from Wells Fargo. The management at Gibraltar looked at several of our deals since their recapitalization and with Greenfield, the timing worked out perfectly. Darren, Scott and their equity guys did a fantastic job in getting it done and Wells Fargo accommodated them by expanding the credit line.”

In it for the Long Haul

As Latimer sees it, Gibraltar has been around awhile and is definitely here to stay. “This isn’t some private equity-backed thing … it’s not about doubling and tripling the size, adding and growing assets and eventually dumping it into a bank. This is a 15- to 20- to 25-year and potentially infinite platform that we’re building here. We’re backed by patient capital and we have capital that has more capital behind it. We’re out to grow a business that has real scale. If in 20 years a bank comes along and expresses interest in us, maybe we’ll listen. But until then, we’re all relatively young, we’re smart and we’re aligned in our strategy. This isn’t a day job for us … we go home at night thinking about the business and we wake up thinking about it. In the end, we’re a finance company.”

Milestone’s Stute weighs in on the significance of this deal for both the acquirer and for the commercial finance industry as a whole. “I think the big take away from this deal is that it’s elevated Gibraltar in the market to be seen as a significant player with it comes to growth and acquisitions. And the deal was possible because of Gibraltar’s equity backing, which more non-bank commercial finance companies have been able to obtain. This makes the commercial finance M&A environment more competitive than it has been since before the recession.”

With regard to Gibraltar’s equity backing, Latimer adds, “We’ve got a dynamic board of directors that includes two members from CCCC and two others from Satori Capital in Dallas. And they aren’t about ‘Here’s your money … good luck guys.’ They’re very involved in everything from business metrics, to our strategy to our HR policies. Also Pete Schwab, who built the number one commercial finance company in U.S. history, sits on our board. So it goes without saying, we appreciate the constructive feedback.”

Winicour is no less sparing when it comes to sharing his excitement. “We’ve come a long way in a short period of time and our strategy is proving itself as a solid one. We’ve grown from a small local shop to be a nationwide player in the industry and we want to keep going. Obviously we want the growth to be organic but there will be other acquisitions if the right ones come along. As Darren said, we’re in this for the long haul … we’re energized. Everyone across the organization is excited about what lies ahead…”