Two veterans of Nashville’s financial and legal sectors have joined forces to clean up troubled companies that aren’t making it onto the radar of larger restructuring groups.
With Tortola Partners, Steve Curnutte, the former boss of Finworth Mortgage, and Robert Gonzales, an insolvency attorney and co-founder of MGLAW, plan to make their name as a fast-moving triage and turnaround team that pumps energy, management know-how and, when needed, cash into businesses that are struggling.
But they say the launch of Tortola isn’t a cyclical move designed to take advantage of the recession and credit crunch that has wounded many companies.
“This is the ultimate capitalist, entrepreneurial play,” Curnutte said. “We’re looking for companies with a heart to be saved and jobs to be saved.”
Serial entrepreneur Curnutte owned Finworth until last summer, when he sold the lender to locally based InsBank. Once the management transition had been completed, Curnutte turned his attentions to the launch of Tortola, the idea for which goes back several years. Gonzales, a Vanderbilt Law School graduate, last fall left the firm he co-founded in 1997 to do the same.
“There will always be companies that struggle in capitalism,” Gonzales said. “But those small companies don’t have to be wound up. So many times, it’s all about cash.”
Tortola’s partners will target companies with revenues ranging from $5 million to $50 million and will only get involved if it can take a majority stake via special-purpose vehicles and have full operational control of the company.
The firm is based on the sixth floor of the Roundabout Plaza and employs a small number of analysts and support staff. Its team is looking at a number of opportunities, including two manufacturers, a commercial contractor, a real estate developer and an office trade vendor.
After analyzing a company’s situation, Curnutte and Gonzales will work with existing management – or if needed, tap their network of area entrepreneurs and operators for interim leadership – to right the ship.
And while Curnutte and Gonzales aren’t trying to time the market, there are plenty of opportunities amid the most acute recession in decades. A survey published last month by the Association of Corporate Growth and Thomson Reuters showed that more than half of private-equity professionals expect merger-and-acquisition activity to increase in the coming six months. One of the contributing factors is companies’ increasing need to sell assets to raise capital and avoid bankruptcy.
Another indicator of the profit potential in turnaround work today is the activity at larger market players. Morgan Keegan & Co., the investment banking unit of Regions Financial Corp., last week said it had acquired Rhode Island-based Spectrum Capital Group in part because of the restructuring expertise of its principal. Spectrum Managing Partner Michael Lederman is now leading Morgan Keegan’s euphemistically named Special Situations Group.
Similarly, private-equity cash that a few years ago was focused on funding industry consolidation plays or promising start-ups — with Nashville’s health care sector a prime beneficiary — is now targeting distressed assets in a variety of sectors.
In commercial real estate, Chicago-based Golub & Co. and Boston’s Alcion Ventures announced late last month that they have created a $100 million joint venture to chase turnaround deals. And in banking, legendary investor Wilbur Ross recently led a team of big-name private-equity players in the purchase of Florida’s failed BankUnited. With regulators committed to absorbing most of the losses on the bank’s current portfolio, the investment group now plans to acquire other struggling banks across the Southeast in coming years.
Curnutte said Tortola’s model won’t be as long-term. Most of the venture’s investments will take less than a year.
“We don’t want portfolio companies for 10 years,” Curnutte said. “We’re a small team focused on finding and diagnosing problems. The operational work will be left to the operators.”