| back

Brentwood Capital shows businesses the money

Brentwood, TN – Wednesday, March 30, 2005

From its offices in the bustling Maryland Farms business park, Brentwood Capital Advisors is proving that a local focus doesn’t have to mean small deals.

The company recently helped one of Nashville’s highest-revenue companies, NewQuest Health Solutions, sell half its equity for a $134 million capital infusion from GTCR Golder Rauner, a private equity firm in Chicago.

“NewQuest is a little bit of an anomaly. We hope there are more of those, but it’s not core to our business plan,” said Kevin Murphy, Brentwood Capital’s managing partner. The six-year-old financial advice firm’s work for NewQuest has been its largest deal to date.

The company’s deals, whether raising capital through senior debt, mezzanine debt or equity sales, generally fall into a transaction range of between $25 million and $100 million.

“We’ve averaged a little over $20 million in every capital raise we do,” Murphy said.

Those deals have largely been kept close to home, too. Brentwood Capital’s last 18 transaction deals have included 13 local companies, according to Murphy.

“Our bread and butter is here in Nashville’s health care service companies,” said partner Thomas Wylly II, formerly with local investment banking firm J.C. Bradford & Co.

In fact, Brentwood Capital has helped launch some of Nashville’s rising stars with a well-timed infusion of capital.

“NewQuest is one of the leading young managed-care companies. It’s a $600 million company that’s growing very rapidly and we think will get Nashville even more notice for its health care management expertise,” Wylly said.

The company has had several deals with Psychiatric Solutions Inc., which has seen its revenues grow 71 percent in the last year, according to its Securities and Exchange filings. The Brentwood-based public company reported revenues of $487.2 million for 2004.

“Just a couple of years ago when we met them, it was a company with $60 million in revenues. We helped them get $45 million in capital at a time when that really helped them take off with their strategy,” Wylly said.

Brentwood Capital also helped Symbion Inc., a surgery center operator, raise $40 million before it went through with an initial public offering.

The capital these companies raised, Wylly said, helped fund acquisitions and growth at a critical development phase.

Herb Fritch, chief executive of NewQuest, said his company’s involvement with Brentwood Capital started as part of a planned acquisition that then failed to materialize.

“Then, the thought was, we should sell part of the company to spread our risk a little bit,” Fritch said. The process of finding the right financial buyer took another 14 months, and the $134 million was “just a fraction of the deal,” he explained.

“We were beating back potential deals with a stick because everyone saw the value in what Herb Fritch and [chief operating officer] Jeff Rothenberger had built,” Murphy said.

Market conditions have also made this an opportune time to sell, according to Nicholas Carteaux, vice president at Brentwood Capital. Carteaux, like Murphy, came from the investment banking group of SunTrust Equitable Securities.

“Multiples [prices] are very high right now and, as a result, people have become sellers. It’s a sellers’ market, and there’s a lot of capital out there on the finance side,” Murphy said

Financial buyers (investing solely for a financial position in a company) are currently on equal footing with the strategic community (companies looking to grow through mergers and acquisitions), according to Murphy.

In fact, three of Nashville’s four biggest deals last year involved financial buyers.

In addition to NewQuest’s transaction, Vanguard Health Systems was acquired by the Blackstone Group in a deal valued at $1.7 billion, and Texas Pacific Group bought a majority interest in Iasis Healthcare for $1.4 billion. The exception to those deals was LifePoint Hospitals Inc., which bought Province Healthcare Co. in a $1.7 billion strategic acquisition.

According to Wylly, acquisition activity and financing deals are running pretty evenly now.

“What’s nice is private business owners don’t just have to sell their company to a big strategic competitor anymore. There are other strategies we can show them where they can get liquidity — money in their pocket — and continue to own the company,” Wylly said. “The average business owner doesn’t know that … they think the only option they have is to sell.”