The Jordan Company LP

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The Jordan Company LP

767 Fifth Avenue, 48th Floor
New York, New York 10153
U.S.A.
Telephone: (212) 572-0800
Fax: (212) 755-5263
Web site: http://www.thejordancompany.com

Private Company
Founded: 1982
Employees: 25
Operating Revenues: $4 billion (2004)
NAIC: 522339 Miscellaneous Financial Investment Activities

The Jordan Company LP is a New York City-based private investment firm. Although formed in the 1980s and a practitioner of leveraged buyouts, TJC has never adopted the corporate raider approach of that era, selling assets and slashing costs as a way to realize a quick profit, however harmful to the long-term health of the acquisition. Instead, the management team, led by partners John "Jay" Jordan and David Zalaznick, prides itself on being "patient money" and taking steps to insure an acquired company is positioned for future growth. TJC targets well-run companies, enlisting management as partners by offering an equity stake in the business. TJC also makes sure the company is not overburdened with debt, then provides the capital necessary for internal growth and acquisitions. All told, TJC has completed approximately 100 major acquisitions, supplemented by the purchase of another 200 companies serving as tuck-ins. Middle market companies, worth from $50 million to $1 billion, are TJC's primary interest. The current slate of companies are involved in such industries as women's swimwear, home healthcare mobility products, electric motors and gearboxes, lubrication pumps, precision metal stamping, property and casual insurance, outsourced direct marketing, maritime containers, and private post-secondary education. A separate company, Jordan Industries, concentrates on smaller companies, owning about 20, and is essentially run by the same management team at TJC. Jordan and Zalaznick also make investments in Europe through a fund, JZ Equity Partners plc.

Jordan and Zalaznick Partner in the 1970s

The more senior of TJC's founding partners was Jay Jordan. He grew up in Kansas City and attended Pembroke Country Day School, where, according to Forbes, he dreamed of buying companies. He then earned a degree in business administration at the University of Norte Dame and took a job in the trust department at First National Bank of Kansas City, working as a stock specialist. There he met another Norte Dame alumnus, G. Robert Fisher, who helped him put together an investment group which bought stock in a trucking outfit for $3 a share and later sold it at $67 a share, reaping a hefty profit. Jordan now moved to New York where in 1972 he enrolled in the Columbia Business School to earn an MBA. However, he would never complete his degree, as he became increasingly involved at Carl Marks & Co., a bond firm where he had originally taken part-time work. At Carl Marks, Jordan carved a niche for himself as a venture capitalist at a time when few Wall Street firms operated mergers and acquisitions departments. By employing typical real estate financing techniques, he became a pioneer in the leveraged buyout. Over the course of the 1970s, he acquired a number of small companies for Carl Marks Capital, including PCI Group Inc. and Pressed Steel Tank. He was joined in 1980 by Zalaznick. Born in 1954, Zalaznick earned a bachelor's degree from Cornell University in 1976, followed by an MBA from Columbia in 1978. He then went to work as an associate in investment banking at Merrill Lynch White Weld Capital Markets Group before becoming a vice-president at Carl Marks.

In 1982, Jordan elected to strike out on his own, forming The Jordan Company, and taking with him Zalaznick as well as interests in 20 buyouts he accomplished at Carl Marks. TJC began searching out little heralded companies in the heartland of the United States, ones that were profitable yet could be acquired inexpensively. Jordan once told the Chicago Tribune, " We're masters of the mundane, the prosaic. . . . We look for old-line, historically profitable, well-managed companies that have a market niche, a proprietary product that's withstood the test of time where we can minimize our business risk." Many of those companies were family owned, launched in the years after World War II, and were now facing succession issues. To assuage fears that the New York LBO firm would strip the business of assets and fire employees, TJC made a point of keeping younger management talent and motivating them through the offer of equity stakes. Just as important was Jordan's willingness to personally close a deal. According to a competitor quoted by Forbes in a 1986 profile, "Jay comes in. His suits are wrinkled, and they can't help but like the guy. With Jay it's not really a financial transaction. The essence of Jay is that he knows what makes people tick. He doesn't play an adversarial game."

TJC was also selective about the companies it sought to buy. According to Forbes, Jordan, Zalaznick, and their associates considered about 500 annual prospects presented to them by a network of business brokers. About 100 warranted further research, and about half of those were paid a visit. In the end, TJC acquired four or five of these candidates. An early success story for the firm was the $22.5 million purchase in 1982 of Piece Goods Shops, a family-owned North Carolina-based chain of 90 home-sewing stores. After adding another 40 stores and paying off the debt taken on to make the acquisition, TJC sold the business for $65 million, representing a tidy profit on the $1 million cash TJC laid out originally.

By 1988, TJC owned controlling interests in 30 companies. As the cost of acquiring the types of companies TJC targeted began to increase, however, the firm began to diversify somewhat. In 1986, it moved into real estate and money management through the acquisition of Penn Square Management Corp., a Reading, Pennsylvania-based real estate firm that ran the $200 million Penn Square Mutual Fund. Jordan and Zalaznick also looked overseas, setting up JZ Equity Partners in 1987 and raising a pool of investment money on the London Stock Exchange.

Late 1980s Creation of Jordan Industries

Several of the companies TJC had acquired in the first six years were not achieving the kind of growth rate management had hoped for, however. Jordan believed they needed to make some strategic acquisitions in order to boost their performance, but he and Zalaznick were already stretched too thin. Thus, he formed Jordan Industries, a holding company to house six of the companies. He also enlisted the help of Thomas H. Quinn, a former roommate and fellow member of the football team at Notre Dame. Quinn had 15 years of experience at American Hospital Supply Corporation, rising to the rank of Group Vice-President, and stayed on when the company was acquired by Baxter Travenol Laboratories Inc. in 1985. He welcomed the opportunity to head Jordan Industries, telling Venture magazine in February 1989 that he had been "a highfalutin hired hand for a long time," adding, "I wanted to build something for myself." The headquarters for the company was located in Deerfield, Illinois, a Chicago suburb where Quinn lived. In some sense, this new conglomerate was as diverse as many of the old ones, which had proven inefficient and bloated and fell out of favor with businessmen and investors. Jordan Industries was involved in such far flung industries as Venetian blinds and plastic pipe products. However, the operation was kept lean and retained an entrepreneurial spirit. In a matter of months, the company acquired seven more companies. The main benefit of putting this baker's dozen of companies together on the same balance sheet was that Jordan Industries was able to raise additional capital at better terms, thereby allowing the parts to command the financial power of the whole to make acquisitions and achieve the kind of growth that eluded them as standalone operations.

TJC and Jordan Industries shared some of the same management team, with Jordan serving as managing partner of the one and chairman of the board of the other, while Zalaznick and Quinn were sometimes named officers to new acquisitions. As a result, the two companies were often confused for one another. As they grew into the 1990s, however, the two staked out their own territories. TJC tended to focus on better-known consumer brands and franchised food operations, while Jordan Industries concentrated on products with industrial or business applications.

One of the largest acquisitions TJC completed during its first decade was American Safety Razor Company, which was bought for $140 million in cash in 1989. The Virginia-based company made shaving blades and industrial/surgical blades for the global market, controlling such tradenames as Personna, Gem, and Flicker. It was also a major custom bar soap manufacturer through a Dayton, Ohio-based subsidiary, Hewitt Soap Subsidiary.

In the early 1990s, TJC enjoyed a number of successes. It scored a hit with an investment in Georgia-based Carmike Cinemas Inc., which enjoyed success in fielding movie screens in second-tier cities, mostly in the South. In 1991, TJC became involved in the candy industry, acquiring Fannie May Candy Shops Inc. and its manufacturing branch, Archibald candy. A year later, the business was bolstered with the acquisition of Fanny Farmer Candy Shops, thereby merging two of America's oldest candy chains. Fannie May was founded in 1915 and Fanny Farmer in 1919. TJC entered the fast food business in 1994, forming National Restaurant Enterprises Inc. to become a Burger King franchisee. It teamed up with Larry Jaro, who owned 11 Chicago Burger King restaurants, and Bill Osborne, who owned another three stores. Former Burger King executive Gary Hubert was then recruited to help run National Restaurant Enterprises. Within three months, the new company purchased 68 Chicago stores from Burger King, as well as 14 units in the West, and bought another 29 Chicago-area stores from several franchisees. As a result, National Restaurant Enterprises was the third-largest Burger King franchisee. Doing business as AmeriKing, the company topped the 200-unit mark in 1997, and by the end of the decade approached the 400 level, with restaurants located in 12 states, ultimately emerging as Burger King's largest franchisee.

Company Perspectives:

We are long-term investors who seek to value over time, not overnight.

By the end of 1995, the TJC stable of companies combined for sales in excess of $500 million, drawn from such diverse products and services as specialty advertising products, watches, pressure-sensitive labels, electronic hardware, crystal and glassware, bicycle reflectors, security locks, electronics connectors and switches, precision machined parts, religious musical recordings, and Bibles. One of the major deals engineered by TJC in the second half of the 1990s was the $240 million LBO of sports apparel manufacturer Winning Ways Inc. in 1996. The deal had been originally broached nearly a decade earlier, a clear reflection of the long-term approach Jordan and his associates took in doing business. Founded in 1974 by chairman Bob Wolff, Winning Ways started out designing and selling tennis warmup suits. It expanded into other sportswear in 1979 when it signed a licensing agreement with Wilson Sporting Goods Co., selling the apparel in Sears stores. Winning Ways then scored a major success in 1985 with the creation of its GEAR for Sports division, selling activewear featuring school graphics in the college bookstore market. Annual sales grew to around $185 million when TJC acquired the company. As was the case with previous LBOs, Winning Ways' management team was kept on and received equity stakes in the business.

According to Venture Capital Journal, TJC invested some $600 million from 1997 to 2001, "but had to slough off approximately $125 million more on other equity sponsors because of capital constraints. Such frustrations helped lead the firm toward the realization that it needed to up its own ante." In 2002, the firm launched its first private equity fund, although in truth Jordan and Zalaznick had experience in this area through JZ Equity Partners. Helping to attract investors in the new $1.5 billion fund, named The Resolute Fund, was Greenwich, Connecticut-based Atlantic-Pacific Capital Inc. serving as placement agent. The fund came at a time when the economy was struggling, and it was difficult to raise capital for further acquisitions. Despite less than ideal conditions, the fund met its target, due in large measure to the firm's 20-year reputation for making smart acquisitions and building value.

Challenges in the 2000s

Jordan Industries did not fare as well during the early 2000s, dependent as it was on high-yield bonds to raise new funds. With investors worried about federal deficits, higher oil prices, and a weak dollar, however, the junk bond market tightened considerably and investors turned instead to safer corporate securities and U.S. Treasury bonds. Although there was talk in the press that Jordan Industries was on the verge of default, Jordan downplayed the idea, noting that he and three other shareholders held $145 million of the company's debt. As he told Crain's Chicago Business in March 2004, "If there was any problem, we just wouldn't pay ourselves interest, and the world would be wonderful. . . . [The firm is] highly leveraged. We keep it purposefully highly leveraged."

TJC also endured other struggles. AmeriKing and Archibald Candy were both forced into bankruptcy and emerged under new ownership. Nevertheless, TJC was able to continue making acquisitions. In October 2004, Professional Paint, a company it formed in 2000 to become involved in the paint industry, acquired a subsidiary of Consocio Comex S.A. de C.V., picking up the leading architectural paint brand in Mexico. Also in 2004, TJC formed TTS, LLC to acquire Tolin Mechanical Systems Company, a $50 million deal funded by The Resolute Fund. Tolin provided facilities maintenance programs and formed the foundation for what was planned to become a national, contractually based technical facilities services business. TJC also divested some assets during this period, including the sale of Acadia Elastomers Corporation and special-chemicals products company Permatex Inc. Given TJC's successful 20-plus years of deal making and ability to retain key partners, there was every reason to expect the firm to continue to find a way to grow no matter what the economic conditions.

Principal Subsidiaries

Apparel Ventures, Inc.; Healthcare Products Holdings, Inc.; Kinetek, Inc.; Lincoln Industrial Corporation; Precision Engineered Products, Inc.; Safety Insurance Group, Inc.; Tolin Mechanical Systems Company; Universal Technical Institute, Inc.

Principal Competitors

Clayton, Dubilier, & Rice, Inc.; Haas Wheat & Partners; Heico Companies LLC.

Key Dates:

1982:: A financial firm is founded by Jay Jordan and David Zalaznick.
1987:: JZ Equity Partners is formed.
1988:: Jordan Industries is formed.
1991:: The firm becomes involved in the candy industry through a Fannie May acquisition.
1994:: National Restaurant Enterprises is created for Burger King franchise operations.
2002:: The Resolute Fund is launched.