Local startup Boxwood Partners is putting the finishing touches on its first deal as a private equity fund.
Boxwood is acquiring an out-of-state internet wholesaler/distributor (name not revealed) that can perhaps best be described as an online version of Sam’s Club. That web-based business has millions of dollars in revenue and six employees, according to Boxwood Partner Patrick Galleher.
The company also has an active M&A division, which assists in the buying and selling of other companies.
Inside Galleher’s new Shockoe Slip office, a flatscreen TV is set to CNBC. On a recent morning, former Wachovia guru Rod Smyth appeared onscreen and prognosticated about the market. The Wachovia Securities logo that formerly framed his mug has been replaced with that of RiverfrontIG, another startup founded by Smyth and several Wachovia colleagues.
While many of the region’s large private companies are floundering – Media General and Circuit City, to name a few, and the finance world seems stuck in a slump – ambitious startups such as Riverfront Investment Group and Boxwood might help to fill in the gap and generate new opportunities for other Richmond businesses.
Already, Boxwood’s downtown office feels full. Several recent hires are from the cross-town investment bank Harris Williams &Co. Galleher said he expects to hire up to ten more employees by the end of the year.
Galleher and Founding Partner/Managing Director Bobby Morris work on both the private equity and M&A deals. The rest of the staff works mostly on M&A.
The firm raised several million dollars to start the fund. Generally, private equity firms pool funds from wealthy investors to buy companies with the intent of reselling them.
In order to turn a profit, Boxwood will have to improve businesses after acquiring them. That means there’s opportunity for local businesses to pitch their services.
When Boxwoods takes control of the target company, it will likely bring in outside vendors to improve its internet presence. Chris Deel, a Boxwood partner with a background in IT operations, is currently at an e-retailing convention in Chicago shopping for potential vendors, Galleher said.
Acquisitions such as these can be a boon to the local business community, Galleher said. “If the PE funds were in Raleigh, then Raleigh firms would get the business,” he said.
Boxwood already uses a Richmond payroll contractor. Galleher said the firm might shop around for marketing and search optimization services. As more deals get done, so too increases the possibility of more local work, he said.
Typically, Boxwood’s PE division targets profitable companies in the online media, internet marketing, retail or wholesaling sectors. The firm stays clear of startups, leaving those riskier propositions to venture capitalists. Boxwood requires target companies to have between $500,000 and $2 million in annual earnings.
The firm might eventually deploy up to $20 million within the next two years, Galleher said.
In a press release from May, Partner Bobby Morris said, “We are essentially bridging the gap between traditional private equity investing, which generally targets larger companies, and local individual investors, for whom transactions of this size and characteristics are often difficult to finance, especially in today’s credit environment.”
Meanwhile, the investment banking side at Boxwood is working with companies in a handful of states, although none are in Virginia.
Before joining Boxwood Partners, Galleher was CEO at WILink (now called PrecisionIR), an investor-relations and webcasting firm.