Successful entrepreneurs often reach a point when they have to consider outside capital if they're going to continue grow their companies.
It's never easy to give up some ownership and control in return for capital, especially if the business has been successful under the same ownership for years.
Take Conditioned Air. For more than 20 years, Theo Etzel has built the air-conditioning contractor into one of the largest companies on the Gulf Coast. With nearly $41 million in revenues last year and 330 employees, the company ranked No. 168 in the Gulf Coast 500, the Business Observer's ranking of the top 500 companies from Tampa to Naples.
But Etzel, 57, has even bigger plans for Conditioned Air. He seeks to double the size of the company in the next five years.
To do that, Etzel turned to Gemini Investors. The Boston-based private-equity firm recently took an undisclosed equity position in Conditioned Air.
Etzel says he prefers equity over debt, even if he had to give up some control. “I didn't want to saddle the company with debt,” he says.
Terms of the deal were undisclosed, but Gemini typically invests $3 million to $8 million in companies with annual revenues of up to $50 million and earnings of at least $1 million before interest, taxes, depreciation and amortization.
Since its inception in 1993, Gemini has invested more than $500 million in 115 companies throughout the U.S. The private-equity firm invests in a variety of industries, from health care to manufacturing, consumer services, technology and business services.
“What we look for are leaders in their space, strong growth opportunities and great management teams. Conditioned Air fit all those criteria really nicely,” says James Rich, managing director with Gemini Investors.
The economic recovery has a lot to do with Etzel's decision to grow the company. For example, Conditioned Air recently added 10,000 square feet of space to its Fort Myers operation to grow its presence in Lee and Charlotte counties. “The time is right with the runway before us,” says Etzel.
Of the five original partners who started Conditioned Air, only one is cashing out because he's 81 years old. Etzel will remain chairman and CEO. “We really wanted to stay in it in some form,” Etzel says. “I'm happily here,” he smiles. “This is an exciting time for me.”
Etzel says Conditioned Air plans to solidify its position in the region it services from Bradenton to Marco Island. “We really believe in that stretch of the market,” Etzel says. “I don't think it's necessary to jump over to the East Coast, Orlando or Tampa.”
Private equity and access to capital gives Etzel options he didn't have before. “It lets me think bigger with fewer constraints,” he says.
Growth in the next few years might involve acquisitions or branching out into another area such as plumbing and electrical work. “We would be very selective,” Etzel says.
“There's a strong organic story, but in addition to that there's opportunity to acquire businesses with the same focus on customer services and opening up new business lines,” says Gemini's Rich. “All of those are on the plate for Conditioned Air.”
Follow Jean Gruss on Twitter @JeanGruss