VOL. 9 | NO. 38 | Saturday, September 17, 2016
EMPHASIS: Financial Services
SEACAP Financial Helping Clients Navigate Economic Waves
By Don Wade
What, a prospective client might fairly wonder, is a Memphis-based business advisory group doing with the name SEACAP Financial? Don’t they realize their nearest shore is beside the Mississippi River?
SEACAP Financial partners, left to right: Wesley Grace (managing partner), Bob King (founding principal), Mackie Gober (founding principal) and Waldrup Brown (founding principal)
(Memphis News/Andrew J. Breig)
But inside the offices of SEACAP Financial on Poplar Avenue, across from East High School, a picture explains it all: Sitting in chairs rooted in the sand at Destin are the firm’s three founding principals – Mackie H. Gober, Robert S. King and J. Waldrup Brown.
“The urban legend is that the three of us met casually at the beach 15 or so years ago and came up with a plan that would provide business advisory service,” Gober said. “And we’ve been together ever since.”
This year, in fact, marks their 15th anniversary. Each of the principals is now of retirement age, but they’re still going strong.
Most of their clients – as in more than 90 percent – are private, family-owned businesses with annual revenue ranging from $5 million to $50 million. That’s the sweet spot.
“That size of company typically lacks certain resources compared to large companies, and that’s where we come in and add the value,” said Wesley Grace, managing partner at SEACAP. “Most don’t have a chief financial officer and 99 percent of them don’t have any kind of board of directors to give them independent, strong, honest guidance.”
SEACAP also has an independent contractor, Kristin Lockhart, who handles executive recruiting for the firm. Otherwise, it’s just the four of them. Their services range from management advisory and business sales and acquisitions to financing and succession planning. Their client list includes manufacturers, distributors/wholesalers, retailers, and service providers that range from banks to law firms to a pet day care company.
When they went into business 15 years ago, they had several years of serving clients through the good times. Then the recession hit. Clients, and prospective clients, were seeking help as they attempted to weather the economic storm. SEACAP probably sounded just right.
While King says their clients generally were not as negatively impacted by the recession as larger companies, many still faced challenges.
“What we did back then was help them figure out how to deal with their current lender, which all of a sudden was tightening the screws down,” King said. “We called it lender fatigue. So we helped them move from Bank A to Bank B to Bank C. A lot of debt restructuring was going on back then.”
But first, Gober says, they always tried to make the current relationship with a lender work. Sometimes the relationship could be salvaged and other times it couldn’t.
“A fair number of companies, whether they were SEACAP clients or not, didn’t have optimum balance sheet structure – the segregation of short-term debt and long-term debt,” Gober said.
Even so, Gober says they were sometimes able to find “harmonious middle ground” between a client and a lending bank, adding, “Just like in law, mediation is used a lot more now than going to court.”
Whether times are good or bad, SEACAP is trying to help its clients find and leverage opportunities.
“At the weakest point in the economy,” said King, “if one of our clients had a good balance sheet, that became opportunistic and they wanted to take advantage of a small acquisition.”
In other cases, SEACAP’s charge is to make sure an opportunity presented to a client is not casually dismissed.
“A client was very successful, not having any trouble, and private equity groups have a way of finding these companies,” said King. “So our engagement was to help them understand their internal financial capacity to perpetuate their growth. They wanted to make sure they had enough cash flow to support the double-digit growth they had … or whether they should accept one of the invitations from the private equity groups and let them buy in and have fresh dry powder they could use to build the company.
“So we went through an analysis and had to develop a business plan, and at end of the day we determined they had plenty of internal gas in their engine to do what they wanted to do without diluting their equity. It was kind of a discovery period.”
The same is true of Memphis. Wesley, 48, says there certainly has been an attitude shift in Memphis over time and that the area appears more attractive to the business owners of tomorrow.
“I don’t have empirical evidence, but it does seem we are keeping more of these young people, instead of them leaving to go to Atlanta,” he said. “It still happens, but it feels like to a lesser degree. There’s a lot more to keep them here now.”
While Memphis has a more positive business pulse than it once did, King says he’s not sure how relevant feelings about Memphis are to a company’s success or failure.
“My clients fall into one of two camps,” King said. “They’re either real bullish on the community or they hate it. And there are very few in the middle. What my clients do have in common, though, is that by and large they’re good business people. And you can run a good business in a city you don’t like or in a city you do like.”
The key for SEACAP: to be ready with solutions to problems no matter what the client’s mindset. King says most of their business is generated by word of mouth.
“I’ll call it good, clean living,” he said.