South Carolina’s legendary climate is good enough – weather-wise and business-wise – that an experienced investment trio think more of the world will want to buy into it.
The three, former S.C. Commerce Secretary Joe Taylor, businessman Donald R. Tomlin and investment banker Daniel D’Alberto have launched Southland Capital Partners, a new merchant bank created to serve the private equity market in South Carolina.
A merchant bank, in general terms, is a financial organization that makes capital available to companies by means other than loans, such as shared ownership, and also provides advisory services to them.
All three partners have experience with growing companies and selling them in the private equity market.
Southland was created because South Carolina is ripe for business and is underserved by the private equity market, the principals said.
Ultimately, Southland aims to buy large ownership stakes in S.C. companies, put additional capital and management skill into maximize growth potential, then either sell the companies or take them public on the stock exchange.
“Currently, private equity activity in South Carolina is very limited,” said Taylor, a longtime businessman in the state. “It really is primarily acquisition of growth-oriented companies. We want to look at the opportunities to acquire companies that we have right in front of us.”
Southland Capital plans to build a private equity portfolio by acquiring companies in South Carolina – and nearby states -- that have annual sales between $5 million and $50 million and super growth potential, the company said.
Southland Capital will provide both the capital and management advice required to maximize each business’s growth potential, and sell the company on the private equity market.
“We are hopefully going to be able to provide a service that doesn’t truly exist in the state of South Carolina that is focused on the state of South Carolina,” said Daniel D’Alberto, who will run Southland Capital’s day-to-day operations.
While a handful of private equity firms are in the state, they don’t focus on acquisitions in the state, D’Alberto said.
Rather than raise a fund, Southland Capital will use its own capital for acquisitions and leverage ties with existing investors located primarily in Boston and New York to fund each deal individually, the company said in a released statement.
“We have seen time and again that investors outside this region have a strong desire to invest in the Southeast, but no real connection to this market,” said Taylor, who served as Commerce secretary from 2006 to 2011. “Southland Capital will provide that connection.”
The lack of private equity activity in South Carolina is a symptom of the state’s economy in general where the focus essentially has been on building factories for companies headquartered elsewhere, D’Alberto said.
Private equity funds flow to and from locations where companies are headquartered, he said, rather than where their factories are located.
South Carolina is spinning off smaller companies that are headquartered in the state from industry giants such as Boeing and BMW, but is behind in attracting larger headquartered companies and the wealth they would generate to necessitate a strong private equity market in the state, D’Alberto said.
“What is becoming more interesting about the state of South Carolina is the general demographic switch – people are moving to South Carolina, people want warmer weather,” D’Alberto said. “Secondly, though, I think South Carolina finally is on the radar from an economic development perspective.”
While BMW was “an outlier” when it arrived in the Palmetto State in 1992, it is not an outlier anymore, D’Alberto said.
“Between Michelin and Continental and Firestone and Boeing, we are starting to gain some traction on attracting larger businesses to what we have to offer here in the state,” he said.
“With the growth of cultural activities in Charleston, Columbia and Greenville, we have been able to attract the type of people who are going to be founders of businesses, presidents of business, former founders of businesses that have sold their businesses up north and moved down south.”