VMG Takes Hands-On Approach to Turnarounds
Most venture firms aim to create significant financial returns for their investment partners, within a relatively short period of time, by providing capital to start or to scale their business. H.W. “Skip” Hauser crafted a venture business model that breaks the typical mold and in so doing has created astounding value not only for his partners, but for his portfolio of companies.
Hauser’s Venture Management Group doesn’t search for the latest innovative technology or idea. Rather, VMG, which includes partner and Chief Financial Officer Kim Brown, looks for businesses with solid potential, but are either poorly led or are fiscally ailing or both. Acquiring those companies at bargain prices, they then find a CEO who fits into their well-defined profile, and places him or her at the helm. Then, they coach and carefully monitor these young thoroughbreds to be champions, while allowing them to grow their equity stake.
Hauser explained, “Our goal is long-term; we aren’t looking for a five to seven year payoff. We want to harvest from these companies for years. We do that by providing the funding and talent resources, along with the incentive of allowing the CEOs we have placed in them to gain a larger and larger percentage of the business, the profits and therefore the responsibility and incentive to succeed.”
The model has worked astoundingly well. Venture Management Group, based in Melbourne, has grown its revenues from $1 million in 1999 to $200 million in diverse products and services that are sold and installed throughout the U.S. Hauser, whose business acumen was honed under Jack Welch at General Electric, has built 54 start-ups and acquisitions.
No Passive Investors
“We don’t have non-working partners. If you are going to be a partner you have to be a managing partner, working with our team as advisors and consultants to ensure the success and the growth of our companies. Once we identify a company, we provide 25 to 30 percent equity, either personally or through Venture; the other 75 percent is straight bank debt, guaranteed by me or Venture. Our typical target is a $5 million company which we buy for book value,” Hauser explained. What Brown refers to as “value buying.”
“Then we bring in a young CEO as a partner with 10 percent equity, for which they have to personally invest. Over the life of the business they can earn up to 50 percent of the company,” Hauser said. “By the time our company partners have bought their 50 percent share, we have paid off the bank debt and own the company free and clear.”
One of Venture’s regional success stories is Omega Medical Imaging in Sanford. In 2010, Venture and Omega’s president, Brian Fleming, acquired the company, which makes imaging devices used by institutions like Florida Hospital and many others. Since taking over, they have grown the company’s sales by 54 percent. Hauser and Brown believe Omega Medical Imaging will reach $50 million in annual sales over the next five years (see Oct/Nov 2013 i4 Business).
With the team Hauser has assembled and his emphasis on fiscal responsibility, being “squeaky clean,” and growth, the potential of Venture Management Group is boundless.