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TGP Investments’ Thomas leaves a lasting legacy in financial services industry

August 2012 - Kansas City, MO - Bill Thomas blazed many trails in his 44-year financial services career, shaping dozens of companies, advancing his industry's analytics, creating vast wealth for investors and building an impressive group of colleagues.

But when he died of lung cancer on July 3, his techniques didn't go with him: That A-list of industry executives who consider him a mentor will carry on the approach he so painstakingly taught them.

"When Bill passed away, that's when I realized just how important he was to so many people," said John Williams, who worked with Thomas at George K. Baum & Co. and TGP Investments LLC. "I got calls from people all over the nation who said, 'Bill made me successful.' He had a very strong following."

Thomas' career began in 1968 at George K. Baum. It concluded with a firm he helped found, TGP Investments and its $56.5 million private equity fund. From George K. Baum to TGP, his accomplishments prompt many peers to consider him an industry icon, Before Thomas, George K. Baum had focused on municipal and tax-exempt bonds, Williams said. But Kenny Baum brought Thomas in to build up the corporate bond business, which soon became a primary driver for the company.

"Bill was very bright and always an out-of-the-box, creative thinker," Williams said.

Thomas also had foresight. In the late 1970s, Williams said, Marion Laboratories started retrenching and wanted to shed some noncore business. Thomas recognized that the economy was entering a period when companies would move away from the conglomerate structure and start selling noncore businesses. That's when George K. Baum's corporate finance department started functioning more like an investment bank.

"They did these transactions where there wasn't a formal fund raised, so they used Bill and Kenny's own money along with George K. Baum corporate money," said Shane Parr, managing director of TGP Investments. "Then they'd find high-net-worth clients of the firm and go out and do these leveraged buyouts and management buyouts."

From 1978 to 1988, Thomas and Baum assisted with about two dozen leveraged buyouts — nearly all of them successful. Their work included companies such as Lenexa-based Performance Contracting Group, a contracting division of Owens Corning. Thomas helped management buy the company, which has grown to about $800 million in revenue. Other successes include Unitog, Sealrite Co. and Access Industries.

Terry Matlack, managing director of Tortoise Capital Advisors, joined George K. Baum fresh out of law school in 1982. He considers Thomas a mentor.

"He spent a lot of time talking to management, reviewing financial statements cover to cover and studying every number in them, trying to know what really drove cash flow," Matlack said.

Thomas incorporated the PC, still new back then, Matlack said. Thomas was one of the first to "marry the power of the spreadsheet and its analytical capabilities" to play what-ifs with companies' financial prospects.

"It was really a huge benefit to both his clients and the people that he was trying to convince to invest in his clients to see those kinds of presentations," Matlack said. "Those are much more commonplace now, but back then they were not."

In the late 1980s, the leveraged-buyout market started to get overheated. Thomas recognized it and changed his focus to being more of an intermediary than a direct investor. But by 1996, Thomas and Kenny Baum were ready to get back into direct deals. The result was a $100 million fund led by George K. Baum Capital Partners. Thomas and Kenny Baum personally invested 15 percent of the money, rare in an industry that typically sees fund managers invest 1 to 3 percent. Thomas did the same thing in 2005 at TGP Investments, accounting for $8 million of the $56.5 million fund.

Thomas also believed in aligning investors' and management's goals and objectives at companies he invested in. He encouraged direct stock investment by management teams to ensure that they went to bed worrying about all the same things he did — and not just for the next year, but for the next five or six years.

TGP investor Don Wagner directly benefited from Thomas' strategy. Wagner previously was CEO of Columbian Steel Tank, now known as CST Industries Inc. In 2000, Wagner wanted to buy a larger competitor called AO Smith Tank Storage. He interviewed three firms trying to find a private equity partner.

"I had a conversation with the other guys, and, of course, they presented well and were very likeable," Wagner said. "Then I talked to Bill, and I said, 'So what is your deal?' Bill's response was, 'What do you want it to be?' That was pretty much it. I didn't even consider the others after that."

Wagner said that once it all was said and done, eight managers at CST exited with more than $1 million.

"He was a generous guy who shared the wealth with management," Wagner said. "I don't know that other firms are as generous toward management."

Tom Van Dyke, a Bryan Cave LLP partner who worked on several deals with Thomas, said his legacy goes beyond the wealth he created for people.

"To me, the real legacy he leaves is his style of looking at deals and analyzing them, that he passed on to others," Van Dyke said. "Primarily, it's Eric Graham and Shane Parr, who run TGP now, but everyone around him learned a lot. That's a great legacy to have."

 


 

FILLING SOME BIG SHOES

TGP Investments LLC has had huge shoes to fill with the death of 44-year industry veteran Bill Thomas, but the company is moving forward without a hitch. Senior partners Shane Parr and Eric Graham continue to lead the firm, assisted by director of business development Tim Leland and advised by John Williams, who retired in May. Because Thomas' death legally is a material event, investors had an opportunity to pull unallocated capital out of the $56.5 million fund. "We met with 100 percent of our investors, and we have everyone's support," Parr said. "We're continuing to move forward and manage our existing portfolio companies, as well as look for new deals." Parr said TGP has no plans to add a partner now. Instead, the firm is focused on finding one or two more investments before the end of 2013, which is when the investment period for the fund ends. Investor Don Wagner said he didn't consider leaving the fund for a second. "Shane and Eric have been with Bill for 10 years," Wagner said. "They are extremely capable guys. You can't say they won't miss Bill because he had 40 years of experience. But the skill set of modeling and analyzing is still there. So I'm looking forward to them getting another deal or two. I'll probably invest with them in a fund going forward as well."