Swift River's Ben James Speaks
Hamilton 'Tony' James has taken his seat among the masters of the universe in the large market LBO realm. So what are his two brothers doing pursuing small-cap plays in the lower-middle market?
March 19, 2008
The Blackstone Group's Hamilton "Tony" James has built his name and bank account chasing multibillion-dollar buyouts. But when it comes to investing James family capital, brothers Benjamin and David James, targets decidedly smaller plays. Swift River Investments, the family fund run by the James family, focuses squarely on lower middle-market opportunities, marrying investment acumen with operational know-how. Benjamin James spoke with MergersUnleashed recently, discussing the themes behind Swift River and the trends he's seeing in the smaller deal realm.
Mergers & Acquisitions: Can you tell us about the Swift River partnership and what your investment philosophy is?
Benjamin James: We take some complementary skill sets and apply them to smaller middle-market companies, where we think we can add a lot of value. We take a boutique approach where we incorporate our high-level experience. I have been in the private equity business for a number of years. My brother David has very senior operating experience, and we also have a very experienced vice president, Christina Pai, who is extremely smart and capable.
Many firms our size don’t have the kind of senior operating experience that we do, and certainly not available as a full-time resource. In addition, all of our capital is family capital, so we don’t have any limited partners.
We believe that the economy is going to get worse, and market conditions are going to get tougher, but we think that we can be very successful because of our experience and attention to detail. We are essentially entrepreneurs. Swift River is a family owned operation that happens to be in the private equity business. This means that we understand and expect that there will be surprises from time to time, but also there won't be any secrets. This attitude makes us very appealing to owners of private businesses.
We have enough capital that we can invest in companies at multiple stages of growth, so if it is the right investment decision, we are able to hold a worthwhile investment for a longer period of time. We can be quite flexible in this regard. We enjoy this flexibility, and we are going to keep our firm very small.
Mergers & Acquisitions: Is there a point at which it won’t make sense to stay as small as Swift River presently is?
James: We desire the flexibility to move in whatever direction we want, and that implies that we will not have limited partners. We are quite different from many private equity firms in that regard. Instead of having a bunch of home run investments in which there are big winners and big losers, we believe in having a lot of solid doubles and triples and developing real relationships with the companies that we are invested in.
This does not mean that we will operate the companies that we are invested in on a full-time basis. We want to support these companies.
We also have close relationships with lending sources that specialize in providing financing for smaller companies, so we can get financing done even in tougher economic times.
Mergers & Acquisitions: Given the recent deterioration in the credit market, have you found it more difficult to get deals done than it has been in the past?
James: We have thought for the past couple years that the market was too frothy. The firm was founded in May 2005, but we’ve only been in business investing for a couple years.
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