EquipNet (www.equipnet.com; Hudson, MA) offers solutions to manufacturers who want to buy or sell used capital equipment in the food & beverage, checmical and pharmaceutical industries. Equipnet combines heavy analytics of “big data” and high customer service levels to maximize the secondary market for this used equipment. The CEO of Equipnet is Roger Gallo who has done a great job developing the business and building shareholder value. I made this investment in 2000, am a director of the company, and plan to hold it for many years.
Current Investments in Private Companies and Funds
BTI Systems (www.btisystems.com; Littleton, MA) is a network technology company offering very sophisticated cloud-based networking products to high-volume data centers and telecom carriers. Their client lists reads like the “Who’s Who” of Silicon Valley customers and international telecom carriers. I made this investment in 2012, supporting Steven Waszak, the newly-elected CEO.
Terrapark (www.terrapark.com; Toronto, ON) is a partnership which invests in parking lots. The entrepreneurs, Jack Pasht and Don Palef, have an encyclopedic knowledge of the parking lots with high development potential in most cities in North America, and an uncanny sense of market timing. Their investment strategy is to buy when the time is right, lease the lots to parking lot operators, and then sell when the time is right. They have generated excellent risk-adjusted returns over many years, and we have earned an amazing steam of dividends (from parking revenues) while they hold the properties. I first invested in Terrapark in 1998 and plan to continue to invest with them in future partnerships.
I am a contrarian investor; I do not follow “conventional” investment management practice, and am deeply skeptical of the vast majority of financial advisors. Instead, I follow a few publicly-traded small-medium capitalization Canadian technology companies (which is the space I know best) and focus on the quality of the management team and consistency of their return on equity. I usually maintain my positions for several years and don’t try to “time the markets”.
Current Investments in Public Companies
Constellation Software (www.csisoftware.com) is my principal publicly-traded investment, where my friend Mark Leonard, is the CEO and leads a remarkable management team. Constellation was a start-up in 1996, went public in 2006 and in the year ended 31 December 2013 achieved revenues of $ 1,210 million with Adjusted EBITDA of $233 million, having completed the acquisition of over 175 vertical market software companies over 18 years. Constellation has developed world-beating “know how” in several aspects of their operations, and it has been a great privilege to be an investor in the company.
Selected Previous Investments
I have provided below a selected list of the companies I have invested in and worked on during my career.
PLAZMIC INC. (TORONTO, ON): Plazmic developed a Java-based system for providing rich graphics on any Java-enabled mobile device. The Company developed and sold systems to customers including Reuters and Disney. During the course of a financing, the Company received an unsolicited acquisition offer from BlackBerry (TSX: BB). Shareholders were given the option of selecting cash or BB shares as consideration, and I selected the BB shares (luckily, which increased 14X post-transaction). I was a board observer and was Plazmic’s principal negotiator during the transaction with BlackBerry.
CIMTEK AUTOMATION SYSTEMS INC. (BURLINGTON, ON): Cimtek provided products and services for the functional testing of complex electronic products such as automotive electronics and video game consoles. Cimtek’s services were focused upon new product introductions and cost-reductions as products matured. Cimtek’s principal customers were Fortune 200 companies such as Microsoft (X-Box 360), DuPont, Visteon, Delphi, Bombardier Transportation, Taser and Motorola. I was the non-executive Chairman of Cimtek until June 2008 (I resigned when I became full-time President of Butterfield & Robinson) and was Chairman of the Audit and Compensation Committees until August 2010.
NATIONAL RUBBER (TORONTO, ON): National Rubber manufactured “under-the-hood” automotive and other industrial products using primarily post-consumer waste rubber. The use of waste materials gave NRI a significant cost advantage over companies using exclusively first-use materials. I joined Clairvest in September 1990 after this deal was "done", and took responsibility for a starting with the recruitment of a new management team including the CEO and 13 of the 16 senior managers over 18 months. I led the negotiating team which obtained C$7.9 million in government grants. I led bank and shareholder negotiations during two major restructurings. I was Chairman of the Environmental Committee responsible for liability management. I initiated an R&D program which made NRI the world leader in scrap tire recycling technology.
GEAC COMPUTER CORPORATION (TORONTO, ON): Geac Computer Corporation was a publicly-traded company in receivership at the time of Helix’s investment. Helix’s Chairman, Ben Webster, invested C$20 million in Geac with virtually no due diligence; he believed that Geac, with C$70 million in sales and a large installed base, could be successfully turned around. The deal was completed in less than a week. The company had serious negative cash flow. I was assigned to “triage” the company and implement the first stage of the turnaround. The three senior executives were replaced and I assisted in recruiting a new management team. I assisted the team in dramatically reducing operating expenses to achieve positive cash flow. Geac then focused on acquiring vertical market software companies with large installed bases which could become profitable by reducing expenses. Without additional capital, Geac grew by acquisition to sales of over C$1 billion with annual cash flow over C$200 million. The stock price increased from C$1.80 at the time of Helix’s initial transaction to over C$120.00 (split adjusted).
EDUCATION SYSTEMS CORPORATION (SAN DIEGO, CA): Education Systems Corporation (“ESC”) developed and marketed comprehensive courseware for the K-12 education market. The company was the low-cost developer of a wide range pedagogically-correct courseware for disciplines from basic reading and arithmetic, through specialized sciences and “life skills” (e.g. "How to Make a Household Budget"). The company became very effective at sales by pairing experienced educators (e.g. retired school principals) with traditional technical salespeople. The company was acquired by Jostens Inc. (NYSE-JOS) and merged with their existing educational software company to form Jostens Learning Corporation. John Kernan and Carl Zeiger of ESC became the CEO and the COO respectively of Jostens Learning. I initiated my fund's very small initial investment in ESC at the start-up stage, and led 2 other investment rounds, eventually becoming the largest investor and co-lead. I assisted in recruiting Carl Zeiger as CFO, who eventually became COO. I was a director and a member of the Audit Committee. I was also on the Special Committee which negotiated the sale of the company to Jostens.
HEALTH DATA SCIENCES CORPORATION (SAN BERNARDINO, CA): Helix was the controlling shareholder in Sterisystems Ltd, a company which provided bedside TV rentals to patients in 80% of Canadian hospitals with over 200 beds. Some hospitals wanted to use the bedside TV’s for some basic IT applications, and my job was to find a strategic partner and obtain the Canadian rights for Sterisystems. I identified Health Data Sciences Corporation, a start-up which was the technology leader in bedside-based hospital information systems. Helix invested US$1 million in HDS and established a joint venture for Canada. I became the President of the Canadian joint venture and personally sold the first HDS system in Canada for over $10 million to the Toronto General Hospital. Helix eventually sold its 50% interest in the Canadian joint venture to HDS for additional HDS shares. HDS achieved a backlog of over $US 250 million and was acquired by Medaphis (NASDAQ-MEDA).
ANDREW FEZZA, LTD. (NEW YORK, NY): Invariably, after the realization of a successful investment, the senior partners at Helix always quickly made some “fun” investments. One of these was financing a high-end fashion designer, Andrew Fezza, who worked principally in leather! Helix’s initial investment was US$250,000, which grew to US$1,500,000 as Helix financed operating losses. I became the interim COO for 6 months and operated through a crisis period caused by the bankruptcy of the Company’s licensee. At the end of this period, I negotiated the license of AFL menswear to Levi Strauss, which eventually purchased the whole company.