A Rare Case Of Bourgeois Values

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Even as Bourgeois Fils has grown from 1 person in 1979 to 12 people today, an enduring theme in its financings has been the preservation of ownership for entrepreneurs. "I have an intense conviction that the people who put their sweat on the line ought to be able to reap the rewards," Bourgeois says. In late 1980, for example, he succeeded in persuading a local bank and a small business investment company to provide $1 million of working capital and subordinated notes to enable two managers to do a leveraged buyout of the New Hampshire footwear-manufacturing company they worked for. Originally, the bank had turned down the managers' request for a loan. But later, with Bourgeois's intervention, they succeeded in getting 60% of the business with only $10,000 of their own money.

Since 1981, however, the firm has tended to specialize in creating financial strategies for financing new ventures that Bourgeois deems both promising and apt to require multiple infusions of money during the early years. Even before establishing its first relationship with an office-copier dealer, for instance, Bourgeois Fils became involved with Atavar Corp., which was gearing up to enter the nascent semiconductor-testing industry in Scarboro, Maine. To enable the capital-short owners to obtain about $1 million of testing equipment to launch their new business, Bourgeois Fils put together and sold a limited partnership of $500,000 in early 1981 and then a second one for the same amount five months later. But even though Atavar was a risky start-up of the type conventional venture capitalists might back, the investors received no equity in the company. Instead, Atavar leased the equipment from the partnerships, who, in exchange for their investment, got tax benefits and income designed to provide an aftertax yield of more than 20% on their money.

"In order to bring investors into a deal like this, you needed to offer a significant return," explains Bill Nyhan, the No. 2 person at Bourgeois Fils. But, as usual, the firm also had to risk some of its own credibility. Before taking Atavar as a client, Bourgeois Fils had done an extensive analysis of the business the entrepreneurs were entering and its management team, which was headed by a former executive from Fairchild Camera & Instrument Corp. "No bank wanted anything to do with it until we found additional equity," Nyhan says. However, the type of equity Bourgeois Fils found from 30 private investors didn't require Atavar's founders to give up any ownership; the partners' interest was only in the equipment.

Bourgeois Fils's ability to add value by structuring and placing creative deals has been enhanced by its growing credibility in the marketplace. "Lots of other people advising small businesses seem to bring us every deal that occurs to them," notes a bank executive who has lent money to a series of Bourgeois Fils clients. "Bert Bourgeois understands what a bank needs, and he doesn't waste our time."

While Bourgeois Fils has walked away from a number of chances to provide its services to other office-copier distributorships in which management didn't measure up to Bourgeois's standards, the firm now has formed relationships with Ricoh dealers in 10 cities, including Phoenix, Los Angeles, Denver, Chicago, and Boston.

To cater to the needs of these and other clients, Bourgeois Fils has been assembling a staff that now consists of nine financial professionals, among them his wife, Marsha Francis, the firm's treasurer, who oversees internal operations and planning. Three other staff members handle data processing and communications at the Exeter office.

For the professionals, the firm has relied mostly on recently minted Harvard and Stanford MBAs, who have been willing to start at base salaries in the low-30s, substantially less than they could earn at better-known investment banking firms. "It's exciting to work on transactions from beginning to end, and there's a real challenge in managing a client relationship," says Carlyle Singer, a recent Stanford MBA. Her job, like others at Bourgeois Fils, combines investment banking and selling of partnership interests with the hands-on duties of a chief financial officer. To ensure quality control while promoting the risk-taking spirit on which the firm is based, employees are encouraged to put their own money in deals they work on. "This isn't Morgan Stanley and it's not Hambrecht & Quist," says Bourgeois. "But it's a place where you can get your hands dirty and learn some things."

Yet even as the firm becomes more established, Bourgeois doesn't expect it to stray very far from where it began. As its clients mature, Bourgeois says, the firm may start doing somewhat larger transactions on occasion and may even act as underwriter for their initial public offerings. What is more, the firm may soon open its first branch office -- not in New York City, but in Newport Beach, Calif. The new location, like Exeter, would help keep overhead costs down, permitting Bourgeois Fils to operate much as it has from the start. "Our business isn't really numbers and analysis," says Bourgeois. "What we sell isn't dependent on 5 or 10 basis points but whether a guy will be able to keep his whole company or have to sell a piece of it. It's a very personal, emotional business, and you can t really institutionalize it. We try to do things a little bit differently, and we really believe in the deals we do."

Says Alex Bernhard, a senior partner at Hale and Dorr, the prestigious Boston law firm that advises Bourgeois Fils, Bert Bourgeois "knows what's economically viable, and he's constantly testing the parameters of what's possible." Happily for Mike Koether, his equipment-leasing venture in Arizona fell within those parameters. "If we hadn't been able to strike our deal with Bourgeois," asserts Koether, "I don't think we would have gotten started in this business."

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