Most would have panicked. With two days left in a grueling two-week road show, the lead underwriter of an initial public offering lost its financial backing and was forced into immediate liquidation. Had Ron Weinberg folded his hand and waited for a new deal, who would have blamed him?
But relying on chance isnt Weinbergs style. So with a bulldogs tenacity and a riverboat gamblers bravado, he convinced a new underwriter to pick up the offering and forged ahead on schedule with a successful IPO that raised nearly $11 million for New West Eyeworks.
He literally pulled a rabbit out of his hat, explains Byron Krantz, a partner with the Korhman Jackson & Krantz law firm and the attorney who handled the IPO for the Arizona-based optical firm. Ron knew that if there was a way to make it happen, hed find it. And he did.
That was in 1993, just days before Christmas.
One of the unwritten rules in finance is that you dont try to finance anything in December because everybodys away for the holidays, explains Weinberg, who served as New Wests chairman. We violated every rule with that odyssey.
Rewriting the rules of the game of business, however, is something at which Weinberg is very adept. Ever since he packed up his Harvard MBA and left Wall Street in the late 1970s to try his hand as an entrepreneur, his greatest asset has been his intimate understanding of finance and how it relates to operations.
If you understand where the money is, how to get it and what to do with it, thats really the underbelly of business, he says. Many business owners just dont realize that.
Calm, engaging and always smartly dressed, Weinberg appears as if hes just stepped out of a Wall Street investment bank in hot pursuit of a deal. His eyes sparkle when he discusses business theories, and he thrives on finding new ways to test his insight. Bottom line: Hes always primed to plunge into the next great challenge.
His ability to deliver has not gone unnoticed. As vice chairman of Cleveland-based Hawk Corp., a manufacturer of friction products, powder metal parts and metal stampings, Weinberg and his partner, Norm Harbert, were recognized as the 1999 Master Entrepreneurs Of The Year by Ernst & Young for turning Hawk into an industry leader.
Weinbergs direction of Hawk isnt his only focus. He owns, operates or has investment stakes in a half-dozen companies, including New Channel Communications, Timestar, Weinberg Capital Corp., James Davis Inc. and U.S. Male.
Business partners, friends and acquaintances say Weinberg is one of those rare business leaders who deftly grasps business principles with a financiers savvy and a CEOs get-the-job-done know-how.
Ive seen a lot of financial people in my time, but Ron really is a Renaissance man, says Dan T. Moore, a member of Hawks board of directors, owner of several businesses, and a fellow Harvard Business School alumnus. Ron is so good at structuring deals that Ive not seen anyone as good as he is. Hes a sort of right-brained financial thinker.
Throughout his 20-plus year career, Weinberg has carved out a reputation for buying and building companies.
I like the businesses were in, he says. But I tend to like most industries that I get into. I develop a passion for the process itself, the strategies of running it and the acquisitions. The excitement can be seeing a new product or doing a big deal.
In 1985, the last thing on Weinbergs mind was buying his way into the publishing business. Nine years earlier, hed left a good job as vice president of corporate finance with an old-line Wall Street firm and, at the urging of an old Harvard chum, Jeffrey Cole, CEO of Cole National Corp., moved to Cleveland and set up shop in the business of investing in companies.
With the sort of strong ties to financial heavy hitters worldwide that make entrepreneurs salivate, and a vast network of business owners, rain makers and investors in his Rolodex, Weinberg spent several years taking small bites of those businesses that pleased his palate.
So when Gerald H. Gordon showed up at the East 9th Street offices of Weinberg Capital one day to chat, Weinberg never expected the meeting would alter his carefully crafted plan of investing in companies without buying total control and lead to assuming majority ownership of the last bastion of Clevelands small independent newspaper publishers.
Gerry Gordon came to see me because he was thinking of leaving and investing in another publication, explains Weinberg. We (Weinberg Capital) owned a block of Cleveland Magazine, and (Gordon) wondered if the magazine was for sale. I really didnt control Cleveland Magazine, we only had a minority stake, but in the course of the conversation, we started talking about the opportunities with Sun.
At the time, Sun Newspapers had solid financial numbers and a strong growth record. But more important, Weinberg recalls, it had loads of potential.
We headed to New York, met with the investment broker handling the deal and bought it.
That deal was genius, raves attorney Krantz, who happened independently to represent both Gordon and Weinberg when the opportunity materialized. It was pure Ron. He knew everything. He had complete knowledge of the value of what he was buying.
That thorough understanding is typical for any deal in which Weinberg involves himself. Says Krantz, Ron negotiates straightforward. He knows whats a fair price and what isnt. And he never seems to overpay.
By the time the ink had dried, Weinberg was majority owner and chairman of newly formed Sun Media; Gordon was a minority partner charged with running the newspaper chains daily operations, standard operating procedure for a Weinberg business venture.
Ive always had a partner of management that Ive given some ownership to that knows the industry, he explains. Im not one to believe you can just sort of do anything, anywhere. Somebody in the business has got to know how to be an operative.
Over the next 13 years, through acquisition and expansion, Sun Media grew from 16 newspapers to 47. In 1997, Weinberg sold his controlling interest to Advance Publications Inc., owners of The Plain Dealer, and walked away, keeping only Timestar, the company that publishes the Health Care Monitor. That business was incorporated into another of Weinbergs ventures, New Channel Communications, a holding company for Weinbergs Internet, software and database management interests.
Krantz has been a consistent player in Weinbergs business dealings since the two met at a party shortly after Weinbergs arrival in Cleveland. Sun Media was their first major project, but Weinbergs negotiating skills left a lasting impression on the well-connected attorney.
So it came as no surprise two years later, when Weinberg and Krantz were on a return flight to Cleveland, that Krantz would help broker yet another deal. Weinberg told Krantz about an idea a friend had relayed.
He said there were a lot of manufacturing companies out there, Krantz recalls. And if you could find a partner who was an equal, that had the expertise in manufacturing, the two people could buy small manufacturers up and build a huge manufacturing company. I turned to Ron and said, You ought to meet Norm Harbert.
Harbert was a lifelong manufacturing man. Hed spent 22 years with Reliance Electric the last three as general manager of its massive rotating product division and left to assume the post of CEO of Ajax Magnethermic Corp., a Warren-based heating equipment manufacturer. When he and Weinberg met at a Sunday breakfast
meeting, which Krantz arranged, Harbert was owner and chairman of Maverick Tube Corp., in Chesterfield, Mo. Krantz was, by no small chance, a member of Mavericks board.
More important, Harbert desperately wanted to move home to Cleveland and was looking for a partner with whom to buy a company.
We hit it off immediately, says Harbert. Ron fit the bill of what I needed. He was very smart, successful, and Byron told me he could negotiate deals unlike anyone hed ever seen. I had a company lined up to buy, but I couldnt get the deal done until I found a guy who was a financing expert. That turned out to be Ron.
The company in question was Friction Products, a small airline brake lining manufacturer with a solid market share. Says Weinberg, I like companies that have enough of a niche in their market that theyre a force to be reckoned with.
So Weinberg and Harbert became partners, bought Friction Products, and renamed it Hawk Corp. Harbert ran the daily operations; Weinberg handled the finance. Meanwhile, he looked for other small complementary companies to buy to create that huge manufacturer he envisioned.
It took seven years and several acquisitions for Hawk to become a $60 million company. But it only took one day in 1996 for Weinberg to double that. With its acquisition of competitor S.K. Wellman, Hawk was instantly a $120 million business, due in large part to Weinbergs understanding of finance.
Up until then, we went with slow and steady growth, with little equity and small debt, explains Weinberg. The S.K. Wellman acquisition, he says, was different. It required a $109 million refinancing of Hawks entire portfolio to pull it off. In the process, each of Hawks holdings was brought under one umbrella company. That positioned Hawk for a 1998 IPO.
The stock offering, ironically, nearly held the same bad karma as New Wests five years earlier. Weinberg and Harbert originally filed for a January IPO. Shortly before it went forward, the Monica Lewinsky scandal broke. With a long shadow of doubt cast across the White House, the financial market was depressed, recalls Weinberg, so he put the IPO on hold until May to see if the climate changed.
If we did the deal in January, wed have only gotten about $13 or $14 a share, he says. But we went public in May at $17. It was a smart strategic decision.
The near-miss aside, part of Hawks success can be attributed to Weinbergs strong belief that to succeed in business, you must invest in talented people.
Having good management is really whats vital, he says. And I look deeper than just the CEO. So many investors and owners get a good CEO and leave the rest hanging. I really drill down the organization to look for excellence at all levels.
I want to see great people, whether theyre running a machine or in accounts receivable or are the president of the business. I want to see that same kind of excellence in all those jobs because it will make a difference.
While understanding finance and investing in talent are two of Weinbergs key rules, theres another, more important one thats kept his head above water even in the worst of times staying calm no matter how rough the waters get.
Never was that more evident than in the New West Eyeworks deal. When Weinberg bought it, the optical maker was on the brink of bankruptcy. He installed a new management team, invested heavily out of his own pocket and expanded the company to more than 130 outlets across the nation. By the time he was ready to take it public in 1993, it was still small, but recognized as a market leader.
Using his connections from Wall Street, Weinberg linked up with old-line investment banker Reich. The firm was founded in the mid-19th century and financially backed by a prominent New York family the sort of small, solid firm on which New Yorks financial empires were founded. All was going well until two days before the scheduled IPO, when members of the family decided Reich wasnt worth the investment and pulled its funding.
Reich immediately was forced into liquidation, and its assets and accounts were purchased by Fahnestock & Co. Weinberg quickly approached Fahnestock principals and, without a break in the road show, sold them on the New West deal. Two days later, New West went public at $7 a share.
Thats the amazing thing about Ron when theres a problem, he gets calmer, says Krantz. He knows that being excited causes you to lose your focus, and Ron never loses his focus ever. Thats why I wouldnt bet against him.
We had something most people have never seen in their life, recalls Weinberg, who reflects more easily on the experience today than at the time. Filing with one underwriter, having them get into trouble, keeping the book together (of projected purchases by financial institutions) and then having another underwriter pick up the deal and take us public, it was very, very unusual, but ultimately, the investors made a lot of money on it.
It was a deal, says Weinberg, that tested every skill Ive ever had in financing something and selling it. But we had a good concept and stayed with it. We were absolutely relentless in letting (Fahnestock) know we wanted to do this deal and that we would be a great company.
Weinberg sold his interest in New West and stepped down as chairman in 1998.
Weinberg says hes not afraid to take a risk, no matter how great, as long as he does enough due diligence to understand the potential pitfalls. But its that understanding of how finance affects operations, and vice versa, that sets him apart from his contemporaries as he writes the next chapter of his business career.
At any one time, I find myself facing choices, he says. Do I take capital and buy a fancy toy, or do I reinvest that money in the business and grow it and enjoy doing that? Typically, I opt for the latter. Thats what really drives me, the excitement of building companies.
Dustin Klein ([email protected]) is editor of SBN.