Belmont stakes: a money manager shifts from financial advising to private equity with aplomb.

AuthorMildenberg, David
PositionMONEYTALK: North Carolina's financial set

On the last Thursday of 2006, Mick McMahan sold his 22-year-old financial advisory business, which then managed about $400 million. On the following Monday, he opened Gaston Capital Partners, a private-equity company, gathering equal investments of $415,000 from himself and eight investors. With the economy on the brink of cratering, it was a terrible time to start a financial business.

But McMahan, 69, knows something about bad timing: He served as a field artillery officer in 1968-69, two of the most violent years of the Vietnam War. He made it out alive, serving in a company of 120 soldiers commanded by future four-star Gen. Barry McCaffrey, and earned a Silver Star.

McMahan also made it out of the worst economic recession since the 1930s in remarkable style: The Gaston Capital investors each eventually received more than $3 million over the course of the fund. Since then, McMahan has raised a second fund totaling $10 million and built a staff of six led by President David Robb, a Charlotte native with experience as a real-estate investor and in the tech industry. Gaston is planning a much larger third fund.

Much of Gaston's early success stemmed from QoL meds, a Pittsburgh-based company that had two pharmacies specializing in drugs for mental-health patients and $6 million in revenue when McMahan acquired control in 2007. When QoL meds sold to a private-equity firm in December 2013, it had about 100 clinics and $230 million in revenue.

Many of Gaston's 15 investments have involved local companies, including one run by Pat Swisher, who started a Charlotte janitorial business in 1983 that grew rapidly over the next 15 years. Too fast, it turned out: In 2002, Swisher pleaded guilty to tax-evasion charges and spent two and a half years in prison. His company was sold in 2004 to famed Florida investor Wayne Huizenga, who later sold it to St. Paul, Minn.-based Ecolab Inc.

After his release, Swisher formed Enviro-Master International Franchise LLC, signing cleaning contracts with restaurant and convenience-store chains. Swisher turned to McMahan for capital in 2014, when the business had 14 franchises and $3 million in revenue. Gaston bought a 50% interest and hired a financial officer. Enviro-Master now has 64 franchises, $50 million in annual revenue (including the repurchased Ecolab units) and ambitious growth plans.

"Pat had a history, and we went in because no one else would," McMahan says. "It was risky, but he is a great salesman and...

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