SHIFTING FROM RUNNING A MEGABANK TO OWNING DUKE'S MAYONNAISE AND OTHER MIDDLE-MARKET COMPANIES IS PROVING LUCRATIVE FOR TWO FAMED BANKERS. NOW THEY ARE PASSING THE TORCH.
Hugh McColl Jr. made a lot of money as he expanded the old NCNB Corp. fiftyfold, earning about $4 million in salary and bonuses in 2000, his last full year as CEO of Bank of America Corp. But "retirement" has proved more lucrative for the iconic 84-year-old banker, thanks to the wonders of private equity. "I've made a lot more money in the few years I've been involved in Falfurrias [Capital Partners LLC] than I did in the 42 years I ran the bank," he says.
The remuneration attests to the success enjoyed by Falfurrias, which was formed in 2006 by McColl, Marc Oken, a former BofA CFO, and managing partner Ed McMahan, to invest in a diverse portfolio of growth-oriented, middle-market companies. McColl says Falfurrias' annual compound return has topped 20% since 2006, far outpacing median gains in the Standard & Poor's 500 and various hedge-fund indices.
The trio believes that leveraging its skills in strategy and operations management and decades of business relationships can add value to portfolio companies and spark strong investment gains for limited partners. Over the last year, McColl and Oken, the firm's 72-year-old chairman, have ceded day-to-day responsibility to McMahan, 44, who wants to ramp up the pace of deals and make Falfurrias much larger while continuing to produce outsized returns. But the veteran bankers remain closely involved in attracting business, raising funds and reviewing potential investments.
The opportunity to join McColl and Oken in his early 30s was irresistible, McMahan says. After earning bachelor's degrees in economics and English from UNC Chapel Hill and an MBA from Northwestern University, he worked for two investment firms, Chicago Growth Partners and William Blair Capital Partners. He also was a financial analyst at Bowles Hollowell Conner &. Co., a Charlotte-based investment bank bought by First Union Corp. in 1998.
"I had some industry experience about how to structure transactions, and I had a lot of thoughts about what a good private equity fund needed to be," says McMahan, whose father, W. Edwin McMahan, formerly led Little & Associates, Charlotte's biggest architecture firm, and served in the N.C. General Assembly. The younger McMahan joined Falfurrias as a partner at its founding and was named managing partner last year.