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E. Paul Casey

Paul Casey thinks Metapoint Partners, the small, leveraged buyout firm he founded in 1987, enjoys a unique competitive advantage. Metapoint’s …

Paul Casey thinks Metapoint Partners, the small, leveraged buyout firm he founded in 1987, enjoys a unique competitive advantage. Metapoint’s tough-minded associates-largely CEOs and ex-CEOs from companies such as International Paper, Warner-Lambert, Mead, Ingersoll-Rand, NCR, and Comerica-help the company to identify acquisition opportunities and gauge their value with uncanny accuracy.

Recently, Casey recalls, he and Rene McPherson, former CEO of Dana Corp., were en route to Texas to meet with an acquisition candidate. Huddled with the company’s senior executives, McPherson asked, “If this were your company, what three things would you do with it?” Silence followed. Finally, someone volunteered that the business needed new leadership and much more teamwork. The pointed question opened the floodgates, Casey says, and others joined in.

“We learned more than we would have from any canned presentation,” says tanned, blue-eyed Casey, the former CEO of Ex-Cell-O, a diversified manufacturer of automotive and other products. “As a chief executive, you monitor performance, assess potential, and learn how to spot value and weakness.”

“Using chief executives expands the universe of possible transactions they see,” says Steven Galante, publisher of The Private Equity Analyst, a Wellesley, MA-based newsletter that covers venture-capital and LBO firms. “They have a greater range of contacts to help with analysis of the deal and may know cornpanies that have a strategic need for this type of acquisition when it comes time to sell.”

Metapoint has parlayed this advantage into a 47 percent annual rate of return, Galante notes, adding, “An investor would be hard-put to get that return anywhere else in the market.” With characteristic modesty, Casey says only that the Peabody, MA-based firm has done “a little better than expected.”

Casey laughs, describing his role at Metapoint as “vice president in charge of contacts.” Indeed, he just lured into the Metapoint fold Harold A. “Red” Poling, the newly retired CEO of Ford Motor. Poling will fit in nicely with Casey’s other recruits. The prestige and influence of the group is evident from the boards they themselves sit on, such as Kellogg, AT&T, General Motors, Dow Jones, Owens-Corning Fiberglas, Merck, the New York Stock Exchange,

Westinghouse Electric, American Airlines, and Shell Oil. The Metapoint stable also includes former senior executives of J.P. Stevens, Dana Corp., Advent International, McCord, Worthington Industries, Unitrode, and NBD Bancorp. Metapoint generally buys manufacturing companies-usually in the $5 million to $30 million in revenues range-fixes them up, and sells them at a profit. It looks for the big fish in the small pond: Julius Koch USA, its most recent acquisition, has 95 percent of the Venetian blind-cord and ladder-tape market. The investment firm started with 16 partners but now has 32. In the last three years, it bought five companies and started a second acquisition fund.

The CEO of Ex-Cell-0 from 1981 to 1986, Casey, now 64, never imagined this kind of future. A hostile takeover of his company in 1986 bumped him into a post as vice chairman of the acquirer, a job, he says with a tinge of anger, that was “basically no job at all.”

Even so, the Ex-Cell-0 experience has served him well. The manufacturer was structured into groups, with five or six divisions in each. “The divisions were headed by a president and run like stand-alone companies,” Casey says. “The stand-alone companies at Metapoint really are no different.”

Three or more Metapoint partners sit on each company’s hoard. In the cases of Spir-it and Gimpel, manufacturers, respectively, of drink stirrers and valves, directors added value and charted a turnaround by using the skills and instincts they honed as CEOs. The companies eventually were sold for a substantial gain.

Sometimes, board members have experience in a particular industry. Martin C. Walker, chairman and chief executive of M. A. Hanna Co., used his high-level automotive experience to help refine the strategic direction of Fluidrive, a maker of hydraulic axles for heavy equipment and vehicles. The company, acquired in 1991, has nearly doubled in sales under the Metapoint umbrella. Given the clout of Metapoint executives, even a telephone call can help. Charles Exley Jr., ex-CEO of NCR, phoned a former NCR colleague to help a small, frustrated, would-be supplier to get his foot in the door at the Fortune 500 company.

Casey must remain alert to the dangers inherent in the LBO business, cautions observer Galante. “Increasing competition means prices get bid up, and you have to have the discipline to say ‘no,'” he says.

In the meantime, the partners manage to mix some fun with such weighty discussions. Their annual meeting in Florida on the Friday after Easter is “part business, part social,” and “a very friendly” occasion. This summer, Casey, a passionate sailor, charted some time to take his 46-foot-sloop up the coast of Maine. In the long run, Metapoint’s navigational course is clear. “You have to €. choose companies where you can add value,” Casey says. “Otherwise, when you turn around to sell them, you won’t get the return that justifies the risk.”

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