Deal Broker Loosens Grip On His Firm

Article originally appeared in the Wall Street Journal

ONE OF THE REGION'S LEADING deal makers, Gordon Tunstall is finally taking some of his own high-priced advice.

The $500-an-hour consultant to companies seeking private or public capital has traditionally kept a tight grip on the reins of his Tampa based firm, Tunstall Consulting Inc. Now, for the first time, he is planning to share the driver's seat, seeking new partners who can help the firm grow. He even has his eye on a possible public offering by the year 2000.

And as Tunstall grows, so grows the region's deal roster, say investment bankers and analysts. The influential Mr. Tunstall plays matchmaker to some of Florida's and the Southeast's hottest companies. And with the added firepower his new partners will bring, his firm could be making more deals than ever.

Though the terms of any deal are still to be drafted, Mr. Tunstall says he has identified six candidates - two current employees and four outsiders - who will be invited to acquire collectively up to 49% of his closely held firm over the next two years. It isn't clear how much capital, if any, the new rainmakers would invest. But the expansion is about gaining people power, not financial muscle, Mr. Tunstall says.

Letting Go

He expects that, in return for a stake in Tunstall Consulting, the new principals will help quadruple the firm's annual revenue to roughly $20 million in less than three years. Mr. Tunstall declines to discuss whether he will broaden the firm's scope as well but people familiar with his plans say he is considering such related areas as securities law.

This expansion marks a major shift for the hands-on Mr. Tunstall who until now hasn't been interested in having the firm grow beyond a size he could personally control. About four years ago, he closed the firm's two outposts, in Atlanta and Fort Lauderdale, partly because it was too much of a hassle. Until recently, he was reluctant even to share Tunstall Consulting's financial results with his own high-ranking staffers.

But after some soul-searching, the 53 year-old Mr. Tunstall says he realizes that it's time for him to let go. "I've got to do this," he says in an interview from Boston. "I'm smart enough to know that I may not be around for the next 30 years to run this firm." He acknowledges that, while he regularly develops long-range growth plans for his clients, he has in some respects neglected his own firm.

Over the past 17 years, as Mr. Tunstall dominated in his role as chief deal maven, some key principals have left to work as executives for Tunstall Consulting's clients. Now he is left with few people around him that he can count on for the future, he says. To stop this brain drain, and to pursue growth, he has decided to provide more financial incentive in the form of an equity stake and possibly profit-sharing for the principals he now hopes to recruit.

Of course, he isn't willing to offer such a carrot to strangers. His potential new partners, he says, are business associates with whom he already has a relationship. The only one whom he will identify right now is longtime friend Marc Bendesky, who joined Tunstll Consulting two years ago as a marketing director from a New York publishing company. Mr. Bendesky, 53, says that, with an equity stake in the firm, he will begin to take a more active role.

Regional Gains

Privately, Mr. Tunstall's investment banking pals say they have urged him to expand. They say they welcome the prospect of bidding on more deals brokered by his firm which could bring more financing to the region.

Tunstall Consulting doesn't reveal most of its client list, but Mr. Tunstall says at least half of the 50 or so transactions he completes annually are generated from companies based in Florida and the South-east. Typically, he targets hot, young companies he believes are capable of delivering at least 20% annual sales and profit growth.

To be sure, Mr. Tunstall's instincts don't always produce long-term winners. One notable former client, burger chain Checkers Drive-In Restaurants in Clearwater, is one of Florida's biggest stock bombs of the past decade. The stock, now at about $2, peaked at a split-adjusted $17.33 five years ago. (Mr. Tunstall says he can't be held responsible for the burger wars and management turnover that have hurt Checkers' performance.)

Still, his clients say he is invaluable for his ability to guide entrepreneurs through what is often a bewildering and intimidating process - attempting to find a suitable underwriter or lender. "I know the chemical business," says John Macdonald, president of JLM Industries Inc., a Tampa based chemical distributor that, with Tunstall Consulting's help, recently filed to go public, "but the public markets are completely foreign to me." Mr. Tunstall is "kind of the financial equivalent of a marriage broker," says Mr. Macdonald, who can't discuss specifics of his proposed public offering because he is in the quiet period.

In the early 1980s, when Mr. Tunstall first began pitching Florida companies to the Street, they were a much tougher sell. At the time, the state's lingering reputation as a haven for penny-stock scams hurt the ability of legitimate companies to raise cash in the public markets. Mr. Tunstall offered a fresh perspective on the state by focusing on solid companies that, while small, offered growth potential. "He has helped lots of entrepreneurs grow their business," says Dick Dobkin, Florida area director of entrepreneurial services at Ernst & Young L.L.P. in Tampa.

Sphere of Influence

Tunstall Consulting's forte is matching companies with the financing source that offers the highest valuation. Deals brokered by the firm often attract more than a few prospective investment bankers that then bid up the amount of capital just to get the business. And clients say it's more than just the detailed business plans prepared by the firm that get financiers' attention. It's Mr. Tunstall himself.

"Gordon will effectively negotiate the deal for you," says Marshall Hunt, chief executive officer at Horizon Medical Products Inc., a private company in Atlanta. Horizon recently hired Mr. Tunstall to help it raise $30 million for an acquisition.

While there's no guarantee that a deal brokered by Mr. Tunstall will in fact, get done, his name does at least open doors. "Gordon's calls get returned first," says Rob Shuler, co-managing partner at Petra Capital LLC in Nashville. "He has taken the time to understand what we do." Mr. Shuler says his investment firm rejects most of the 200 or so unsolicited proposals it receives each month, many of which are from companies seeking underwriting for a public offering. Petra, which provides private financing, mostly bridge loans, isn't even in that business,

For someone who wheels and deals in the high-stakes game of corporate finance, the boyish looking Mr. Tunstall doesn't immediately come across as a tycoon. His firm's headquarters offer a view of trash dumpsters at a shopping center he owns in the suburbs of north Tampa, about a mile from his house. He rarely takes clients to fancy restaurants, instead serving takeout food in his conference room. His trademark power lunch is a rotisserie chicken from Boston Market.

Sharing in the Wealth

But he does know how to make money. Though his fees don't include equity stakes in his clients' companies, Mr. Tunstall usually buys their shares in the open market, a practice that by his own admission has made him financially comfortable. He says he won't buy shares in any publicly traded company unless it's a client.

"It's kind of a symbiotic relationship,' says Mr. Tunstall, who drives a limited edition BMW Z3, styled after the roadster driven by James Bond in the movie "GoldenEye." (It was a Christmas gift from his wife, Nancy, courtesy of a Neiman-Marcus catalog.)

For her part, Mrs. Tunstall, who is also the firm's treasurer, admits that when her husband first broached the subject of giving up sole ownership of Tunstall Consulting, she balked. But increasingly, she fears that they will be forced to shutter the firm should Mr. Tunstall decide to retire, or even significantly reduce his workload.

Mrs. Tunstall, 41, says she is apprehensive about the changes. The toughest part, she says, is learning to delegate and trust others with what up to this point has in many ways been their "baby."

I'm just afraid," she says, that "in five years, if Gordon couldn't do this anymore, the firm would just go away.

And what about Mr. Tunstall's investment-banking friends? Though they may welcome the prospect of more deals, are they concerned that Mr. Tunstall may be diluting his firm's cachet in the long run? Most say no.

"We welcome the expansion," says Petra Capital's Mr. Shuler, adding, "This is a very wise move on his part, because Gordon is stretched to the max."

Meanwhile, Mr. Tunstall, though he hasn't yet reduced his travel schedule - he is often on the road four days a week - is at least learning to focus on something besides deals. Last week, he took his electric piano along for the ride on his private plane so that he could practice while shuttling between Detroit and Boston.

He seems to be focusing more on the time when he can delegate in order to have more time for such diversions. The new T-shirts he has ordered for staffers proclaim "Tunstall Consulting: 2000."

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