Equity firm looks for minority auto suppliers

DETROIT -- Former General Motors executive Roy Roberts wants to team up with troubled minority-owned auto suppliers.Roberts, a former group vice president at GM who became managing director of Reliant Equity LLC, is offering cash and management expertise if needed to keep suppliers' operations afloat or to fund growth. Reliant Equity, a Chicago-based private-equity firm, opened a Detroit office last month. Roberts said his firm will have plenty of money to spend. It will start raising a fund of $250 million this month, has about $20 million left to spend in its current fund of $120 million and has commitments from its institutional investors to provide any money needed to close deals that come up before the second fund is liquid.Roberts, Thomas Darden, Omar Simmons and Carr Preston founded Reliant in Chicago and raised the first fund in 2001.Roberts retired from GM in 2000. Darden worked at GM for seven years in the 1980s and worked for four years at Wind Point Partners, a private-equity firm, after it opened its Southfield, Mich., office in 1997.'Strategic advantage'"We both have worked in the auto industry," Roberts said, "and that gives us a strategic advantage over other investors who don't know this industry as well." Roberts and Dave Bing, CEO of the Bing Group in Detroit, said they probably will talk soon to discuss a possible investment by Reliant, which usually seeks a controlling interest.Bing said his company, which makes metal stampings and other parts, could use cash."Roy is a personal friend and is somebody who I have a great deal of respect for," Bing said. "I think there is a great need out there. There will be a lot of people getting in line, probably."Roberts said: "If he wanted a significant partnership, we're here to provide that. I haven't approached him, but we'll talk."Because Reliant Equity is minority-owned, suppliers can sell a majority stake in their company and retain minority certification.The availability of private-equity capital from a minority-certified investor is good news for a number of cash-starved minority-owned automotive suppliers, said Melanie Duquesnel, vice president of targeted business development for LaSalle Bank."If they are willing to invest in minority companies that do work with the automotive industry, I think this is huge," she said."There are a couple of companies that I work with on my prospect list that could really use a cash infusion."Roberts said Reliant is in serious discussions to buy a controlling interest in two Detroit-area manufacturers.Why Detroit?Roberts said Reliant decided to open a Detroit office because valuations for companies in the struggling Michigan economy make this a good time to buy."It is the perfect time to be here," said Roberts, 66."I'm shocked when people say, 'Why would you come to Michigan?' This is the opportune time to be here doing deals. There are a lot of deals to be made. We have to be in this market."Jethro Joseph, the Chrysler group's senior manager of minority supplier development, said Chrysler has long encouraged minority-owned automotive suppliers to seek out private partners."Our stance on that is it is better to grow through equity as opposed to debt," Joseph said."That is the preference because with equity you, one, get the needed capital, and, two, maybe the needed management and consulting help with the new partners that are brought into the business."Targeting minority firmsRoberts said the fund will target minority- and majority-owned light and heavy manufacturers in the Midwest, both auto and nonauto, as well as companies providing business services and making consumer products."As much as I want to look at auto suppliers, by no means is that where we want to spend a majority of our time," he said. "We want a balanced portfolio."Reliant has six portfolio companies in its first fund, including one in Michigan, Saginaw Powertrain Inc. Darden said the firm typically buys a majority interest in companies with revenue between $25 million and $100 million and earnings before interest, taxes, depreciation and amortization of $4 million to $10 million. You may e-mail Tom Henderson at thenderson@crain.comYou may e-mail Brent Snavely at bsnavely@crain.com

Equity firm looks for minority auto suppliers

Featured Stories