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News
September 3, 2007
Crain's Detroit Business
Gilbert starts private-equity biz
RockBridge to invest up to $200M, focus on Michigan
By Tom Henderson
3:01 am, September 3, 2007
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Dan Gilbert has co-founded a new private-equity company, RockBridge Equity Partners L.L.C., which plans to invest $150 million to $200 million over the next three years to acquire controlling interest in profitable, growing companies.
RockBridge is based at the Rock Financial/Quicken Loans headquarters in Livonia. The company is expected to announce its formation this week.
Though housed in the Rock headquarters, RockBridge is an independent entity.
Joining Gilbert as co-founders and partners are three experienced local investment professionals: Kevin Prokop, Brian Hermelin and Rob Kramer.
They say that while RockBridge will target companies in North America, one mission will be to find Michigan companies and help them grow.
“We have a good perspective on the Midwest market,” said Hermelin. “We are looking at companies as far as California and as close as Detroit. To the extent we can add to job creation in Michigan — I wouldn't say it leads our strategy, but we have a strong bias here. We all live here, and anything we can do to create better economic conditions in Michigan is a good part of the mission.”
Prokop was most recently a turnaround specialist at Southfield-based private-equity firm Questor Management Co. L.L.C. and was a Crain's 40 Under 40 honoree in 2006.
Hermelin is the former CEO and executive chairman at Belleville-based Active Aero Group L.L.C. He was a co-investor with Gilbert in a $32 million investment in Pleasant Ridge-based ePrize Inc. in 2006.
Kramer spent 20 years as an investment banker and helped take Rock Financial public in 1998, helped sell it to Intuit in 1999 and helped Gilbert buy it back in 2002.
“The recapitalization of ePrize led to a discussion with Dan about whether we could do something bigger, more focused,” said Hermelin. “I had been running Active Aero and wanted to get back to the investment side of the world.”
Despite his track record at Questor, Prokop said RockBridge will not invest in turnaround situations or troubled companies. He and Hermelin said it generally will acquire a controlling interest in companies valued between $30 million and $150 million that have significant revenue, are profitable, need capital to grow and management expertise.
They said business segments will include sports, media and entertainment; financial services; business services; and Internet-related companies.
When asked if Gilbert's strategy includes a possible move of Quicken's headquarters to Detroit to be able to house some of RockBridge's portfolio companies there too, Elizabeth Jones, Quicken's vice president of communications, said: “Dan hasn't made a decision yet, so there's no answer to that, yet.”
“RockBridge is a good sign for the Detroit financial community, that we're adding another high-quality investment group,” said Gerry Boylan, managing director of Long Point Capital Inc., a private-equity firm co-based in Royal Oak and New York City.
One of Long Point's New York employees, Steve Linden, was hired by RockBridge as a senior associate.
“The positive effect when any new private-equity group is formed is tremendous,” said Jim TenBroek, managing director of Wind Point Partners, a $2 billion private-equity firm co-based in Southfield and Chicago.
“That directs capital to a city, where there's a great spillover effect,” he said. “A certain percentage will end up being invested in local companies, first of all, and it's highly likely the group will hire local service providers such as attorneys, accountants and banks to help with its investments.”
RockBridge will not raise a specific fund. Instead, it will find investors on a deal-by-deal basis, with each deal its own limited partnership.
“One of the discussions was whether we'd go out and raise a fund or not, whether to sacrifice the time to raise a fund or just go out and do business. We chose doing business,” said Hermelin.
Prokop said the partners have looked at several deals.
Jones said Gilbert will remain a partner in Livonia-based Camelot Ventures L.L.C., which does angel and venture-capital investing and which coordinated the investment in ePrize, but that any of his future investments will be through RockBridge.
Gilbert's other investments include Livonia-based Fathead L.L.C., which sells life-sized vinyl wall graphics of sport stars, “Star Wars” characters and NASCAR vehicles; the Cleveland Cavaliers of the National Basketball Association; the Cleveland-based Lake Erie Monsters minor-league hockey team; and Cleveland-based Flash Seats L.C.C., an Internet-based company that helps fans buy or sell tickets to sporting events.
Tom Henderson: (313) 446-0337, thenderson@crain.com
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