SouthernSun Asset Management, a small-cap/smidcap equity boutique, teamed with private equity firm Rosemont Investment Partners to purchase stakes held by its largest outside shareholders and place a majority of the firm's equity in employee hands.
In an interview Wednesday, Michael W. Cook, SouthernSun's founder, CEO and chief investment officer, said the move will help drive SouthernSun's continued evolution from a family-money-focused, one-man shop launched in 1989 to a manager with a strong mix of institutional and retail clients..
Terms of the deal weren't disclosed, but Mr. Cook said the recapitalization will buy out the interests held by two Miami-based friends in the industry who helped him launch the firm: private equity investor Earl W. Powell and hedge fund investor Marko Dimitrijevic. Between them, they owned a majority of SouthernSun's equity.
SouthernSun employees now own 51% of the firm, with a road map worked out with Rosemont that will allow the firm to become almost 100% employee owned over the coming decade, said Mr. Cook.
For now, Mr. Cook said, the recapitalization has allowed him to put equity into the hands of key members of the management team — Managing Director Michael S. Cross, Director of Research Phillip W. Cook and COO and Chief Compliance Officer William P. Halliday. But the long-term plan is to distribute equity broadly to every individual at the firm, said Mr. Cook.
SouthernSun, with 21 employees, managed more than $1.3 billion in assets as of June 30.
Mr. Cook said the firm's oldest offering, its small-cap equity strategy with $1.13 billion in assets, is close to capacity, but SouthernSun's marketing team is just beginning to focus on its smidcap product, which has $133 million in assets and capacity for up to $3 billion. In addition, an all-cap global equity offering, which the firm has managed for more than four years for one Australia-based client, holds further promise, he said.
According to material provided by the company, SouthernSun’s list of institutional clients includes FedEx Corp., with $13 billion in retirement assets; the $320 million City of Atlanta Firemen's Pension Fund; the $1.7 billion City of Memphis Retirement System; and the $1.8 billion Carpenters Pension Fund of Illinois.
Mr. Cook said Rosemont provided the most compelling model of the four or five capital partners with which the SouthernSun team seriously considered working. “Their model clearly suited us best,” considering where the firm was and what the management team was hoping to achieve, he said.
In a separate interview, David D. Silvera, a managing director with Rosemont, said SouthernSun's “consistently good performance” and strong client list attracted his firm's interest, and that a change in SouthernSun's ownership structure could further accelerate the firm's business momentum.