J.H. Whitney & Company
Encyclopedia
J.H. Whitney & Company is a venture capital
firm in the U.S., founded in 1946 by John Hay Whitney
and his partner Benno Schmidt
. Today the firm focuses primarily on leveraged buyout
s, turnarounds, acquisitions, and recapitalizations of more mature companies particularly those it considers to be in the middle market. The firm is based in New Canaan, Connecticut
.
transactions and raised $750 million for its sixth institutional
private equity fund
in 2005. The $750 million raised in 2005 was a significant decrease from its previous funds, when the firm raised $1.1 billion in 2001 and $975 million in 2000 for Whitney V and IV, respectively. The performance of the 2000 vintage fund IV in particular was impacted by the firm's exposure to technology and internet businesses
.
who put up $10 million after World War II to finance entrepreneurs with business plans who were unwelcome at banks. Mr. Whitney brought in Benno Schmidt
as his partner to run the company. Whitney had been investing since the 1930s, founding Pioneer Pictures
in 1933 and acquiring a 15% interest in Technicolor Corporation with his cousin Cornelius Vanderbilt Whitney
. It was not until after World War II that what is considered today to be true private equity investments began to emerge marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation
. (ARDC) and J.H. Whitney & Company.
Whitney would become a highly professional organization, whereas before World War II
, venture capital investments were primarily the domain of wealthy individuals and families. It was Schmidt
, in fact, who is credited with coining the term "venture capital", originally known as "development capital". The company was originally described as a lender of "private adventure capital" and Schmidt would shorten the term to "venture capital."
By far Whitney's most famous investment during this period was in Florida Foods Corporation. The company developed an innovative method for delivering nutrition to American soldiers, which later came to be known as Minute Maid
orange juice and was sold to The Coca-Cola Company
in 1960.
industry in the 1980s Whitney (and other early venture capital firms including Warburg Pincus
) began to transition away from venture capital
toward leveraged buyouts and growth capital investments, which were in vogue in that decade.
Whitney's most public foray into the leveraged buyout space came in 1989, when it completed the acquisition of Prime Computer
. In 1988, "corporate raid
er" Bennett S. LeBow
, who controlled a smaller computer maker, MAI Basic Four
, began an attempted $970 million hostile takeover of Prime Computer
. Management resisted LeBow's advances and eventually agreed to a $1.3 billion leveraged buyout with Whitney, acting as a white knight
. For Whitney, owning Prime proved to be nearly a total loss with the bulk of the proceeds from the company's liquidation paid to the company's creditors.
Whitney would complete other buyouts in the 1980s including the acquisition of retailer Filene's Basement
.
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
firm in the U.S., founded in 1946 by John Hay Whitney
John Hay Whitney
John Hay Whitney , colloquially known as "Jock" Whitney, was U.S. Ambassador to the United Kingdom, publisher of the New York Herald Tribune, and a member of the Whitney family.-Family:...
and his partner Benno Schmidt
Benno C. Schmidt, Sr.
Benno Charles Schmidt, Sr. was an American lawyer and venture capitalist who was active in New York City civic affairs and played an important role in the initiation of the War on Cancer....
. Today the firm focuses primarily on leveraged buyout
Leveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
s, turnarounds, acquisitions, and recapitalizations of more mature companies particularly those it considers to be in the middle market. The firm is based in New Canaan, Connecticut
New Canaan, Connecticut
New Canaan is a town in Fairfield County, Connecticut, United States, northeast of Stamford, on the Fivemile River. The population was 19,738 according to the 2010 census.The town is one of the most affluent communities in the United States...
.
Investments
The firm, which today is known as Whitney & Co. continues to make investments in leveraged buyoutLeveraged buyout
A leveraged buyout occurs when an investor, typically financial sponsor, acquires a controlling interest in a company's equity and where a significant percentage of the purchase price is financed through leverage...
transactions and raised $750 million for its sixth institutional
Institutional investor
Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
private equity fund
Private equity fund
A private equity fund is a collective investment scheme used for making investments in various equity securities according to one of the investment strategies associated with private equity....
in 2005. The $750 million raised in 2005 was a significant decrease from its previous funds, when the firm raised $1.1 billion in 2001 and $975 million in 2000 for Whitney V and IV, respectively. The performance of the 2000 vintage fund IV in particular was impacted by the firm's exposure to technology and internet businesses
Dot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
.
Founding and early history
J.H. Whitney & Company was founded by John Hay WhitneyJohn Hay Whitney
John Hay Whitney , colloquially known as "Jock" Whitney, was U.S. Ambassador to the United Kingdom, publisher of the New York Herald Tribune, and a member of the Whitney family.-Family:...
who put up $10 million after World War II to finance entrepreneurs with business plans who were unwelcome at banks. Mr. Whitney brought in Benno Schmidt
Benno C. Schmidt, Sr.
Benno Charles Schmidt, Sr. was an American lawyer and venture capitalist who was active in New York City civic affairs and played an important role in the initiation of the War on Cancer....
as his partner to run the company. Whitney had been investing since the 1930s, founding Pioneer Pictures
Pioneer Pictures
Pioneer Pictures, Inc. was a Hollywood motion picture company, most noted for its early commitment to making color films. Pioneer was initially affiliated with RKO Pictures, whose production facilities in Culver City, California were used by Pioneer, and who distributed Pioneer's films...
in 1933 and acquiring a 15% interest in Technicolor Corporation with his cousin Cornelius Vanderbilt Whitney
Cornelius Vanderbilt Whitney
Cornelius Vanderbilt Whitney was an American businessman, film producer, writer, and government official, as well as the owner of a leading stable of thoroughbred racehorses....
. It was not until after World War II that what is considered today to be true private equity investments began to emerge marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation
American Research and Development Corporation
American Research and Development Corporation was a venture capital and private equity firm founded in 1946 by Georges Doriot, the "father of venture capitalism" , with Ralph Flanders and Karl Compton .ARDC is credited with the first major venture capital success story when its 1957 investment of...
. (ARDC) and J.H. Whitney & Company.
Whitney would become a highly professional organization, whereas before World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, venture capital investments were primarily the domain of wealthy individuals and families. It was Schmidt
Benno C. Schmidt, Sr.
Benno Charles Schmidt, Sr. was an American lawyer and venture capitalist who was active in New York City civic affairs and played an important role in the initiation of the War on Cancer....
, in fact, who is credited with coining the term "venture capital", originally known as "development capital". The company was originally described as a lender of "private adventure capital" and Schmidt would shorten the term to "venture capital."
By far Whitney's most famous investment during this period was in Florida Foods Corporation. The company developed an innovative method for delivering nutrition to American soldiers, which later came to be known as Minute Maid
Minute Maid
Minute Maid is a product line of beverages, usually associated with lemonade or orange juice, but now extends to soft drinks of many kinds, including Hi-C...
orange juice and was sold to The Coca-Cola Company
The Coca-Cola Company
The Coca-Cola Company is an American multinational beverage corporation and manufacturer, retailer and marketer of non-alcoholic beverage concentrates and syrups. The company is best known for its flagship product Coca-Cola, invented in 1886 by pharmacist John Stith Pemberton in Columbus, Georgia...
in 1960.
The 1980s and the move to leveraged buyouts
In response to the changing conditions, in the venture capitalVenture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
industry in the 1980s Whitney (and other early venture capital firms including Warburg Pincus
Warburg Pincus
Warburg Pincus, LLC is an American private equity firm with offices in the United States, Europe, Brazil and Asia. It has been a private equity investor since 1966...
) began to transition away from venture capital
Venture capital
Venture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
toward leveraged buyouts and growth capital investments, which were in vogue in that decade.
Whitney's most public foray into the leveraged buyout space came in 1989, when it completed the acquisition of Prime Computer
Prime Computer
Prime Computer, Inc. was a Natick, Massachusetts-based producer of minicomputers from 1972 until 1992. The alternative spellings "PR1ME" and "PR1ME Computer" were used as brand names or logos by the company.-Founders:...
. In 1988, "corporate raid
Corporate raid
A corporate raid is an American English business term for buying a large interest in a corporation and then using voting rights to enact measures directed at increasing the share value...
er" Bennett S. LeBow
Bennett S. LeBow
Bennett S. LeBow is a financier and corporate raider. He is also the former Chairman of the Board and CEO of Borders Group, an international bookseller based in Ann Arbor, Michigan and Chairman of the Board of Vector Group, a holding company primarily involved in the manufacturing of cigarette...
, who controlled a smaller computer maker, MAI Basic Four
MAI Basic Four
MAI Basic Four refers to a variety of Business Basic, the computers that ran it, and the company that sold them .Basic/Four Corporation was created as a subsidiary of Management Assistance, Inc. in Irvine, California...
, began an attempted $970 million hostile takeover of Prime Computer
Prime Computer
Prime Computer, Inc. was a Natick, Massachusetts-based producer of minicomputers from 1972 until 1992. The alternative spellings "PR1ME" and "PR1ME Computer" were used as brand names or logos by the company.-Founders:...
. Management resisted LeBow's advances and eventually agreed to a $1.3 billion leveraged buyout with Whitney, acting as a white knight
White knight (business)
In business, a white knight, or "friendly investor," may be a corporation or a person that intends to help another firm. There are many types of white knights...
. For Whitney, owning Prime proved to be nearly a total loss with the bulk of the proceeds from the company's liquidation paid to the company's creditors.
Whitney would complete other buyouts in the 1980s including the acquisition of retailer Filene's Basement
Filene's Basement
Filene's Basement, also called The Basement, is a Massachusetts-based chain of department stores which was owned by Retail Ventures, Inc. until April 2009 when it was sold to Syms....
.
External links
- J.H. Whitney & Co. (official website)