Peterson Partners

June 25, 2006 Peterson partners promote business $300M equity fund looks for talented and visionary CEOs By Dave Anderton Deseret Morning News Airplanes, milk and radioactive waste have never looked this good . at least to Peterson Partners, a Salt Lake-based $300 million equity fund, whose investments have created thousands of new jobs and turned small companies into major hitters. You could call Peterson Partners an entrepreneur's best friend. In the 10 years since the fund launched, it has been a key investor for more than 40 companies, including JetBlue Airways, Winder Farms and EnergySolutions. Finding the next great company is what Joel Peterson, the firm's founder, has made his life's passion. He jokingly refers to his portfolio companies as "his children," unwilling to single out any favorites. "I don't want anybody to read this and say, 'Why didn't they mention me?' " Peterson said. "What gets us excited about what we do is finding these great entrepreneurs, these great business ideas and helping them get to a place that they might not otherwise get. "I have worked with entrepreneurs my whole life. I like backing entrepreneurs. I like the energy that entrepreneurs have. I like to figure out ways to add value to their businesses." Peterson teaches a course on entrepreneurship at Stanford Business School and holds an MBA from Harvard University. Before founding Peterson Partners, he was the managing partner at Trammell Crow Co., one of the world's largest commercial real estate service companies. Peterson Partners sets a high standard for companies it invests in, beginning with the chief executive officer. Jordan Clements, the firm's managing partner since 1995, said ideal companies all have one thing in common: a talented and visionary leader at the helm. "We look first to the quality of the leader," Clements said. "We've looked at the companies that have been successful. We've looked at the companies that haven't been successful. So much of it comes down to the leader. And yet it's no one personality type. Really what it comes down to is what we call issues of the head and the heart." Take JetBlue Airways founder David Neeleman. Peterson calls Neeleman a "serial entrepreneur." "He's done deal after deal, and I think that will be his whole life, starting new businesses," Peterson said. "He's a visionary. He spots opportunity. But he's also a person with enormous empathy. His people love him, and he really cares about them and they feel that. They sense that. He's able to motivate people to get things done that they might not otherwise do." Peterson Partners was part of the first group of investors in JetBlue, investing $2.5 million. Neeleman's high character, solid business judgement and strong work ethic were convincing qualities that have carried JetBlue as it has become one of the nation's premier airlines, Peterson said. The payoff for Peterson Partners has been more than money. Neeleman has joined the firm as one of seven limited partners, and he returns the praise. "Early on in JetBlue's history, Peterson Partners played an important role in making sure this company succeeded, and they are one of the reasons why JetBlue is where it is today," Neeleman said in an e-mail statement to the Deseret Morning News. "Today, Peterson Partners continues to make a big difference in many companies throughout the country, and it is because of their genuine desire to help companies succeed that they have been so successful over the years." As a buyout fund, Peterson Partners targets companies in high-growth industries with strong margins on products and services, having revenues of $10 million or more. It then takes those companies to the next level. The firm's other two partners are Richard Durham, the former chief financial officer for Huntsman Corp. and chief executive officer of Pliant Corp., and Rick Stratford, who formerly worked for Arthur Andersen and Hewlett-Packard. Peterson Partners' largest single investment has been a $12.5 million stake in EnergySolutions, formerly Envirocare, which operates a low-level radioactive waste disposal facility in Tooele County. With skyrocketing energy prices, Peterson Partners may soon find itself in an enviable position as attention again shifts to nuclear power to help meet the nation's energy needs. According to a report released last week by the U.S. Energy Information Administration, higher fossil fuel prices and concerns about security of energy supplies are expected to improve prospects for nuclear power capacity through 2030, with many countries projected to build new nuclear power plants. World nuclear capacity is projected to rise from 361 gigawatts in 2003 to 438 gigawatts in 2030. A gigawatt is enough electricity to power roughly 500,000 homes. Earlier this year 40 firms, including EnergySolutions, expressed interest in operating a pilot plant to recycle nuclear waste for the Department of Energy. EnergySolutions said the plant would not be located in Utah. "The company that we're building through EnergySolutions will not be focused on bringing more waste into Utah," Clements said. "Rather, we're focused on providing a full array of engineering and other waste management services at the site where the waste is generated. Nuclear energy is coming back in a huge way worldwide as a means of meeting the great demands for energy." The firm also has invested in a number of smaller companies. Talley Goodson, chief executive officer of 3form, a Salt Lake-based designer and manufacturer of architectural products, said Peterson Partners took a significant equity position in his company in 2002. The company has since grown its revenues roughly 15 times more than before Peterson Partners became involved. One of Peterson Partners' smallest investments has been in West Valley-based Winder Farms, which specializes in home delivery of milk and other grocery products. Even though the dairy home delivery industry has been flagging since the 1950s, Peterson Partners saw potential. Eric Jacobsen, CEO of Winder Farms, said Peterson offered $1.5 million despite no clear exit strategy. Today, Winder Farms delivers food products to more than 20,000 Utah households and has plans this fall to enter the Las Vegas market. "I think Peterson's style is to invest in people they like and trust and believe in, and exit strategies are secondary to finding good partners," Jacobsen said. "We have both gone into this thing and said, 'Hey, we don't know what the exit is, but we'll figure out something that will make sense for both people.' " Such connections keep Peterson Partners hitting investment home runs. Several years after the firm was founded, Clements recalls being approached by a couple large institutions who wanted to be partners. "We had a very strong track record of investment returns, and they wanted to invest some large amounts of money with us," Clements said. "But they wanted us to commit to grow much larger and to make much larger investments in any one company. And our response to that was, 'No, thanks.' Sure, we could do the other and we could perhaps make more money, but we really genuinely have fun working with these small businesses, and that's what we want to do." E-mail: danderton@desnews.com