J.H. Whitney & Company

J.H. Whitney & Company is a venture-capital firm in the U.S., founded in 1946 by partners John Hay Whitney and Benno Schmidt. Today, the firm focuses primarily on leveraged buyouts, 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.

J.H. Whitney & Company
Limited liability company
IndustryPrivate equity
Founded1946 (1946)
HeadquartersNew Canaan, Connecticut, United States
ProductsInvestments, private equity funds
AUM$1.0 billion [1]
Number of employees
9 [2]
Websitewww.whitney.com

Investments

The firm, which today is known as Whitney & Co. and also J.H. Whitney Capital Partners, LLC, continues to make investments in leveraged buyout transactions, and raised $800 million for its sixth institutional private equity fund in 2005.[3] The $800 million raised in 2005 were 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.

History
History of private equity
and venture capital
Early history
(origins of modern private equity)
The 1980s
(leveraged buyout boom)
The 1990s
(leveraged buyout and the venture capital bubble)
The 2000s
(dot-com bubble to the credit crunch)

Founding and early history

J.H. Whitney & Company was founded by John Hay Whitney, 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. When starting the company, Whitney wanted a broad team of young experts to be his deputies. He went to the deans of Harvard Business School, Yale Law School, and the MIT Graduate School of Engineering and asked each man who the best student they produced in the past five years was. The HBS dean cleverly responded that he was insulted that Whitney would think that he would simply rank his best students and hand the list out, but that if he was to do such an outrageous thing, he would rank C. Wrede Petersmeyer, a graduate the previous year, first. Whitney hired Petersmeyer the next day, and he went on to become a partner at the firm and run Whitney Communications. 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. What is considered today to be true private equity investments began to emerge after World War II, marked by the founding of the first two venture capital firms in 1946: American Research and Development Corporation and J.H. Whitney & Company.[4]

Whitney became a highly professional organization, whereas before World War II, venture-capital investments were primarily the domain of wealthy individuals and families. Schmidt, in fact, 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 shortened the term.[5]

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.[6]

The 1980s and the move to leveraged buyouts

In response to the changing conditions, in the venture-capital 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.[7][8]

Whitney's most public foray into the leveraged-buyout space came in 1989, when it completed the acquisition of Prime Computer.[9][10] In 1988, "corporate raider" 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.[11]

Whitney completed other buyouts in the 1980s, including the acquisition of retailer Filene's Basement.[12]

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References
  2. SEC from ADV
  3. "Metro Business; A Change of Identity For J. H. Whitney." New York Times, June 14, 2000
  4. Wilson, John. The New Ventures, Inside the High Stakes World of Venture Capital.
  5. Cuff, Daniel F. "BUSINESS PEOPLE; Deal for Prime Pleases Partners at Whitney." New York Times, June 26, 1989
  6. RICHARD A. OPPEL JR. "Benno C. Schmidt, Financier, Is Dead at 86." New York Times, October 22, 1999
  7. POLLACK, ANDREW. "Venture Capital Loses Its Vigor." New York Times, October 8, 1989.
  8. LUECK, THOMAS J. "HIGH TECH'S GLAMOUR FADES FOR SOME VENTURE CAPITALISTS ." New York Times, February 6, 1987.
  9. Cuff, Daniel F. "[BUSINESS PEOPLE; Deal for Prime Pleases Partners at Whitney https://query.nytimes.com/gst/fullpage.html?res=950DE3DE1439F935A15755C0A96F948260]." New York Times, June 26, 1989
  10. "Whitney Agrees to Buy Prime for $1.25 Billion." Associated Press, June 24, 1989
  11. Norris, Floyd "Market Place; Buyout of Prime Computer Limps Toward Completion." New York Times, August 12, 1992
  12. "Campeau Sets Sale of Unit."New York Times, June 10, 1988
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