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Peter Rosenthal Discusses BB&T Factoring Portfolio Acquisition
Last week, Rosenthal & Rosenthal, Inc. announced the completion of a deal to acquire the domestic factoring portfolio of BB&T Corporation, one of the largest financial services holding companies in the United States.
As part of the deal, Rosenthal will acquire BB&T’s portfolio of 90 factoring clients, adding approximately $2 billion in volume to its already robust $9 billion in factored volume. Twenty-five BB&T factoring professionals will join the nearly 200 Rosenthal staff currently serving the firm’s clients nationwide.
The deal marks the first acquisition in Rosenthal’s 80-year history. Here, Peter Rosenthal, President of Rosenthal & Rosenthal, discusses the acquisition.
By Michele Ocejo
Rosenthal & Rosenthal just announced the completion of a deal to acquire the domestic factoring portfolio of BB&T Corporation. This marks the first acquisition in Rosenthal’s 80-year history. Why this acquisition and why now?
Up until this point in our 80 years, all of our growth has been organic. We’ve never made an acquisition before. This is certainly new territory for us. But reaching this point in our history where we’re doing nearly $9 billion in factored volume pre-acquisition, obviously it gets tougher and tougher to grow organically. And we’ve always been open to the concept of acquisitions; it’s just a question of finding the right opportunities. When we learned about BB&T wanting to exit the factoring business, it just seemed like the timing was right and the opportunity was perfect for us. We have the technology platform to grow, and we have seasoned professionals here to manage the business. It just seemed like the perfect opportunity to take advantage of.
The specifics of the BB&T opportunity were so compelling. First of all, it gives us the opportunity to expand geographically. We’re obviously headquartered in New York, and we have an office in California that we’ve had for about 15 years now. So we have both coasts covered. But we do business all over the country. We were already doing business in the Southeast and have always had our eye on opportunities there. By acquiring the BB&T portfolio, and opening two new offices, a front office in Atlanta and an operations back office in High Point, North Carolina, it was just a perfect opportunity to expand geographically, which is one of our goals.
The second goal which we have been working on for some years now is to expand into other industries. The lion’s share of our factoring portfolio pre-acquisition was centered in apparel and consumer goods industries. And the BB&T portfolio is focused more on furniture and carpeting, which were two industries that we didn’t have a large presence in. We’ve been interested in furniture businesses in particular for some time now and, with our expertise, we feel we’re well positioned to address their unique needs.
As you mentioned, furniture and carpeting are major focuses for the BB&T portfolio. What is it that makes them so attractive? Are there specific challenges and opportunities in these industries?
The geographic expansion and the industry expansion made the BB&T acquisition a very, very compelling value proposition for us.
It’s an opportunity for us to diversify our portfolio. As I mentioned, we’re heavily focused in the apparel industry, which is wonderful from the perspective of having deep knowledge of that industry. It certainly helps us and helps our clients. But from a risk-management standpoint, having the opportunity now to diversify to other industries with different credit exposures is very attractive. We have hired a number of the BB&T professionals both in Atlanta and High Point to help us manage that business. They bring with them a tremendous amount of specific knowledge of those industries which will help us hit the ground running.
Of course, there are always idiosyncrasies that pertain to different industries. The furniture industry is certainly more fragmented than the apparel industry. You have more customers to deal with, so that presents its own challenges. But what Rosenthal has always been good at is providing sound advice on customers, to help clients avoid potential bad debt and address any working capital needs that might arise.
Furthermore, our technology is such that it can help us greatly in managing such a diverse portfolio. I think it’s just a question of getting our name out and using this as an opportunity not just to acquire a portfolio, but to use it as a platform for further growth. We think there’s certainly an opportunity to grow in those industries where we know we can have a meaningful and positive impact.
As you mentioned, Rosenthal’s core business has been apparel and fashion. Have the changes brought about by the increase in online shopping and the Amazon effect affected your focus on this sector?
I wouldn't say it’s affected our focus. We’re still very, very committed to the sector, and I think going forward apparel will still be an anchor of our business. But it’s certainly changed the way our clients do business and it’s forced us also to adapt to find creative ways to support them. The movement away from brick and mortar and toward online has been ongoing for a number of years now, and it has certainly been a disruptive force in retail. I think if you look at the retail landscape today, it’s hard to argue that it’s not a challenging environment. We still have so much brick and mortar that we’re probably over-retailed in some respects. We’re certainly seeing a contraction as far as number of stores, and many retailers have experienced significant credit disruptions. The combination of these factors has created one of the most complex and challenging retail environments we’ve seen in a long time.
The disruption caused by the move to online shopping is a constant topic of conversation with our clients. We also discuss how they can leverage their online platforms to grow their businesses. We’re always trying to find creative ways to help them do that. That’s one of the great things about our business being a privately held institution. We’re always looking for new ways to support our clients. We don’t have the same layers of bureaucracy that some of our either publicly held or bank-owned competitors do. It allows us to be more flexible, to move more quickly, and it’s, without a doubt, a definite advantage for us that we try to leverage.
What else does Rosenthal & Rosenthal have planned for this year?
We don’t have anything specifically on the horizon as far as acquisitions, although we certainly would be open to any opportunities that presented themselves. We’re excited about integrating the new BB&T business into our business.
I should mention also that we think there are a lot of opportunities on the asset-based lending and purchase order finance side as well, and we think we’re going to be able to introduce those products in our southeast region as well. We think we can get a lot of traction there, so we’re excited about seeing how that develops. The purchase order product has been really well received in our current market, so we’re hopeful that when we introduce it in the southeast that there’ll be a similar reception. In addition to building the factoring business down there, which we expect to be able to do, we think there are going to be a lot of asset-based lending and purchase order finance opportunities as well. That’s something we’ll certainly start to focus on in 2018.