Insight brings its money into the new company, expecting a payout on its investment years later.How did Insight live up to this representation? Here's the payout Insight took from Hirschfeld after taking a controlling interest in April 2006:
Hirschfeld's PEU owners pulled $97.9 million from the firm, splitting it mostly 50-50. A 51% cut of $98 million is $50 million.April 2006-December 2006-$6.7 million in partnership distributionsYear ended December 2007-$47.8 million in partnership distributionsYear ended December 2008-$28.2 million in partnership distributionsNine months ended September 2009-$15.2 million in partnership distributions
Despite this cash bleed Insight turned around the firm in award winning fashion:
SOUTHLAKE, TEXAS, September 8th, 2008 – Insight Equity Holdings, LLC (“Insight”), is proud to announce that they have been honored by the Turnaround Management Association (TMA) as 2008’s Mid-Sized Company Turnaround of the Year for the acquisition and enhancement of Hirschfeld Steel Group, a premiere fabricator of structural steel for bridges, stadiums, mass transit structures, industrial facilities and other industrial and commercial projects. Insight acquired Hirschfeld Steel Group, based in San Angelo, Texas, in April 2006.Insight issued this press release on September 8, 2008. A week later Lehman Brothers failed and Merrill Lynch ran into Bank of America's arms. The financial crisis sent investors running from equities.
In June 2009 Insight pulled a signature PEU move, a dividend recapitalization, where debt is added to fund a PEU owner dividend.
Insight Equity Holdings LLC (“Insight”), the Dallas, Texas-area private equity firm, has completed the recapitalization of Hirschfeld Industries with LBC Capital Partners in conjunction with the incumbent lenders, Bank of America and Wells Fargo Business Credit. Proceeds of the recapitalization will be used to finance a recently executed JV agreement with Martifer Energy Systems to manufacture wind towers in the United States as well as provide a dividend to the equity holders.Insight filed for an independent public offering on Hirschfeld Industries in November 2009. It didn't fly. Hirschfeld's SEC filing did identify a risk:
Limits on our ability to influence or control partially-owned joint ventures or strategic partnerships, such as our wind tower joint venture with Martifer, could restrict the future operations of such joint ventures or strategic partnerships and harm our results of operation. With limited control over the management of our partially-owned joint ventures, we cannot solely dictate items such as dividend or operating policies and strategic partnerships without the cooperation of our business partners in these ventures, such as in the case of our wind tower joint venture and our interest in a strategic partnership that has rights to construct a magnetic levitation rail line between Anaheim, California, and Las Vegas, Nevada. If we and our partners cannot agree on certain business issues, the performance of the ventures may be harmed, and we may not be able to remove cash from such ventures. Our joint venture and strategic partners may have interests that are different from ours and could influence key business decisions that are not in our best interests. Our joint ventures and strategic partnerships may not be successful, including in the event that we do not have a good working relationship with our joint venture and strategic alliance partners.Note the concern about removing cash from joint ventures. It's important to keep that PEU gravy train going. As for joint ventures not being successful, demand for wind turbine towers is evaporating in the West Texas heat. Hirschfeld Wind may soon be Hirschfeld Oil Tank.