American Capital was a publicly traded private equity and global asset management firm, trading on NASDAQ under the symbol “ACAS” from 1997 to 2017. American Capital, both directly and through its asset management business, originated, underwrote and managed investments in middle market private equity, leveraged finance and structured products. It participated in management and employee buyouts either by providing mezzanine and senior debt financing for buyouts led by private equity firms or by providing capital directly to companies through a “One Stop Buyout” in which it funded senior debt, mezzanine and equity and was the controlling shareholder. American Capital and its affiliates invested from $10 million to $600 million per company in North America and €10 million to €300 million per company in Europe. At its peak, American Capital had over $100 billion of assets under management.
Founded in 1986, American Capital went public in August 1997 at $15.00 per share, raising $155 million, making it the first private equity firm to go public in the United States. American Capital was sold on January 3rd, 2017 for $4.1 billion or $18.06 per share. Adjusted for a stock dividend paid in 2009, which had the effect of a stock split, the $18.06 per share selling price translates to approximately $23.50 a share when compared to its share price at the time of its IPO. In addition, during its time as a public company, American Capital paid $30.32 per share in dividends.
For those investors who bought American Capital stock in its 1997 IPO, and held their shares through the sale of American Capital, they received a 14% compounded annual return including dividends (not reinvested). This compares favorably to the 10% return made by investors in shares of Berkshire Hathaway over the same period. It wasn’t just investors in its IPO who outperformed the market. For a stockholder who invested in one share of ACAS at its IPO and one share of ACAS on January first of each of the 19 years it was public and held the shares through to the sale on January 3rd, 2017, 70% of those 20 investments would have outperformed the S&P 500 Financial Sector over the same time periods.
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These results were achieved through two recessions, including the Great Recession. From the time of its IPO through 2015, American Capital produced a 16% Economic Return, that is, a 16% growth in its book value plus dividends paid. And, despite the Great Recession, the $5 billion American Capital invested in the equity of its One Stop Buyouts produced a 16% compounded annual return.
American Capital built seven billion-dollar financial institutions over the years which included: American Capital, American Capital Equity I, European Capital, American Capital Agency, American Capital Mortgage, American Capital Equity III and American Capital Asset Management. American Capital took five companies public, and invested over $33 billion in middle market companies to support their buyouts and growth. During the time American Capital was public, it owned and or controlled over 155 companies and invested in over 600 companies, including well-known companies such as AAMCO, Aeriform Corporation, Affordable Care, Algoma Group, Bumble Bee Seafoods, Bushnell Outdoor Products, CamelBak Products, Case Logic, Confluence Kayaks, Crosman Corporation, Cycle Gear, Electrolux, Explorer Pipeline, Euro-Pro, Evenflo Company, Gibson Guitars, Meadows of Wickenburg, Nancy’s Specialty Foods, New England Confectionary Company (NECCO), Parts Plus, Piper Aircraft, Potpourri, Riddell Sports Group, Ranpak, Rug Doctor and Service Experts.
American Capital was founded by Malon Wilkus in 1986, who resigned as Chairperson and Chief Executive Officer (CEO) at the time of the sale of American Capital in 2017. American Capital was headquartered in Bethesda, Maryland. Malon Wilkus was Chairperson and President of American Capital from its founding until its IPO in 1997. It made its first investment in the equity of an employee owned middle market company in 1990. By August 1997, American Capital had facilitated approximately 18 ESOP transactions (Employee Stock Ownership Plans) and had invested in the equity of 7 employee buyouts. Based on third party valuations and net realized gains, the return on these investments was 36% per annum prior to its IPO. With that track record American Capital went public on August 29, 1997 in a $155 million equity offering at a price of $15.00 per share. At the time of its IPO, American Capital changed its operations and tax status to a Business Development Company (BDC). American Capital immediately began paying dividends and continued paying regular dividends until 2009. At the time of its IPO, American Capital maintained its headquarters in Bethesda, MD, with additional professionals based in or near New York, Pittsburgh, San Francisco, Savannah and Boston. As of the IPO date, David Gladstone, former Chairperson and CEO of Allied Capital (a then existing BDC), was elected Chairperson, Malon Wilkus was elected Vice Chairperson and was appointed President and CEO, Adam Blumenthal was appointed Director and Executive Vice President, Steve Hester was appointed Vice President and General Counsel and Roland Cline was appointed Vice President.