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The Good, The Bad & Private Equity

Not all corporate exits have fairytale endings. Greg Baldwin looks back on selling Baxa. 

Once upon a time -- 1975, to be precise -- Brian Baldwin and Ron Baxa co-founded Baxa. 

Brian's sons, Greg and Jeffrey, got involved in the 1990s and rose to CEO and COO of the Englewood-based manufacturer of pharmaceutical safety devices. The company grew to 500 employees and $100 million in sales by the mid-2000s. 

"At that point, I felt it was a frothy market for private equity," says Greg. He took the plunge with Goldman Sachs -- when the investment bank was "the Coca-Cola of Wall Street, an untarnished brand" --  and closed on a minority recapitalization in July 2006. 

"It was premature to sell the company," Greg says. The recapitalization "would be a way for us to grow the company from a closely held family company to a publicly traded company." 

Goldman bought five-year preferred shares of Baxa with a 10 percent interest rate that was to be paid in kind -- i.e. in the form of more preferred shares. An "eye-popping" valuation of 15X EBITDA led to "a very good liquidity event," says Greg. "The family was taken care of." 

But the deal made for major changes in Baxa's management structure, he notes. "Often in negotiations, a private-equity firm operates under 'your price and my terms' or 'our price and your terms." 

Reporting to the new board members that came with Goldman's preferred shares was a lot of work. "They're smart and they're digging into your numbers," he recalls. "I realized it was going to be an exhausting process. They had a lot of ideas in their playbook to grow the bottom line and they weren't always compatible with our culture."

When it came time for Goldman to redeem its position in 2011, Greg says he saw little choice but to sell the company. "The dream of going public took a crushing blow with the financial crisis." 

In retrospect, he likens equity deals like Baxa's to a casino's model, with the investment bank as the metaphor's casino. "Their chances of losing are pretty small." 

In 2011, Illinois-based Baxter International called up and expressed interest in buying Baxa. The company soon sold for $380 million. Greg says it was a better alternative than taking on $100 million in new debt. 

There were other ramifications. "I was sort of hoping we'd remain a distinct business unit in Baxter's business," says Greg. It didn't turn out that way. "Within a year, the senior team was pretty well gone." 

"Sometimes you hear what you want to hear," he continues. "There was a lot of things said that made me feel good, but there was nothing in writing." In the end, "It's hard to have your cake and eat it, too." 

Greg left the company soon after the sale, as did his dad and brother. "All three of us felt the same way," he says. 

Greg today is involved in several early stage companies and nonprofits and starting to do some CEO coaching. "It's been a fun part of my life after grinding at Baxa for 20 years," he says. 

"I'm an extremely lucky guy. As I like to say, I came to the attention of the owners of Baxa at an extremely young age."

Reach Greg Baldwin through CompanyWeek.