BACKGROUNDER

Allegiance Capital Brings Wall Street Expertise
To Middle-Market Investment Banking

As today’s corporate mega-mergers steal the spotlight with each deal seemingly bigger than the next, mid-sized companies – firms with revenues between $20 million and $100 million – are finding it harder and harder to attract Wall Street’s investment bankers.
 
But according to David J. Mahmood and David M. Lonsdale, owners of Allegiance Capital Corporation, Wall Street’s love affair with billion-dollar deals isn’t creating a problem for mid-sized companies.  Instead, the trend on Wall Street is fueling the growth of investment banking firms outside the hallowed halls of Manhattan – firms specifically dedicated to the needs of mid-sized companies.
 
Based in Dallas, Allegiance Capital Corporation is a prime example.  “Allegiance brings the sophistication and expertise of Wall Street investment banking to the middle-market segment,” say Mahmood and Lonsdale.
 
“Our mission is to help our owner-clients receive a premium value for their assets, whether it’s through a sale, financing or strategic partnering, and in order to do so, an MBA by itself simply isn’t enough; you absolutely must understand the nuts and bolts of the business itself, and what motivates and drives the owners of closely held and privately held companies.”

Mahmood should know.  Deal structuring has always been his forte, even when, as he puts it, “I had all my hair.”  In his early twenties, he was already working in a corporate environment where he was given an operating division to shut down. 

Rather than closing the business, however, he formed the Hoyle Playing Card Company.  Hoyle grew to become one of the major names in the playing card industry, selling cards to most of the major casinos in Las Vegas. 

But Mahmood’s entrepreneurial drive didn’t stop with Hoyle.  With more than 35 years of experience under his belt today, he has worked for Fortune 500 companies and several start-ups along the way. 
 
Such diverse experience helped form his philosophy as a “hands-on” investment banker.  Said Mahmood: “Until you know what it’s like to meet a payroll, you have no idea what it’s really like to run a business.”
 
As an investment banker for the last 20 years, Mahmood has brought his experience to hundreds of complex, multi-million dollar transactions.  At Allegiance, he requires hands-on experience from his associates as well.
 
Lonsdale, President and Managing Director, has built successful companies in Europe and the U.S.  His early career consisted of leadership positions in McDonnell Douglas where he orchestrated their European information technology strategy and managed the applications division of Tymnet, and Dun & Bradstreet where he managed A.C. Nielsen’s software and systems company.  After McDonnell Douglas, Lonsdale ran companies that developed hardware and operating system technology for pen-tablet computing, Internet security for B2B e-commerce, and fault-tolerant computing platforms for the telecommunications industry.  Lonsdale successfully sold these companies to corporations that included Microsoft and Sun Microsystems. 

The combination of David Mahmood and David Lonsdale at Allegiance Capital brings a wide variety of business and industry experience that they use to help their clients bring transactions to a successful conclusion.

Many of Allegiance’s senior partners have owned and managed their own businesses and have held credentials as CEOs, CFOs, presidents and treasurers of large and mid-sized companies.  Mahmood believes such experience is essential to understanding the financial markets and how to engineer financial transactions.

Most importantly, Mahmood contends that practical experience leads to a better understanding of the psychological needs and impediments that actually govern a company.  “People run businesses,” Mahmood says, “so unless you can understand their motives and what drives them personally, you simply can’t close a transaction to everyone’s best benefit.”

And closing transactions is what Allegiance is all about.  “As investment bankers, we’re paid for results, not activity.  So the bottom line is that our own bottom line goes nowhere unless we get results.  You really can’t ask for a better motivation than ‘no results, no pay’ to close a deal.”

Sometimes, however, closing a deal requires innovative thinking and a willingness to try non-traditional approaches.  This is where a team of executives who bring real-world industry knowledge come in hand.  Through outstanding networks, industry connections and a solid business reputation, Allegiance is able to open doors – and opportunities – that might not be available through other channels.

And international transactions are as frequent as domestic deals for Lonsdale’s team. Allegiance Capital can help engineer cross-border business ventures, mergers, strategic partnerships or alliances, with particular emphasis in Canada, Mexico and South America.

According to Lonsdale, the company’s contacts comprise a global database with thousands of potential buyers, sellers and funding sources.  Through its worldwide network, Allegiance can assist in every aspect of financing, from debt settlement or restructuring, to mezzanine financing, to receivable and inventory funding, to purchase order financing, to buyout management.

“The needs of mid-sized firms can differ substantially from those of multinational corporations,” Lonsdale points out.  “Traditionally, family members and the core management team play a more pivotal role in the decisions of mid-sized business than what you’ll typically find with Fortune 1000-sized companies.  Other types of personal considerations – such as how a sale or merger might impact employees who’ve been friends of the owners for years – are also critically important.

“That’s why to be of real value, investment bankers who wish to serve the middle-market segment must understand the needs of the people behind the numbers. And at Allegiance, we’ve put together a team with the experience and expertise necessary to serve mid-sized companies as efficiently as we do effectively.”