Tools & Resources For Financial Executives

Tools & Resources For Financial Executives: "Sector-bender

More and more nonprofits have for-profit subsidiaries. Now one CFO wants to turn that model upside down.

Tim Reason, CFO Magazine
August 01, 2004

It's a question many successful private companies face: how to finance the next stage of growth. Initial public offering? More private equity? John W. Gillespie, CFO of The Mentor Network, a residential-care provider, has another idea: find a large nonprofit foundation with a similar mission to buy the company.
The idea, he admits, is highly speculative. Outside of the hospital industry, it's rare for a for-profit company to peddle itself to nonprofits as an acquisition target. Even if it were common, few foundations are large enough to absorb a company the size of Boston-based The Mentor Network, which has grown to more than half a billion dollars in annual revenues.
And that's not to mention the regulatory and tax changes that might be necessary for a deal of such scale. 'I'd put the chances of it happening in the low single digits,' says Gillespie. 'But it's worth exploring.' For one thing, Gillespie, a former investment banker, is less than sanguine about the prospect of going public in the era of the Sarbanes-Oxley Act. And while he's pleased with his company's private-equity owner, Chicago-based Madison Dearborn Partners, he can envision a day when The Mentor Network will outgrow the private-equity market."