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Sykes Group Cuts Deal To Purchase GunnAllen

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By RICHARD MULLINS

The Tampa Tribune

Published: September 6, 2008

TAMPA - With deep losses and a credit crunch crippling Wall Street's biggest names in finance, now is the perfect time to buy a bank, says John H. Sykes.

At 72 years old, the founder of call center company Sykes Enterprises Inc. is taking that risk personally, as he and a group of investors cut a deal to purchase a controlling stake in the parent company of Tampa-based stock brokerage GunnAllen Financial.

Nationally known and recording about $150 million in annual revenue, GunnAllen has 750 brokers in 39 states. Recently, it has been hit with regulatory problems and suffered financial losses.

With the deal, Sykes will become the chairman of the company and pour money into new product development, marketing and sales - to move GunnAllen on par with companies such as Raymond James Financial Inc.

For Sykes, the idea of a potential deal started to come together last year. Below is a conversation with Sykes, edited for clarity and length.

When did you first look at GunnAllen with an eye at buying?

About a year ago. I had retired and sat at home for two days and my wife asked what I was doing there. I knew I was going to have to do something and get out of the house. I sat down with my legal adviser, Marty Traber, who took Sykes public, and I went through four or five things I was thinking about. Marty called me one day and said there might be an opportunity with GunnAllen.

Where and when did you first start talking with someone at GunnAllen about buying into them?
Five months ago at SideBern's in South Tampa I met with Rick Frueh, CEO of GunnAllen Financial Inc. It was more for Rick and me to feel comfortable with each other. ... How would we get along? In today's terms we kind of vetted each other. Once we philosophically and culturally felt we could come together, we decided we could do something. Then in the last 90 days, we really got serious.

How much did you invest?

We agreed not to say since it's a private company, but all the money is going into the company, not a dividend or executive departure packages.

What are your hopes for the organization?

In short term, strengthen the organization and bring in an infusion of capital. We want to diversify to a more broad line of business. At present, the great majority is in stock transactional business ... I'd love it to be close to what my friend Tom James made at Raymond James. I really admire what they've done.

What kind of customers will this bank be for?

Whether you're dealing with Merrill Lynch, Raymond James or whatever, we really want to provide those kinds of comprehensive services. This will not necessarily be restricted to people of private wealth. As we move forward, we'll be able to sell more banking products, mortgages, auto loans.

What kind of revenue is there now with GunnAllen?

Last year it did about $150 million. On a run rate for this year, perhaps $140 million, a little reduction but not as great given the market conditions.

Is it profitable?

No. They need the infusion to help out in that. It's a private company, so I'd not want to go too much into that.

Will the headquarters stay here?

Yes.

If business conditions remain as they are, will there be job cuts?

The business environment will dictate that. There's nothing on the table at the present time.

Will this new bank merge with the one you run, NorthStar?

There are no plans for that. They might end up being customers of each other, however.

Why buy now, with so many big name banks having big problems?

I feel there is an opportunity. What you try to do is get at the bottom of the trough and get an investment so you can ride it back up. We think that now is the time to do that and take a position. A lot of people in bad times, the first thing they cut is marketing and sales staff, but that's when you really need it. The idea is that while everyone else is going quiet, you can take some business.

THE DEAL

John H. Sykes and a group of unnamed investors will purchase a controlling stake in Tampa-based brokerage Gunn Allen Holdings Inc. The deal could close in 30 to 60 days.

John H. Sykes

Founder and chairman emeritus of call center company Sykes Enterprises Inc. Age, 72. Also serves as chairman of NorthStar Bank in Tampa, which focuses in part on under-served communities.

Rick Frueh

Chief executive officer of GunnAllen Financial Inc. He will remain in that role after transaction. Age, 52.

GunnAllen

Holding company: Gunn Allen Holdings Inc. Operates as GunnAllen Financial Inc., a national stock brokerage and financial services firm.

Ownership: Private.

Operations: 750 representatives in 39 states use GunnAllen name as part of their stock brokering. 300 direct employees, 260 in Tampa.

Revenue: Roughly $150 million in 2007, potentially $140 million in 2008.

Net income: Not disclosed, although Sykes says it is not profitable now.

Richard Mullins

Reporter Richard Mullins can be reached at (813) 259-7919 or rmullins@tampatrib.com.

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