Equity firm favors companies with growth potential, good management
CHAMPAIGN — Horizon Hobby announced in December it was being sold to an investor group that included Armory Capital.
But the distributor of hobby products, including radio-controlled planes, helicopters, cars and boats, wasn't the first company in which Champaign-based Armory Capital had taken an equity stake.
The private equity company had previously acquired interests in a tuxedo rental and sales business, a plastics firm, a home care company and two student-housing developments — all with ties to central Illinois.
Armory Capital, with offices on the fourth floor of the Busey Bank building in downtown Champaign, has as its managing partner Jacob Ambrose, the 32-year-old son of Horizon Hobby CEO Joe Ambrose.
Its other partners include: Greg Lykins, the chairman of Busey Bank's parent company, First Busey Corp., and Rusty Freeland, an attorney with the Meyer Capel law firm in Champaign.
Jacob Ambrose said the August C. Meyer Jr. family is a source of the company's capital, and each of the partners also share ownership in Armory Capital.
Armory Capital bills itself as a "family investment office" that, unlike many institutional equity companies, doesn't limit itself to five- or 10-year investments.
"We have the flexibility to hold long-term investments," Jacob Ambrose said.
That characteristic appeals to established family-owned companies looking to expand.
"We try to identify well-run companies with good growth opportunities and a management team that favors having longtime partners," Ambrose said.
"Our target investment size is $10 million to $30 million, but we'll look below and above that," he said.
"We're not likely to look at startups or turnarounds," he added.
In most cases, Armory buys a majority share in the company, but sometimes takes a minority position, he said.
Operating cash flow is one of the factors Armory Capital considers in determining investment targets, Ambrose said. A company with a cash flow of less than $2 million "is a little too small for us," he said.
Ambrose, who grew up in the LeRoy area, has a bachelor's degree in finance from the University of Illinois and a master's degree in business administration from the University of Chicago.
Before founding Armory Capital, he worked at Highland Capital Management as a research analyst; at the Piper Jaffray investment bank as an analyst in its middle-market mergers and acquisitions group; and at Minneapolis-based Goldner Hawn Johnson & Morrison as part of the private equity firm's investment team.
In 2009, Ambrose, Lykins and Freeland formed Armory Capital.
Its first investment was Alpha-Care Health Professionals, enabling that Champaign-based home care company to expand several times, Ambrose said.
In 2010, Armory invested in two student housing projects of Next Chapter Properties, an Austin, Texas-based company whose CEO, Rodney Poole, lives in Champaign.
The two properties are 165-unit and 108-unit developments in Mobile, Ala., and Corpus Christi, Texas, respectively, both near college campuses.
Ordinarily, Ambrose said, Armory Capital does not make real estate investments, but in this case Next Chapter's experienced management team made the investment attractive.
Next Chapter recently developed the 75 Armory student apartment building at First Street and Armory Avenue in Champaign, but Armory Capital is not an investor in that project, Ambrose said.
Armory Capital's third investment was in Imperial Plastics, a plastic components maker in Lakeville, Minn. That firm had been acquired by Norman Oberto, an entrepreneur from Decatur who was looking for further investment to support growth.
In that case, Armory Capital was a partner with Ambrose's former employer, Goldner Hawn, in a private equity fund that made the investment in 2011.
In 2012, Armory Capital invested in Jim's Formal Wear, a distributor of tuxedos and accessories based in the small town of Trenton, Ill., east of St. Louis.
The company was founded in 1964 by Jim Davis, who was succeeded by his son, Gary Davis. Now, Gary's son, Steve, is the company president.
The Davis family was looking for a partner to enable a transaction between the generations, Ambrose said. They hired someone to help them find a limited partner, and that party "reached out to us," he said.
In the Horizon Hobby transaction, completed in January, the investor group included not only Armory Capital but also Mill City Capital, a Minneapolis-based private equity firm.
Ambrose said Armory Capital is not involved in "hands-on" operations in the businesses it invests in. Sometimes, there will be weekly communications with the companies, he said, and preferably the CEOs are in contact "as events arise."
Armory is "almost always" represented on the companies' board of directors, he added.
Armory Capital draws its name from West Armory Street in Champaign, Ambrose said, even though none of Armory's partners lives on that street.
The best-known portion of Armory Street runs along the north side of the Champaign Country Club and is lined with the homes of families of some of Champaign's best-known residents — among them Jimmy John's founder Jimmy John Liautaud, developers Peter Fox and Spencer Atkins and automobile dealers David Parkhill and Kevin Sullivan.
"We liked the local connection, and the name was available," Ambrose said, adding that "Armory" also conveys stability.
What it is: "Family investment office" that makes private equity investments in companies.
Address: 100 W. University Ave., Suite 401, C.
Managing partner: 32-year-old Jacob Ambrose. He and his wife, Danielle Izard Ambrose, have three children: Theodore, 5; Joe, 2; and Julian, nearly a year old.
Other partners: Greg Lykins, chairman of First Busey Corp., and Rusty Freeland, attorney with Meyer Capel
Investments include: Alpha-Care Health Professionals, Champaign; Imperial Plastics, Lakeville, Minn.; Jim's Formal Wear, Trenton; Horizon Hobby, Champaign; and two student apartment developments managed by Next Chapter Properties, Austin, Texas.