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Turben began in the days when business relationships truly meant ties that endure good times and bad. Turben worked with local banks during his years atPrescott, Ball & Turben Inc. , a Cleveland investment banking boutique that his father, Claude Turben, co-founded in the '20s. After a brief stretch in private equity in New York, Turben returned to Cleveland and started Chagrin Valley Co. Ltd., Kirtland's predecessor firm, in 1977. By the time the Kirtland name was adopted in the '80s, Turben was at the center of a small but thriving LBO ecosystem, making control investments in the region's middle-market manufacturing and services companies. That ecosystem is alive and well in Cleveland, where at least a dozen midmarket PE firms, both old-timers and the not-so-old, have set down roots. Turben's contemporaries include fellow Ohio natives David Morgenthaler, Loyal Wilson and Frank Linsalata. Morgenthaler, whose grandfather was a wealthy Cincinnati banker, founded his namesake firm in 1968. Wilson, a former First Chicago Corp. private equity executive, formedPrimus Capital Funds in 1983. Linsalata, who grew up in Akron, Ohio, and went to Case Western Reserve University in Cleveland, was at Cleveland corporation Midland-Ross Co. for 19 years before setting upLinsalata Capital Partners in 1984. Their community is more collegial than most. "We sometimes send leads each other's way, and some management teams might say they'd prefer to deal with people in the Midwest," says Kirtland senior managing partner and CEO John Nester. Unlike Cleveland buyout shops with national reach, Kirtland, based in suburban Beachwood, remains largely regional, investing in companies based in the Midwest. It has also kept its focus on the lower midmarket, in contrast to others that have changed profiles as they expanded. Kirtland's last two funds were $205 million and $165 million, respectively. The firm, which manages $325 million, not including capital from CEOs and individual limited partners, usually puts in between $15 million and $25 million of equity. In the early days, Turben managed small pools and raised more capital on an as-needed basis. Kirtland's first institutional fund closed on $28 million in 1993. It operated with three partners until 1995. He recruited Nestor, a former Continental Illinois executive, in 1986. Two years later,Ernst & Young executive Michael DeGrandis, now managing partner and CFO, joined them. Lacking adequate operating acumen at the outset, Kirtland preferred to partner with management, offering them attractive incentives. This approach would become a hallmark of the firm's strategy. Successful CEOs typically end up either as investors in Kirtland's funds or as advisers on deals. "Long after we've sold our investments in companies, the CEOs, current and former, participate in our funds," managing partner Tom Littman says. Nestor adds, "They like our style, they like what we do and want to continue working with us. If they're on the board, we give them the opportunity to co-invest." That symbiotic relationship with management, which extends to its lenders as well, appears to have benefited its overall returns. While it's had its share of duds, the firm boasts a gross compounded internal rate of return of 41%. One of Kirtland's first major investments was in a company called North American Refractories Co., which it bought in 1985 from Allied Signal Inc. -- nowHoneywell International Inc. -- for $65 million. As the divestiture was being planned, with First Boston as adviser, Ed Wright, the CEO of the group, found himself in an awkward position. He had been warned explicitly against participating in any management buyout because it was distracting, but, quietly, he and his team decided to push ahead. Wright sought someone who could assemble a deal discreetly without management getting word. His National City Bank private bank contact referred him to Turben. "I met Jack Turben on that basis as someone I could trust," says Wright, who admits to checking up on Turben and found "his reputation as being fair and honest." Wright's group prevailed against competition that included West German engineering groupDidier-Werke AG . His team invested 50-50 alongside Turben. "Jack didn't know anything about the refractories industry, and I didn't know anything about buying businesses, so we made a good pair," Wright jokes. The company, one of the largest suppliers of refractory products for the iron and steel industries, with at one point more than 85% of the U.S. market, tapped global partnerships and licensing agreements to boost growth. Turben's contacts at financial institutions in Europe also helped support its financing needs when U.S. banks got wary of the steel industry's ups and downs. Revenue and Ebitda improved substantially. "It was a tremendous return for us, including all the managers and employees who had hocked their homes to participate in the buyout," says Wright, who stayed with the company for five more years after its sale to Didier-Werke in 1989. Kirtland made 5 times its money. Kirtland would burnish its collaborative record with partnerships. Out of its second, $105 million fund raised in 1998, it invested inFairmount Minerals Ltd. , a Chardon, Ohio, producer of industrial sand established in 1986. The family of then chairman and CEO William Conway controlled the company, along with other senior executives and employees. Conway and Turben knew each other from University School in Cleveland and later at Yale University, though they were not close friends. Conway fielded buyout offers and expected to be acquired by a strategic buyer. But he was convinced by the combination of price -- $140 million -- and Kirtland's willingness to just take 51% ownership of the company, rare in buyout circles. "We had a lot of mutual friends who were telling me, 'This is a logical fit for you,'" recalls Conway. His family ultimately took 25% equity, with other employees picking up 24%. Kirtland strengthened the company's financials and bank ties, he says, allowing the company to undertake some "fairly significant" recapitalizations. The company made a major bolt-on acquisition and, on Kirtland's advice, divested three underperforming subsidiaries to concentrate on its core business. In 2004, Kirtland sold the company back to management and made 4 times its $23 million cost. Both Wright and Conway are among the 10 or 11 CEO LPs in Kirtland funds. Wright became involved with Stonebridge Industries Inc. in 1999, part of Kirtland's attempt at turning around Tier 1 automotive parts companies, which didn't meet the firm's expectations. "Buying underperforming companies and turning them around was a strategy I was uncomfortable with," says Wright, now CEO of Chicago-basedEssex Crane Rental Corp., owner of the largest fleet of lattice-boom crawler cranes and attachments in the U.S. Special purpose acquisition company Hyde Park Acquisition Corp. is purchasing Essex Crane for $210 million, potentially yielding a respectable gain. The SPAC's shareholders have yet to approve the deal. Kirtland, which celebrated its 30th anniversary last year at the city's Rock and Roll Hall of Fame, has evolved into a 13-strong outfit, with an operating resource group led by Bob Fines, an 18-year veteran ofGeneral Electric Co. Yet, for all the growth, there has been little style drift, says Ed Pentecost, a managing director at National City Equity Partners, the bank's buyout arm and Kirtland LP. "They've been great partners to managements and banks, and it's served them well." "We've had long-term relationships with senior and subdebt lenders, and that's been a real strength," adds Turben, now in his 70s and still active as the firm's senior managing partner and chairman. "There've been times when others couldn't get deals done, but we've been able to." Still, Turben's principals remain cautious about a downturn. "We
need to have a plan in place and be alert," says Nestor. "Our
philosophy is: 'Hope is not a strategy.' " -- Vyvyan Tenorio
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Private equity has long been a force in Cleveland. Part of the credit must go to John "Jack" Turben, founder of Kirtland Capital Partners and something of a leveraged buyouts pioneer in Ohio. 
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