May 15, 2006
Lock, stock and barrel | A well-connected hedge firm buys Bushmaster Firearms
By Chris Churchill
Cerberus Capital Management targets the business world's biggest fish. The Wall Street powerhouse has in recent years snapped up the Albertson's supermarket chain, the National and Alamo car-rental chains, and the financing arm of General Motors, among other businesses. Now, the firm has quietly added another business to its $18.5 billion rostrum: Windham-based Bushmaster Firearms.
Richard Dyke, founder of the gun manufacturer, sold his 28-year-old company in April for a sum he will not disclose. Dyke says he believes Cerberus will not move the company from Maine, and predicts new ownership will be good for Bushmaster and its 140 employees. "I thought it made sense for a 72-year-old to look after his family and not be an inhibitor to company growth," Dyke says. "Bushmaster really needed somebody with deeper pockets and more entrees into the world market than a Dick Dyke-type fellow has."
But what does Cerberus want from Bushmaster? The company, named for the mythical three-headed dog that guards the gates of hell, is much watched and admired in investment circles, having gone from a small hedge fund with assets of just $10 million in 1992, according to a recent Business Week profile, to a voracious juggernaut whose companies together employ more than 100,000. The magazine calls the Cerberus rise "mind boggling" and cites the organization's notoriously secretive nature. Cerberus did not return phone calls for this article.
Dyke and Don Hatt of Atlantic Management Co., the Portsmouth, N.H.-based company that handled the sale, both admit initial surprise that Cerberus was among the dozen or so companies that expressed serious interest in the Windham company. "Bushmaster clearly was a smaller company than they typically invest in," Hatt says. "But they saw the growth potential, and they have an interest in defense-related companies."
Cerberus is politically connected ˆ former Vice President Dan Quayle heads its international division ˆ and there's belief those connections will result in new contracts and employment growth at Bushmaster. Cerberus "is going to accelerate the growth rate," Hatt says, because it has "more money and more contacts."
Industry observer Andrew Molchan, president of the Fort Lauderdale, Fla.-based Professional Gun Retailers Association, says the acquisition of Bushmaster is intriguing, and he wonders just what Cerberus is planning. But he warns other deep-pocketed firms have entered the gun industry without significant results and suggests there is only so far Bushmaster can go with its primary product, the M16 rifle. "We're talking about a very mature product," Molchan says. "We're not talking about a cutting-edge technology product, where big money might produce a breakthrough."
Sales growth, industry scrutiny
It was not, however, as if Bushmaster was faltering on its own, says Dyke. Annual sales increased from $3 million in 1993 to $65 million in 2005, he says, growth that occurred in the face of flat overall gun sales nationally. In 2003, Bushmaster added to production and sales by acquiring a bankrupt competitor thousands of miles away, Arizona-based Professional Ordinance Inc. Bushmaster now sells 8,000 guns a month, Dyke says.
Yet Bushmaster has also experienced considerable turbulence: It fought hard, but unsuccessfully, against an assault-weapons ban enacted in 1994. Eight years later, a high-powered assault rifle made by the company was used in a series of sniper attacks around Washington, D.C. ˆ an unsettling event for the company and its workers. Some of the families of sniper victims later sued the company, forcing Bushmaster to settle the suit for $550,000 while insisting it shared no responsibility for the deaths.
Though conceding that the proper role of weapons in society is "an ongoing debate," Dyke says liability concerns played no role in his decision to sell, especially as Congress has moved to protect gun manufacturers from such suits. "God knows we had our share of scares," Dyke says. "[But] we were big enough that we could fight them whenever we had to fight them."
Dyke approached Hatt about selling Bushmaster early in 2005. By December, Hatt says, the pair had selected five finalists, and once Dyke settled on Cerberus, a deal was quickly sealed. Dyke says he expects Cerberus to push Bushmaster annual sales to $250 million, and says the company's recent signing of a five-year lease extension on its Roosevelt Trail Road property suggests it plans to stay in Maine. He likewise expects Bushmaster will continue to buy from the 34 machine shops, located mostly in Maine, that have supplied the manufacturer with parts.
For his part, Dyke says he will not withdraw from the business world. The Windham resident, who has bought 53 companies over his long career, expects to use proceeds from the Bushmaster sale to acquire struggling Maine companies. "I think I've got a few deals left in me," Dyke says.
Richard Dyke, founder of the gun manufacturer, sold his 28-year-old company in April for a sum he will not disclose. Dyke says he believes Cerberus will not move the company from Maine, and predicts new ownership will be good for Bushmaster and its 140 employees. "I thought it made sense for a 72-year-old to look after his family and not be an inhibitor to company growth," Dyke says. "Bushmaster really needed somebody with deeper pockets and more entrees into the world market than a Dick Dyke-type fellow has."
But what does Cerberus want from Bushmaster? The company, named for the mythical three-headed dog that guards the gates of hell, is much watched and admired in investment circles, having gone from a small hedge fund with assets of just $10 million in 1992, according to a recent Business Week profile, to a voracious juggernaut whose companies together employ more than 100,000. The magazine calls the Cerberus rise "mind boggling" and cites the organization's notoriously secretive nature. Cerberus did not return phone calls for this article.
Dyke and Don Hatt of Atlantic Management Co., the Portsmouth, N.H.-based company that handled the sale, both admit initial surprise that Cerberus was among the dozen or so companies that expressed serious interest in the Windham company. "Bushmaster clearly was a smaller company than they typically invest in," Hatt says. "But they saw the growth potential, and they have an interest in defense-related companies."
Cerberus is politically connected ˆ former Vice President Dan Quayle heads its international division ˆ and there's belief those connections will result in new contracts and employment growth at Bushmaster. Cerberus "is going to accelerate the growth rate," Hatt says, because it has "more money and more contacts."
Industry observer Andrew Molchan, president of the Fort Lauderdale, Fla.-based Professional Gun Retailers Association, says the acquisition of Bushmaster is intriguing, and he wonders just what Cerberus is planning. But he warns other deep-pocketed firms have entered the gun industry without significant results and suggests there is only so far Bushmaster can go with its primary product, the M16 rifle. "We're talking about a very mature product," Molchan says. "We're not talking about a cutting-edge technology product, where big money might produce a breakthrough."
Sales growth, industry scrutiny
It was not, however, as if Bushmaster was faltering on its own, says Dyke. Annual sales increased from $3 million in 1993 to $65 million in 2005, he says, growth that occurred in the face of flat overall gun sales nationally. In 2003, Bushmaster added to production and sales by acquiring a bankrupt competitor thousands of miles away, Arizona-based Professional Ordinance Inc. Bushmaster now sells 8,000 guns a month, Dyke says.
Yet Bushmaster has also experienced considerable turbulence: It fought hard, but unsuccessfully, against an assault-weapons ban enacted in 1994. Eight years later, a high-powered assault rifle made by the company was used in a series of sniper attacks around Washington, D.C. ˆ an unsettling event for the company and its workers. Some of the families of sniper victims later sued the company, forcing Bushmaster to settle the suit for $550,000 while insisting it shared no responsibility for the deaths.
Though conceding that the proper role of weapons in society is "an ongoing debate," Dyke says liability concerns played no role in his decision to sell, especially as Congress has moved to protect gun manufacturers from such suits. "God knows we had our share of scares," Dyke says. "[But] we were big enough that we could fight them whenever we had to fight them."
Dyke approached Hatt about selling Bushmaster early in 2005. By December, Hatt says, the pair had selected five finalists, and once Dyke settled on Cerberus, a deal was quickly sealed. Dyke says he expects Cerberus to push Bushmaster annual sales to $250 million, and says the company's recent signing of a five-year lease extension on its Roosevelt Trail Road property suggests it plans to stay in Maine. He likewise expects Bushmaster will continue to buy from the 34 machine shops, located mostly in Maine, that have supplied the manufacturer with parts.
For his part, Dyke says he will not withdraw from the business world. The Windham resident, who has bought 53 companies over his long career, expects to use proceeds from the Bushmaster sale to acquire struggling Maine companies. "I think I've got a few deals left in me," Dyke says.
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