EMG: From Dallas to China

Last Friday was the first time I ever spoke to Ed Ewing, chief executive of Dallas-based turnaround firm Ewing Management Group. I also got the sense that it might be the last. Not a big fan of the press, to be certain, particularly when it comes to matters that Ed doesn’t think concern them (me). Namely, the operational doings of private equity firms.

As he put it: “I hope to someday have enough free time to care about when private investors open offices, close offices or lay people off. It would be a much more relaxing way to make a living.”

Why the pique? Probably because of a Dow Jones piece written early last month, which said that investors were grumbling over EMG’s inability to close a single deal since closing a $1 billion fund in late 2004. The article blamed Ewing himself, for reportedly insisting that all EMG transactions be certifiable homeruns. No singles, doubles or triples need apply. It also said that EMG was closing its New York office, with employees offered the opportunity to relocate to Dallas. EMG also has an office in Shanghai.

I had called Ewing because of rumors I’d heard that Dallas was also on the chopping block. He emphatically denied the charge – “I own the building” — but did imply that layoffs have occurred.

Why lay people off in Texas after closing New York? The reason seems to be that Ewing has become enamored of China, where EMG recently bought two separate companies. He declined to say if the China transactions came from the $1 billion fund, or a separate vehicle (which means the original Dow Jones story may, or may not, have been accurate).

Ewing explained that deals in China make more fiscal sense to him than do ones in North America. “I sincerely admire people who pay 12x cash flow and lever 5, 6, or 7 times,” he said. “I strongly hope they can make money that way, but I just don’t have those skills.”

He did not specifically cite Dow Jones’ doubles vs. homerun issue – but did acknowledge that he’s willing to go “nine years” before his next deal, if that’s what it takes. “I’m the largest single investor… Would you invest a certain amount of your own money because of the calendar, even if you didn’t think it was a great opportunity? Me neither.”