Computers to concrete
Heisley didn’t start out his career as an turnaround specialist. After graduating from Georgetown University in 1960, the Alexandria, Va. native spent 13 years in the computer business, first with IBM, then RCA, and finally at Sperry Univac, where he rose to executive vice president.
"When I started back in 1960, some people were predicting that a few hundred computers would do all the data processing for the whole industry," Heisley says. "There were less than 100 computers installed at that time."
By 1973, Heisley tired of the big corporate environment and accepted a position as president of a financially struggling manufacturing firm in Pennsylvania. After turning that company around, he learned of another distressed manufacturer, Diversified Products Groups of Conco Inc., in Mendota, about 55 miles south of Rockford.
Intrigued by the opportunity to revitalize another company, Heisley took the $150,000 equity he had in his home and borrowed more than $10 million from banks to purchase the manufacturer — which hadn’t made a dime in eight years.
"The company had really lost its way," he says. "It had been around since the early 1900s and had built up a lot of baggage over time. They needed someone to come in and straighten out the product offerings, get rid of a lot of bad business practices."
In the first six months, Heisley sold four of the manufacturer’s six divisions and eliminated $6 million of inventory. The remaining divisions, Spartan Tool Co. and Field Controls Co., became the first companies under Heico when it was created in 1979. Those businesses are still part of Heico today.
From the money generated in the first turnaround, Heisley set out to acquire more companies, but he found the only ones he could afford were distressed businesses, in or near bankruptcy.
"I never had the financial contacts in the early days, when people were doing mezzanine financing with junk bonds," Heisley says. "This wasn’t a grand strategy. It was just my target of opportunity."
Heisley never heard of business acquisition practices, which were coming into vogue in the early 1980s, like issuing high-yield bonds to finance leveraged buyouts. The practice, popularized by financier Michael Milken, who later served two years in prison for securities fraud, is blamed for causing the savings and loan scandal of the 1980s.
Although he never used them, Heisley believes that using junk bonds to acquire small to mid-sized companies prevented the collapse of many companies.
"Because of junk bonds, companies exploded because they had access to the financial markets," he says. "(The markets) were denied to any company other than one of great size because the only way you could get any financing would be if you were an investment-grade company. I don’t think that’s truly appreciated."
