Advertisement
  1. Archive

Buyout doesn't mean Bay4 will pack up

The blinking computer servers stacked in a corner of the Tucker Mansion here track millions of pieces of leased IT equipment nationwide.

The mansion, across from the Safety Harbor Spa, is headquarters of Bay4 Capital LLC. Once a local success story, the information technology leasing company was acquired in October by giant General Electric's Commercial Finance unit. The deal's price was not disclosed.

But unlike many big corporate buyouts that spell doom for local operators, the acquisition of Bay4 is expected to expand rather than erase the company's presence in Safety Harbor.

Clay Biddinger, the entrepreneur who co-founded Bay4 in the late 1990s, has become GE's president of technology finance.

The mammoth conglomerate, whose US Equipment Financing division is based in Stamford, Conn., also has retained all of Bay4's nearly 50 employees, including 25 in Safety Harbor. That number is expected to grow.

Leasing everything from disc drives to servers to phone systems makes sense to businesses for many of the same reasons that leasing a car appeals to some consumers: Rather than requiring a big upfront investment, a lease offers a predictable monthly expense. If the company wants to upgrade equipment in the middle of the lease, there's no penalty. Once the lease ends, the equipment is simply turned in.

Biddinger, who graduated from Rollins College in Winter Park in 1977, started working in computer leasing in the late 1970s with Equitable Life Insurance. Though he has seen the technology change dramatically _ with computers getting smaller, faster, more intelligent and less expensive _ the perks of leasing have remained the same.

"Companies like the freedom of keeping their bank lines open," he said. "And you have the flexibility of upgrading or changing equipment if you need to."

About 40 percent of all corporate IT equipment sales are handled through lease arrangements today, Biddinger said, with the rest financed through bank loans or purchased with cash. It is a market where Bay4 carved a niche as an alternative to more traditional lessors such as equipment manufacturers or major banks and insurance companies. Biddinger said Bay4 distinguished itself by being "equipment agnostic," neither preferring nor recommending any particular brand of technology.

"We want whatever type of equipment is best for the company," said Biddinger, who said companies that lease equipment through a manufacturer are stuck if they decide to switch technologies in the middle of the lease. "We're specifically not technology-bound."

Bay4 is Biddinger's second successful IT leasing endeavor. He started the first, Sun Financial Group, in 1981 and sold it in 1995 to GATX Corp. for $30-million. Biddinger continued with the company for about three years before striking out on his own again. In mid 1998, he formed CMB Capital, leasing IT equipment to dot-coms that had landed venture investments.

"It was a way to be conservative even in that world," said Biddinger, who counted Tampa telecom Z-tel Communications Inc. among his accounts. "Today it would be termed very aggressive."

When the dot-com bubble burst in March 2001, Biddinger took over a troubled IT leasing company in Colorado. But it was slow going at first.

"After Sept. 11 (2001), everyone took a breather," he said. "We knew business would start again. The real question was when."

Biddinger said he and his three partners kept hammering away at deals, working through banks rather than using a direct sales force.

"We identified banks that didn't have leasing expertise; they'd introduce us to their customers, and we'd write the leases," Biddinger said. "We'd take the risk."

By the end of 2002, with a change in the tax laws, corporate IT purchases began to pick up. (CMB also changed its name that year to Bay4 Capital, in honor of its four founding partners.) Biddinger, who declined to reveal Bay4's revenues, said business has been progressively improving and consistently profitable.

Bay4's portfolio got a major boost in 2003 when it bought the IT leasing business of bankrupt Comdisco Holding Co. for $19.6-million in cash and assumption of $24.5-million in debt.

"We got 10,000 master leases with companies that are in the Who's Who of American and Canadian business," Biddinger said. A master lease establishes basic terms of the agreement under which numerous equipment purchases can be made. "It gives us millions of assets," he said.

Biddinger thinks the Comdisco acquisition made his company particularly appealing to GE's US Equipment Financing division. Though GE has been in the technology leasing business, that has been a minuscule portion of its $27-billion lease portfolio, which is concentrated in hard assets such as planes, trucks and heavy machinery.

"This is a piece of the business GE wanted to enter," said Biddinger, who described IT leasing as a $30-billion market. "So they called us about four months ago, we had lunch with them up in Connecticut and here we are."

Despite his history of independent entrepreneurship, Biddinger said he had few qualms about signing up with giant GE.

"Though Bay4 was well-established, we spent a lot of time explaining who we were," he said. "It's not the same as being one of the largest companies in the world."

In the weeks before Christmas, Biddinger was jetting around to GE's leasing offices nationwide, meeting employees and potential customers. But his base will remain in Safety Harbor, and he expects the local office to grow.

Staffers already have crammed the historic Tucker Mansion to capacity, with cubicles packed into the third-story attic and desks in the parlor. Expansion on an adjacent parcel is possible, said Biddinger, who heads the group that owns the 81-year-old building.

"We're definitely going to add people," he said. "And we're definitely going to stay in the area."

Kris Hundley can be reached at (727) 892-2996 or hundleysptimes.com.

YOU MIGHT ALSO LIKE

Advertisement
Advertisement