WATERLOO -- The empty cubicles and barren desks that take up nearly half of VGM Financial Service's office space are a common sight for a company one year removed from being bought out.
Typically those unused work spaces would be the result of the combined companies downsizing to eliminate duplication in their new organization. At VGM Financial, they are the signs of growth.
At a time when mergers often result in thousands of layoffs or integration headaches, the acquisition of VGM Financial Services by Minnesota-based TCF Financial Corp. has thus far been an ideal marriage. For VGM, it means more potential clients and more workers to handle the anticipated workload.
"When we came in, we knew we wanted their team, their assets. We wanted everything that was in place," said Craig R. Dahl, executive vice president of TCF Financial Corp. "We're hiring people in Waterloo, not downsizing."
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VGM Financial Services was one of the first divisions established within The VGM Group. Formed in 1991 as VGM Leasing, it provides equipment leasing and finance options to its members.
VGM founder Van Miller brought in Jim Phillips to run the operation. Phillips has spent his entire career in the leasing industry and had VGM as a client during his years at Lease America in Cedar Rapids.
"Starting a leasing company from scratch is a daunting challenge when you realize how much there is to do," said Phillips. "Myself and a lady I hired ran it the first year. Slowly, we put the pieces of the puzzle together."
It grew over the next decade to the point where many of its clients' needs were growing beyond VGM's lending capacity. Some were threatening to leave for larger pockets. Nothing short of a $20 million investment by Miller could have prevented that from happening. So he made the tough decision to sell one of his prized assets.
"If we hadn't sold it, it would have been downsized," he said. "We grew VGM Finance to the point where we couldn't grow anymore because of limited capital. We had certain customers that were growing and threatening to go elsewhere."
But instead of a straight buyout, VGM officials structured the deal to be more of a "marriage." The deal, consummated in March 2004 with TCF Financial of Wayzata, Minn., included a long-term lease in its current location at VGM headquarters, plus a 15-year marketing agreement with VGM.
"We wanted to structure the purchase so that it wouldn't affect the present employees," said Miller. "It actually gave them more security because now growth is not a problem, it's a benefit."
TCF had been one of five lenders that VGM Financial used to fund its leasing programs. Dahl said TCF began a business relationship with VGM with the intention of eyeing it as a buyout target.
"TCF is big, with over $12 billion in assets, but we're small compared to the world market. We needed to pick a niche market we could be competitive in, and the home medical equipment market fit that," said Dahl.
"There are only a couple assets a leasing company has: people, money and systems," said Dahl. "The systems aren't much different across the industry and the money is all the same. But the big difference is the people. We love the people at VGM. They're hard working and have formed great relationships."
Instead of cutting workers, as is the custom with many mergers, VGM Financial has actually boosted employment by seven since the deal was completed and now employs 46. Additional staff is anticipated in the near future.
"TCF went out of their way to make sure that employees knew they were important to them," said Phillips. "There have been no staff reductions. They went out of their way to cover all benefits."
The extra financial backing of TCF has allowed VGM Financial to begin leasing to the golf and club industry, also a staple of The VGM Group. The leasing division can also look to expand in the medical field beyond home equipment and is eyeing the long-term-care, dental and radiology industries.
Another plus for employees is the expanded career opportunities. Not only can VGM Financial workers still transfer to openings within the VGM Group, they now can eye opportunities within TCF, which has bank branches in six Midwest states and leasing divisions in industries covering franchise restaurants and charter bus companies.
"They have openings for salespeople around the country every day," said Phillips.
Phillips said TCF was an ideal partner because its culture is similar. Both companies are founded on Midwest values, both encourage casual dress and both reward employees for their loyalty, he said.
"There are two draws to doing a transaction like this: economics and culture. In our case, the culture was more important than the economics," said Phillips.
Perhaps the only downside, said Phillips, is the extra regulatory work that comes with being owned by a bank.
"To go from an unregulated world to a regulated world, I'd rather be an unregulated one, but there are tradeoffs you make," he said.
Joel Palmer can be reached at (319) 291-1582 or [email protected].