Shifting to the Direct Channel: Drury Leads MB Equipment Finance into the Middle Market
by Rita Garwood Monitor 100 2015
As he takes the reins from industry legend Ed Dahlka, newly appointed president of MB Equipment Finance David M. Drury discusses his vision for the company formerly known as Cole Taylor Equipment Finance. He looks back on the 12 years he spent with GE Capital and envisions what the future may hold for the industry when the “800 pound gorilla” is gone for good.
David Drury is thrilled. His office is buzzing with the activity of a rebrand: new signs are going up and he is excited to be representing the industry under the newly named MB Equipment Finance. Two years ago, Drury left a perfectly good job at the biggest finance company in the world to work at a start-up, Cole Taylor Equipment Finance. Today he is stepping into the big shoes of industry icon, Ed Dahlka, who recently retired as the company’s president.
MB Equipment Finance has come a long way since Dahlka founded the subsidiary in 2012. This year, on the power of a nearly 40% year-over-year increase in net investment, the company has risen 13 spots to be ranked #72 in the Monitor 100. “My goal is to continue to build upon the foundation Ed started and to position our organization as a national force in the industry,” Drury says. “I’ve always held the belief that I work for the individuals employed by the company. My role is to shape the vision and provide the tools and framework necessary to facilitate the team’s ability to achieve our goals. As a small company, no one here is just a manager; we all roll up our sleeves to get the job done for our customers. That’s my style and I think everyone here is excited about it.”
Gaining Mastery Amid Mergers
Like many others in the industry, Drury didn’t go to college planning on a career in equipment finance. “I think most of us fell into this business,” he says with a laugh. “My first job out of college was with a small community bank in Pittsburgh where the loan officer training program involved rotation through all sorts of ‘glamorous’ positions — working behind the teller line, opening new accounts, processing and approving car loans and mortgage applications. I even had to repossess a car at one point!”
Drury continued to hone his trade in his next position with a leasing company that eventually became Banc of America Leasing through a series of mergers. “I worked for and with so many smart people during that time period and I held a number of positions, ranging from credit analyst to operations manager and, ultimately, to sales professional,” he explains. “Many people from that organization have very senior positions throughout the industry today.”
After a Nations Bank/Bank of America merger resulted in a change to Drury’s role, he decided to join Mellon U.S. Leasing which was acquired by GE Capital after two years. “GE ultimately positioned me well for my current role,” he says. “I had an opportunity to lead sales teams, as well as the company’s intermediary funding business unit. GE does such a nice job developing talent. I really can’t say enough about how much I learned in the various roles and the leadership development programs,” he says, recalling a management development course that included a public speaking program where he had to stand before a room of 50+ people who critiqued every stutter of the tongue or flail of the hand. “We will miss this type of institutional personnel development in the industry over the long haul,” he adds.
After 12 years, Drury made the tough decision to leave GE. “The opportunity to work for an industry icon like Ed Dahlka was too good to pass up,” he recalls. “The plan was to be Ed’s #2. I’m not sure even Ed really knew at that time how long he would work. Ed was the primary reason I left GE and the opportunity to succeed an industry icon like him is really an honor.”
Aligning with MB Financial Bank
The vision of MB Equipment Finance is aligned with that of the parent bank, MB Financial Bank, which seeks to be the pre-eminent middle market bank in the markets it serves. With offices in six states, MB Equipment Finance has a national footprint, having financed and leased equipment assets in 48 states. “At the end of the day, the bank’s strategy of focusing on middle market clients on a direct basis exactly aligns with our strategy,” Drury says. “The long-term plan is to accelerate growth and become a significant profit contributor to the bank. We want to hold up our share of the bargain.”
Drury continues by explaining that rebranding of his business unit to MB Equipment Finance simply aligns the name with MB Financial Bank and does not indicate other changes in the structure of MB Financial Bank’s family of leasing businesses. Along with Celtic Commercial Finance, LaSalle Solutions and MB’s Lessor Finance division, MB is able to provide the market with comprehensive equipment finance and leasing services. “The rebrand just made sense,” he says. “MB Equipment Finance is a bank leasing company. I expect the bank will continually evaluate opportunities to leverage best practices among all the MB leasing businesses, but no significant, impending changes are currently contemplated to the businesses themselves.”
Blossoming Direct Channel
In the past, MB Equipment Finance was largely focused on building a portfolio through its buy desk, which represented 94% of total 2013 volume. However, a 389% increase in company’s 2014 direct origination sources indicates that efforts are now being concentrated toward direct channel growth. “When you start a company de novo you have no assets so the quickest way to build assets is to buy them,” Drury explains. “For the first two years in business, as we were building out our direct sales team; this was the quickest way to basically pay the electric bill.” Coming off the finalization of the company’s three-year strategic plan, Drury says the primary focus will be continued emphasize of the direct channel in 2015 and beyond. “We’d really like the direct channel to represent 70%+ of our new business volume on a going-forward basis and it’s an exciting time for us,” he says. “We’ve planted a lot of seeds and we’re starting to see those seeds start to sprout, grow and blossom. It really inspires me to see our hard work paying off and the team starting to have some real success.”
Despite the shift toward direct originations, the buy desk will not be forgotten. “I’ve spent a fair amount of my career in this channel and I remain committed to the strategic importance of building and growing reciprocal capital markets relationships, and this will be our approach,” Drury says. “We’ll continue to buy assets; but, we’ll do it strategically and work with those who are syndication partners for us as well.”
Much of 2014 was spent trying to build a sales team, and Drury says this will continue. “We’ve done a great job recruiting top talent that have been frustrated by our larger peers in the industry,” he says, explaining that smaller territories and verticals force sales teams to occasionally abandon long-term relationships to others while also having to become increasingly involved with administrative responsibilities. “All of this really impacts a successful salesperson’s ability to effectively manage the client relationship and sometimes it creates bureaucracy that bogs down the deal process,” he says. “We take a throw-back approach as a generalist; offering our sales teams large territories, no verticals and a packager model that permits sales teams to do what they enjoy most, and that’s hunt, develop relationships and sell. In general, our sales team is targeting public and private companies with revenues between $50 million and $2 billion, but our sweet-spot is somewhere in the $75 million to $500 million revenue range,” Drury says.
While Drury describes the competitive environment as “brutal,” he says MB Equipment Finance is still able to stand out. “We can do all the things that a big financial institution can do without the functional dysfunction so common in larger, more bureaucratic organizations,” he explains. “The people here have all worked for the largest financial institutions in the country, so from that standpoint we have the same level of expertise, but we’re a small group that can make quick decisions and our customer service is top-notch. We pride ourselves on the ability to often fund transactions the same day the customer requests us to. Many big institutions can’t be responsive as quickly as we can be.”
Envisioning the Industry’s Future
Drury says he is cautiously optimistic about the economy this year. “We had pretty slow GDP growth in the first few months of the year,” explains. “If it bounces back I hope to see more capex spending help create more finance and leasing opportunities.” Like many Monitor 100 participants this year, Drury is wary of continued margin pressure. “There remains a seemingly endless supply of capital chasing the opportunities that are out there,” he says. “Margin compression has really made us smarter about the types of transactions and the customer profile we pursue.
When he envisions the industry without his former employer, GE Capital, Drury sees both possibilities and a void in the market. “I never thought I’d see the day when GE would exit the market entirely and remain only with its captive operations,” he says. “There are a ton of really good people and businesses there and I expect some of that will create new entrants in the market and perhaps even expand the size of some of the current participants in the market. It might also create a reduction in some of the capital market purchasing activity that’s out there just because they’re such a big syndicator of assets. I suspect that anyone who’s going to buy parts of the business will likely desire to hold a fair amount of what they do. It may also create somewhat of a finance company void in the market because GE did so many acquisitions of its competition in the ‘finco’ space over the last 10-15 years and the customers who need reliable financing in that market may be more challenged to find suitable options. That being said, our industry is opportunistic, and I’m confident both MB Equipment Finance and our competition will find ways to serve many of those markets.”