More Than Money: IPO Takes GE Finance Arm in a New Direction

July 31, 2014

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When the Audax Group acquired Aavid Thermaloy, a top maker of heat sinks and cooling systems for everything from PCs to EVs, in late 2012, the private equity firm used a loan from GE Capital to close the transaction. Sounds like a plain vanilla financing deal, but it did not stop there.

A year later, GE licensed to Aavid some of the most advanced heat management technology from its research labs. It could give equipment makers an edge in producing tablets and laptops that are wafer-thin, whisper quiet and drain less power from batteries. “Our relationship with clients does not revolve just around money,” says Rod Bollins managing director at GE Antares Capital. “Technology and research are part of a plan that helps our clients generate new revenue. Our lending competitors cannot bring that to the table.”

Top Image: GE Licensed to Aavid a technology called dual cool jet (DCJ). The cooling device has no moving parts and works like tiny bellows. It uses electricity to generate rapid pumping and sucking action. It was originally developed for moving air inside jet engines.

The Aavid deal illustrates GE’s strategy to build a smaller, more focused financial arm wrapped around GE’s industrial core and research. It also explains the company’s plan for a staged exit of the North American retail finance business, beginning with taking Synchrony Financial public, today. “This is a good transaction for GE shareholders,” said Jeff Immelt, GE chairman and CEO. “The IPO furthers our strategy to position GE Capital as a smaller, safer, specialty finance leader, and achieve 75 percent of our earnings from our Industrial businesses by 2016. With a strong, competitively advantaged set of Industrial businesses and a valuable, commercially-focused financial services business, we believe our portfolio will deliver valuable growth for shareholders for years to come.”

Already some 75 companies are part of the new program, which straddles GE Capital and GE Global Research. They are mid-size businesses owned by private equity clients like Audax. “It’s a great relationship builder for us,” Bollins says. “It helps our clients grow and GE gets royalties from markets where we don’t normally sell.”