Jeff Fox's Circumference Group Keeps Focus on Investments, Growth

by Gwen Moritz  on Monday, Mar. 11, 2013 12:00 am  

In other words, if you are looking for startup capital, don’t look to Circumference Group.

CG is looking exclusively for tech companies that have made the “uncomfortable transition” to maturity, which means they generate cash but all too frequently fall victim to “strategic drift” that takes the form of acquisitions outside of the business’ core of expertise just for the sake of revenue growth that will satisfy investors.

(If you think that sounds something like, say, Acxiom Corp. of Little Rock, please don’t mention that to Jeff Fox. “I can’t opine on Acxiom,” he says firmly.)

To Fox, it sounds almost stereotypical. “There are hundreds, thousands of companies in the same situation,” he said. And that gives CG a potential market that is plenty big enough to keep Fox’s team from straying outside its own area of expertise.

“We try to live the words we sell,” he said. “You can’t be good at everything.” In fact, he said, “The word ‘focus,’ if it wasn’t already used, it would be the name of our company.”

Case Study

It’s safe to say that Convergys was exactly the kind of company that Fox was looking for when he launched Circumference Group in January 2009, when his long tenure at Alltel ended with its sale to Verizon Wireless.

The sale of Alltel to private equity investors in 2007 had resulted in a payday of some $71 million for Fox personally, and he remained part of the management team until the Verizon deal closed. Then he, Smith and another Alltel executive, Frank O’Mara, formed Circumference Group.

(O’Mara departed shortly thereafter to run the divested Alltel assets known as Allied Wireless Communications Corp. of Little Rock for acquirer Atlantic Tele-Network Inc. of Beverly, Mass. The sale of Allied Wireless to AT&T Corp., announced in January, is expected to close in the last half of the year.)

Convergys was one of 12 companies in CG’s original portfolio, and Fox’s theory sounds like Investing 101: “We had invested in the business because we thought the company was worth more than the stock price.”

Convergys’ stock had peaked at nearly $55 a share back in 2000 but was languishing below $10 when Fox got involved. By the time he stepped away from the CEO position last fall, the share price was back up to the $15-$16 range.

But more striking than a run-up in the stock price — after all, most stocks have recovered since the trough of early 2009 — is the change in Convergys’ bottom line. The company, with revenue in the $2 billion range, lost $93 million in 2008 and $77.3 million in 2009. It even lost $53.2 million in 2010, when Fox was CEO for most of the year.



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