"When you reach the scale of more than 600 employees, there will always be someone who's unhappy," says Focus CEO Rudy Adolf. "We're dealing with them through the appropriate channels."
Also in mid-November, Focus announced a capital infusion of $15 million from its original backer, Summit Partners, and $35 million from Polaris Venture Partners. At the same time, Focus extended its credit facility by $30 million.
Adolf says that Focus' recent capital infusion--which he says was approved by nearly 97% of its partners and which will help the firm make more acquisitions in coming months--and the recent addition of Joel Isaacson & Co. points to the success of the company's business model.
But there's concern in some circles that this new infusion of capital, called a "cramdown" in Wall Street parlance, could dilute Focus' original partners. That increase in the number of shares outstanding, combined with the changes in market conditions produced by the financial crisis, could possibly lower the value of each individual Focus share.
And with Focus now embarking on what could be another acquisition spree, some original partners may start to fear they are likely to suffer dramatic dilution. And there are concerns, as yet unconfirmed, that senior Focus management, Summit and Polaris will be not subject to the same level of dilution as the advisors who sold their firms to Focus before the recent recapitalization.
Adolf counters that's not the case. "To the best of our ability, whenever we do transactions we structure them in a way that's accretive to all shareholders," he says. "Ultimately, all of the value that's been created is through all of the transactions we've been doing."
How the dilution factor plays out remains to be seen. "If the money isn't used for good, productive purposes, it will be dilutive," says Bob Kresek, managing partner at Founders Financial Network in Cupertino, Calif., one of the four original firms that joined Focus in 2006. "But if it's used for good, productive purposes--just like any other company investing its assets--it ought to accrue to all other shareholders in a very positive sense."