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Entrepreneurs Restart Their Sold Start-Ups

Mergers: After seeing their operations go bad, some businesspeople are buying them back.


WINDSOR, Conn. — Dr. Jeffrey Berkman's profits grew after he sold Industrial Health Care, an occupational health-care business, to a publicly traded management company.

Berkman became a national medical director for the new owner, NovaCare Inc. But his travel schedule put a strain on his family life, and profit pressures led to reduced perks for employees at IHC and some of the workers quit. Berkman began losing faith in big business.

"I found myself . . . a figure on an organizational chart," he said. "It was a hard pill to swallow."

When NovaCare, whose stock plummeted from nearly $18 a share in late 1997 to pennies last year, was bought out by another company with no interest in occupational health, Berkman decided to buy back IHC's Connecticut clinics.

He is among a small number of entrepreneurs over the years who have bucked the bigger-is-better consolidation trend.

N.C. Fabric Maker Thrives After Buyback

Chuck Flynt founded Flynt Fabrics Inc., a small fabric manufacturer based in Greensboro, N.C., in 1972. Ten years later, the 15-employee operation was losing money, so Flynt sold out to Ti-Caro Inc., which had three factories and yearly sales exceeding $35 million. Flynt became a division president, running four companies, including the one he started.

In 1985, Flynt bought his company back.

"I wanted to run the business myself," he said. "It was just a matter of control and where you want to go. [A business] becomes a very personal venture."

The company Flynt bought back had two factories and annual sales of about $15 million. Today, Flynt Fabrics has six plants and some 600 workers.

Statistics on business buybacks are hard to find, though Gene Fairbrother, small business consultant at the National Assn. of Self Employees in Washington, says they are not common.

"Our members frequently call saying, 'I want to sell my business,' " and ask how to establish a price," he said. "I never had the question posed to me: 'Gee, I had my company bought out and I want to buy it back.' "

Larry Kesslin, president of New York-based Let's Talk Business Network, an entrepreneurial support service, said buybacks are typically by someone who doesn't want their business messed up.

"Entrepreneurs start businesses for one of two reasons--either they love what they're doing or are doing it to make money," said Kesslin. "It's those who love their business that may buy it back."

Jack Rennie, chairman of Washington-based Research Institute for Small and Emerging Businesses, says buybacks are most common when the acquiring firm is failing and the founder can buy it back for less.

"If they're younger they can kind of say, 'I think I made a mistake,' " he said. "It may not have been a mistake in the first place, but they take a step back and realize they're not happy now."

Berkman, 45, became an orthopedic surgeon to combine his love of sports with medicine. He also had the entrepreneur's spirit. In 1991, he opened Connecticut's first facility dedicated solely to workers' compensation cases.

"I had talked to injured workers, insurance companies, other doctors, chiropractors, everyone," he said. "I came up with the idea of a one-stop shop for treatment and prevention."

Berkman sold IHC to NovaCare--a $3 billion company in 1996--for $8 million. NovaCare said it had plans to use his clinics as a model for others across the country.

NovaCare was bought in 1999 by another company that told Berkman they weren't interested in occupational health, so last June he regained ownership.

"I bought back what I sold for less than I sold it for," he said. "It was one of those deals where if you look at the numbers I made out, but if you look at the personal toll, it was a draw."

Three of the dozen or so employees who quit after the sale to NovaCare have returned to work for Berkman, and IHC has won several sizable contracts.

"Today, I wake up excited about all my opportunities," Berkman said. "I'm much, much happier."

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