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Montana silversmiths: … hits the mother lode
Montana Silversmiths President and Chief Executive Dennis Potzman is happy about the recent sale of the company, which makes and distributes Western belt buckles and jewelry in Columbus. An investment company based in St. Louis, Mo., bought Montana Silversmiths’ stock last month, but promised to be a hands-off owner. The company is branching out into home decor products like the sculpture of a golfing cowboy. Working under a trophy elk mount, engraver Kendall Smith puts the finishing touches on a buckle.

Over the last 15 months, Montana Silversmiths President and Chief Executive Dennis Potzman heard all the wild rumors about who was buying the company, but he couldn't say anything.

"We've been rumored to be bought and sold by the Russians that bought the mine to the Justin Boot company to Goldman Sachs that did the Montana Power deal," Potzman laughed. "I've heard everything."

On Oct. 22, the majority of the company's stock was bought by Thompson Street Capital Partners, a private equity company in St. Louis, Mo.

It's the second time the Western jewelry and accessories business, which started in Columbus 31 years ago, has changed hands.

The 1-1/2 year process of looking for a business partner was "pretty grueling," Potzman said.

The company came on the market when Arena Brands Inc., (formerly Hat Brands Inc.) wanted to sell. The Dallas-based company bought Montana Silversmiths in 1994.

Potzman hired investment bankers out of Richmond, Va., who started brokering the company.

"We had quite a few offers," he said. When Thompson Street came along, it was the right mix.

"In this case, it worked out fabulously," Potzman said. "They happened to be the company we wanted to work with from Day 1."

Hands-off owners?

Potzman's plops down his 6-foot-3-inch frame into an easy chair in his office overlooking a cottonwood-rimmed eddy of the Yellowstone River.

"Everybody accuses me of just staring out the window, which I do," Potzman said, "but I'm thinking as I stare."

Deer often dot the meadow. Two bull moose even showed up for lunch in June at the company headquarters on the edge of the former sleepy cowtown.

Workers store fishing poles by their desks and catch trout on breaks.

The relaxed Montana attitude among the company's 200-plus employees won't be changing much, both Potzman and the new owners said.

In 2000, co-founders Peter Finley and Jim Cooper left other venture capital companies to form Thompson Street. The St. Louis company raised $145 million and bought four companies in its first year.

Many venture capitalist companies, sometimes nicknamed "vulture capitalists," buy distressed companies at pennies on the dollar, carve them up and sell the assets.

That's not Thompson Street's style, Finley said.

"There's a vast industry of private equity companies like ours that aren't looking for troubled industries, but ones looking for growth," Finley said from his St. Louis office. "As a matter of fact, we make far more money investing in good businesses that have good futures."

He said the company only has nine employees, including secretaries, so there aren't enough people to micromanage acquisitions.

The company's growth potential and international name recognition cinched the deal, Finley said.

"The people of Montana Silversmiths have done a fabulous job of keeping their customers happy and building brand identity that's as strong as any I've seen," he said.

Managers become owners

Fortunes have turned since July 2003 when soft retail demand led Potzman to lay off 18 of 207 employees on the company's 30th birthday. Business has come back and improved.

Before buying, Finley and other executives made several trips to Montana to check out Montana Silversmiths. Thompson Street plans on holding its acquisitions for five to eight years, some up to 12 years, Finley said, before selling.

"We don't have any plans to make any significant changes in the business at this point, including keeping it in Columbus," he said.

Some managers in Columbus have been made owners, Finley said, adding that giving successful managers equity only boosts their motivation.

Potzman declined to say how many mangers received stock in October, but confirmed, "I'm one."

Neither side is releasing many financial details.

However, Thompson Street's Web site says it buys companies that have annual sales of at least $30 million up to $200 million. Montana Silversmiths is privately owned, so its annual sales are not publicly available.

American Capital, a publicly traded buyout company based in Bethesda, Md., gave Thompson Street $26 million in credit, loans and senior debt for the Montana purchase.

That means Montana Silversmiths sold for at least $26 million on the bottom end and the price tag undoubtedly was much higher. A general rule of thumb is that companies sell for at least their annual revenues. In 1993, the last year where numbers were available, Montana Silversmiths reported sales of more than $25 million.

Thompson Street now owns seven companies.

Growth spurts

Montana Silversmiths built its current building along the Yellowstone in 1981, added on just three years later and completed the last addition in the late 1990s.

"We were growing so fast, we were penned in," Potzman said.

So the company bought the neighboring Montana Power office in 1997 and 1998, moved it four blocks away and expanded onto that land. The headquarters now covers 65,000 square-feet on the riverbanks.

In Billings, Montana Silversmiths runs a 12,000 square-foot office at 2521 Enterprise Ave., and just moved into an 18,000 square-foot warehouse on Monad Road. This will be used as a distribution center for the latest line of Western lifestyle products.

Goofy galloper

Best known for shiny belt buckles, earrings and the like, Montana Silversmiths is branching out.

Two years ago, the company started making Western home decor items like Western sculptures, picture frames and lamps.

This year, the company started making leather goods like purses and billfolds.

Perhaps the strangest product was conceived four years ago when staff members decided to make a stuffed horse with human characteristics. "Elmer" runs computers and goes golfing and fishing.

New at her job, Marketing Director Judy Wagner ordered a seamstress to sew her an "Elmer" costume. She told Potzman she planned on wearing to the biggest sales event of the year, the Western English Sales Association in Denver, where thousands of retailers buy their yearly inventory.

Potzman warned Wagner "Elmer" could flop at the serious-minded buyers event.

"We told her that at the Denver market either you'll be a hero or you'll be fired," Potzman said.

Wagner still has her job, and there are two "Elmer" costumes retailers rent out for their promotions.

"If anyone had told me in 2000 that Elmer would take off, meaning sales of millions and millions of dollars, I wouldn't have believed it," Potzman laughed.

Another gamble was making a belt buckle featuring the deadly bull, Bodacious. The bull was famous for pitching cowboys forward, then rearing back to smash their faces. The vicious bull was retired nine years ago after hurting many riders.

"That probably was one of the biggest selling buckles we've ever done," Potzman said.

Montana Silversmiths makes 10,000 items and develops hundreds of new products each year, too much for any store to display. Two catalogs a year are printed so retailers can show customers the full inventory.

Belt buckles remain a core product.

"I call them cowboy business cards. You can tell a lot when you meet someone by their belt buckle," Wagner said.

Broncs and buckles

Fishing poles leaning up against the wall, designers and engravers hunch over the company's latest deadline order: making the 10 trophy buckles for the next world champions who win their events at the National Finals Rodeo next month in Las Vegas.

One engraver finishes hand-carving the 2004 World Championship Bareback Rider buckle, complete with diamonds, lots of silver and rose, green and yellow gold - a work of art worth up to $20,000.

The company makes 600 buckles per year for the Pro Rodeo Cowboys Association, which are handed out at competitions across the country.

Marketing the huge product line is easier because of smart decisions early on, Wagner said, adding that founder Kent Williams, who sold the company 10 years ago, picked the right name.

"The name Montana Silversmiths is very powerful," she said.

Wearing the belt buckle his staff gave him when Montana Silversmiths first opened, Stillwater County Commissioner Chuck Egan welcomed the news about one of the town's cornerstone employers.

"You always wonder how things will go," Egan said.

The jewelry manufacturer and the mine go hand-in-hand, he said with many husbands and wives working at one or the other.

"When things got hard in agriculture, it got hard to pay the taxes on the land, so many spouses both went to work," he said.

"Montana Silversmith's has been a mainstay for this county's economy."

Jan Falstad can be contacted at (406) 657-1306 or

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