High-School Dropout Vaults Into Mega-Wealth With M&A Bargains – Bloomberg

Michael Flacks has quietly been snapping up discounted assets

He says he’s willing to buy companies others might not touch

The Plaza Hotel in New York. Photographer: Michael Nagle/Bloomberg

By Benjamin Stupples and Katie Linsell
May 19, 2023, at 2:01 PM GMT+3

Ken Moelis recently sold his residence at New York’s Plaza Hotel to a fellow dealmaker with a far lower profile than the legendary investment banker.

The home — complete with marble bathrooms, 12-foot ceilings, and sweeping views of Central Park — went for almost 30% less than its original $15 million listing price.

And that’s just how Michael Flacks likes it.

The high-school dropout has carved out a niche for discreetly snapping up bargains of increasingly larger assets, spanning clothing, cleaning, and paint distribution companies worldwide.

A British native now based in the US, Flacks is looking to ramp up his investments after acquiring four businesses in the same number of years. Those alone are currently worth more than $250 million, according to data compiled by Bloomberg.

His Flacks Group is developing its first residential real estate project from scratch in Florida, one of the hottest housing markets in the US. It’s on a site bought a decade ago for little more than $500,000 and near his own residence in Miami’s Fisher Island enclave for the ultra-wealthy. 

“I’ve been under the radar,” Flacks, who turns 56 this month, said in a recent interview at London’s Claridge’s Hotel. “Why did I buy in New York? I bought it on the cheap.”

Flacks, who has a net worth of about $600 million, as per the Bloomberg Billionaires Index, is among those looking to boost allocations beyond public markets to seek returns in an uncertain economic environment. Investors including pension funds, family offices and insurers are likely to turn their focus to private equity and private credit this year, BlackRock Inc. said last month.

With no outside money, the Flacks Group chief executive officer has more dealmaking flexibility than most buyout companies, allowing him to consider potentially lucrative opportunities others dare not touch due to concerns linked to the environment or governance.

In September, for example, his firm bought for an undisclosed sum Kelly-Moore Paints, a US paint manufacturer with historic liabilities for previously using asbestos in its products. Before that, it acquired Corizon, a provider of health-care services for US prisons fined in the past for poor performance, and Pleuger Industries, a German maker of submersible pumps for oil and mining firms.

Kelly-Moore Paints is going through a restructuring, partly to deal with its legal issues, and Corizon was sold at a profit months before it filed for bankruptcy, according to a person familiar with the matter who asked not be identified as the details are private. Pleuger filed a lawsuit last month against its larger US rival and former owner, Flowserve Corp., claiming it infringed on intellectual property rights.

A Flowserve representative didn’t respond to requests for comment.

As he’s taken on little personal debt over the years, Flacks said rising interest rates haven’t curtailed him and his core team of fewer than two-dozen employees.

“I’m looking at opportunities others won’t look at,” Flacks said. “Generally, we are buying a multinational’s asset they don’t want. We don’t feel bad about looking at something that will die in 15 or 20 years.”

A native of Manchester in northwest England, Flacks got his start selling fur coats and leather jackets in street-market stalls after dropping out of school at age 16.

He later expanded his retail operations and parlayed the money into real estate, including in places like Germany, after prices slumped in the wake of the 2008 global financial crisis. Property investments in the country still make up more than half of the roughly two-dozen real estate assets listed on the company’s website. 

Flacks began buying up other businesses about a decade ago, with a focus on distressed firms saddled with debt. His company led a consortium of investors in 2012 that bought Irish women’s clothing chain A Wear out of administration and completed a similar deal a few years later for German sporting-goods business Fan & More. In 2020, it acquired German cleaning-systems firm Zippel from a Japanese machines conglomerate and made an unsuccessful bid to take control of department-store chain Hema, a staple in town centers across the Netherlands.

“I like iconic brands,” said Flacks, who still speaks with a broad Manchester accent. But “some retailers should be left to die.”

Not all of Flacks’s deals have gone to plan. Banks filed to take control of the two homes he acquired on Fisher Island between 2005 and 2006, when their values slumped after the financial crisis. Local filings still register his address at one of them, while the other was sold in 2009 for less than half of the $4 million Flacks paid for it in 2006. 

Stefan Muller, a former investment banker at Moelis’s namesake firm, joined Flacks Group last month, signaling the firm’s dealmaking intentions. Flacks is now targeting businesses with annual earnings of $50 million to $100 million, more than double his previous range, and is looking to boost his company’s presence in the UK and Japan.

While Flacks said he won’t invest in cigarette or vaping brands, there are few limits on what types of deals come next. He said he’s currently looking at a major business that doesn’t meet current environmental, social and governance standards.

“If life gives me lemons, I make lemonade,” he said.

— With assistance by Tom Maloney and Deirdre Hipwell