Advanta Corp., the aggressive seeker of highly profitable credit Card and second mortgage accounts, has added young, small, privately held companies to its wish list.
Horsham, Pa.-based Advanta has formed a limited partnership that will work like a venture capital fund, searching out investment opportunities in the financial and information services industries.
Though venture capital funds are not uncommon in the financial services industry, Advanta's partnership is unusual because it will invest in companies with which it can identify strategically.
Down the road, Advanta must explore joint ventures or even closer relationships.
"The general concept is not revolutionary," said Anthony P. Brenner, the partnership's senior managing director. "But we have a very narrow focus."
Mr.-Brenner, who has also served on Advanta's board of directors since May 1992, previously was president of a private equity investment partnership called Cedar Point Partners.
Alex W. "Pete" Hart, who recently left the presidency of MasterCard International Inc. to become executive vice chairman at Advanta, will-also be overseeing the development of Advanta Partners.
Knowledge of Markets Lauded
"Pete has a great understanding of where markets are heading and who the players are," said Mr. Brenner.
Advanta, a $6.1 billion-asset corporation, plans to put as much as million into Advanta Partners over a five-year period. It foresees the relationships between Advanta and the target companies typically lasting for three to seven years.
Mr. Brenner said Advanta Partners probably would not take on more than two or three deals a year, ranging from $5 million to $15 million each.
Advanta expects to complete its first deals in early 1995. This year, the partnership will concentrate on hiring a managing director for a New-York office, and studying .the targeted industries.
Advanta Partners will seek out young, fast-growing companies that are in need of cash infusions, its officials said. But it would also consider management buyouts of divisions of public companies that are neglected by their corporate parent and deemed to be of strategic value to Advanta.
Dating, Not Marriage
As far as the Start-up opportunities are concerned, "We are going to 'date' companies, invest in them, and make money, as opposed to marrying them, or buying them," Mr. Brenner said.
He added that in the future, some of the target companies could become part of Advanta.
Prime investment candidates would be companies that "turn mundane data into useful information," and companies that could benefit from Advanta's marketing expertise, said Mr. Brenner. There is potential for the partnerships to serve as a conduit for an exchange of services, he said.
The idea to form such partnerships originated in Advanta's year-old corporate development group, which was formed to identify candidates for mergers and acquisitions as-well as broader market trends.
Analysts do not believe that the partnerships are going to be meaningful to Advanta Corp.'s bottom line anytime soon.
"Advanta is always looking at new ways to market consumer products," said Richard S. Goleniewuski an analyst with Goldman Sachs. He interprets this latest venture as Advanta's desire to be more in the information flow.