Brad Buscher helps nurture 28 businesses and creates a cutting-edge national industry from scratch.
Photo by Jeff Silker
The most succulent Pinot Noir originates from France’s Burgundy region, where an ideal terroir, i.e., the best soil, weather, and farming techniques, contributes to magnificent color, legs, a black cherry bouquet, and subtle yet succinct distinctions in taste and texture.
This specific variety of Burgundy and 1,800 other bottles reside in Brad Buscher’s wine cellar buried in his Riverfront Drive headquarters in downtown Mankato. He especially nurtures and cherishes Burgundy, as his lofty Chevalier du Tastevin Society membership attests.
In like manner, 54-year-old Buscher nurtures and cherishes businesses. In fact, a person could call him a “business connoisseur.” He searches the world over for just the right companies to pluck from the vine—a weighty 28 at last count, including several that have pressed out new industries and been positioned for exponential growth. After selecting, he buys in and helps create the best terroir, and in due course savors the profits or sells.
Not surprisingly, he hails from a fine line of business connoisseurs, going back to Grandfather “Ferd” who reorganized Mankato’s National Bank of Commerce in 1934.
Today, as chief executive officer of Bankers American Capital Corp., a merchant bank, Buscher provides capital to businesses and expertise in terms of marketing, human resources, government relations, management, accounting, engineering, etc., and participates in any profit or equity growth. He is chief executive officer of Mercury Waste Solutions, managing partner of BRB Development, past board chair of the Bank Holding Company Association, and an Association of Lighting and Mercury Recyclers director.
But above all: Buscher the connoisseur.
Fortunately, I was blessed to come from a family of successful businesspeople. My grandfather F. A. Buscher came to Mankato in 1934 and reorganized the National Bank of Commerce and worked there as president until 1967, when he and my father Robert J. Buscher acquired the American Bank in 1968. They were consummate businessmen looking for opportunities in which they could surround their capital with competent managers. Banking was only part of their business. My grandfather was in on the ground floor of helping entrepreneurs of many of the big companies finance their growth in Mankato. He would occasionally lend them his own money.
So people seeing your banking resume would see only so much?
Clearly, banking is where my roots are, and I consider myself a banker. However, a merchant banker is not a commercial or investment banker. A commercial bank derives revenue from accepting deposits and paying a rate of interest for deposits. It has the FDIC system backing it. It lends to businesses and individuals, and sometimes, large industrial corporations, at a rate of interest greater than what they are paying out. So they are living on what is called the spread. Investment banks, on the other hand, are predominately fee driven. If they buy or sell stock for you, you pay them a fee. If they raise money or provide consulting services for you, you pay them a fee. It’s all fee driven. Merchant banking is a hybrid. We tend to invest in companies in the form of a secured piece of indebtedness, typically a senior secured position with some underlying assets, mostly for working capital purposes, such as inventory and receivables. At day’s end, when the debt has been paid and the company has moved on, we either participate in the profit of the enterprise or end up with an equity kicker, warrants or options to acquire equity. What really differentiates merchant bankers from venture capitalists is we don’t just lend money and walk away. We take over some aspect of management. In our case, we typically do the cash management. We also may provide oversight for engineering, consulting relationships, management information systems, marketing, government relations or capital projects. These will vary depending on what a company needs.
To succeed as a merchant bank long-term, you need to have a stockpile of talented individuals in various specialties ready and willing to work for you. How do you find and cultivate these people?
I’m relationship oriented. Most people here have been with me many years. My assistant, Connie Hulscher, started 33 years ago. Our COO was here 26 years before leaving recently to run a company we used to own. My CFO has been here 15 years. Our core management group is professional and we have many years of experience and we have been together for quite some time. Our basic operating principle is that people under your direction never do what you expect; they do what you inspect. Consequently, we have a system of checks and balances to our agreed upon operating systems. As a bank, we ran one of the most profitable operations in the country, with very high margins which were driven by this operating philosophy.
The scope of your business?
We typically don’t disclose revenues. However, we are partners in 28 enterprises—a few we control and others we own 100 percent. The aggregate of our downstream investments employs up to 400 people. The sales range is somewhere above $150 million.
You have a lot to monitor.
Yes we do. As I have said, we rely heavily on operating systems with similar business models. My interest in banking disciplined us to look for recurring revenue streams. Once you had the interest spread and knew the owner was going to pay off in five years, you had a revenue stream. Banking operates at a high degree of leverage. You take a dollar of capital and you can leverage it up to 15 times. In essence, banking is a people-related business in which you can learn how certain industries and enterprises work. It’s a great microeconomics lesson. In a bank, you get to see companies in start-up, development, and maturity. If paying attention, you will see industries that make more sense than others. In my years on the college lecture circuit, I used to give this assignment to students: If you had the benefit of hindsight, and I gave you a million dollars, and it was 1890, what would you invest in? Eventually, these young people would say something like railroads, oil, flour milling, or locking up water rights. You try to find a product or service that everyone must have. In other words, can you imagine not having a wireless telephone today? These opportunities still exist. You have to think into the future.
Is this why you entered the waste/metal reclamation business?
We’re constantly looking for businesses fitting that profile and also businesses having great recurring monthly revenues. People have to have cars, for example, but there is so much competition. Every time a customer buys one, you have to invent a new customer because that customer may not be back for five years. I would much rather own a utility knowing that people have to use power every day. Daily use stabilizes cash flow. When you have predictable recurring revenue, not only is the business worth more, but it also allows the flexibility to plan and forecast.
Certainly, my parents and grandparents and a host of others, including Don Linder, Frank Farrar, Bob Etter, and W. D. Radichel. However, the key person was Christopher Faye. In my opinion, without parallel, he is one of the brightest and most interesting people around. His interests include business, finance, real estate, art, religion, and mathematics. Although not holding one, he probably has the equivalent in knowledge of two PhDs. He encouraged me to apply myself and focus on mathematics. We had a long and illustrious business relationship. He so impressed me that we later put him on our bank board. He taught me that behind every question, there is a deeper question that should be explored. He invited me to think about Socrates and Plato and other great scholars. I remember him telling me one day, “If you start out with the wrong assumption and follow it logically to its conclusion you will never get very close to the truth.”
Where did you go on to college?
After graduating from Mankato West in 1974, I enrolled in the University of Utah College of Business. I received a degree in finance with an emphasis in economics. While there, I was in a finance program doing private consulting as a student intern. I initially had gone to Utah to be a ski racer. I didn’t know I would receive a phenomenal education.
My first job opportunity was as an analyst with a First Chicago Banks data processing subsidiary and learned how big money center banks operated. I had a photographic memory and would often be asked to solve difficult problems. That led to an opportunity doing analyst work in the real estate syndication and lending department. But I didn’t want to work there the rest of my life and was thinking of ways to apply what I had learned. Then I ran into some developers financing and building racquetball clubs. They offered me a junior partner opportunity and I borrowed $25 thousand to put into it. This pyramided with leverage into five different clubs. About 1980, I helped build the racquetball club near MSU, which was a big success at the time. However, not all were. We hired a contractor to build a facility in Northfield and the property wasn’t vetted well. The back end of the building sank three feet due to poor soils. The contractor went out of business and we had no right of recourse. We couldn’t get a certificate of occupancy. It took two years to resolve. That was when interest rates were 20 percent. We unwound it, and I sold my interest in 1982. Then I decided to start getting serious about what I wanted to do.
Were you involved with American Bank in Mankato at this time?
I was, but not in a serious operating role. When I did become involved fulltime, my dad and I ran it as a partnership until selling in 1994 to First Bank System. American Bank really was a finance company disguised as a bank. Our business model was unique because we were counter-cyclical. When others got out of sectors, we got in. We started acquiring ag banks from the FDIC during the ag depression and were often the only bidder. One time, in 1986, we were in Minneapolis bidding on a bank. We bid a thousand dollars, but had to put up capital to support it. I had to get out the map to find the town of Lamberton. We were buying a bank with assets of $25 million at a significant discount from people I had never met and had to show up the next morning when the government turned over the keys. It just so happened Dan Rather had done the CBS Evening News from there the previous evening. It was quite surreal.
On the asset side, we were doing participation financing. We helped form financial intermediaries when the Indian gaming industry began. We partnered with Lyle Berman, who helped start Grand Casinos and put up equity in exchange for operating agreements with the Indians to build these places. We provided financing for the fixtures. In the early projects, we shared a percentage of the slot machine revenue. Instead of paying it off in five years, they paid it off in four months. We had a perpetual annuity locked in, which First Bank System inherited.
As for First Bank System buying you out, did you approach them, or they, you?
They came to us. It was like courting. I was well connected in banking circles and served on a number of boards. We didn’t have a crystal ball and couldn’t figure out how we could compete in the future in such a competitive business. In 1994, the Internet had not come to fruition and we weren’t interested in taking on partners and diluting equity, but knew we had to grow. It just didn’t look then like the future would hold promise for a private mid-size bank.
Did you hold onto your First Bank System stock?
I did for years. It later merged with USBank Corp. and I sold off my position before the collapse of the banks in 2008-09. As for our own businesses, we don’t typically hang on to them forever. We are always building for a future graduation date. The happiest days are when you buy and sell them.
Did you start buying with Mercury Waste Solutions in 1996?
No, there were a number of smaller investments. They say the test of your success is if you tell stories about your mistakes. Believe me, we have had whopping mistakes.
Tell me one.
I could tell you ten. (Laughter.) The most embarrassing was in 1999 with the infamous Tom Petters and investing in his Redtag.com, which turned out to be a shell company and a precursor to his Ponzi scheme fraud. To my knowledge, this didn’t come out in his indictment and ultimate conviction as I think the government had enough on him already. It was purported to be an Internet-based direct marketing company allowing people to post things for sale to businesses, such as a warehouse of inventory you could unload. He was going to merge this company into the “Ponzi scheme” company. He never did and the business never took off and all the proceeds disappeared. It wasn’t worth the price of ink to line item the loss on my tax return.
Tell me a great success.
Mercury Waste Solutions Inc. came to me through my merchant banking company. The owner wanted me to finance specialized pieces of equipment he had invented. He was a genius entrepreneur. He had looked at the Clean Air Act of 1992 and said the government would be regulating storage and disposal of mercury in products. He thought an industry would develop around it. Sure enough, in 1992, the State of Minnesota began requiring the recycling of fluorescent lamps. This man had invented a machine to break fluorescent lamps into three parts: the aluminum end caps, the glass, and the mercury in the spent calcium phosphate. Mercury is an element and therefore won’t go away. The only way to reclaim the mercury is to heat the calcium phosphate. The man building the machines wanted financing, but what he really needed was a partner. I said no to him three times.
Few people understand how mercury is used. It would be easier to give you a short list of what mercury isn’t used to manufacture (or is integral at some point in the process) than to give a list of what it is used for. It’s used in pressure instrumentation, the medical industry, and as an electrical conductor, a fungicide, and a solvent. For years, there wasn’t a time when you couldn’t come into contact with something chlorinated. Chloral alkali facilities use mercury wet-cell mercury beds to produce chlorine.
Mercury was an integral part of how certain civilizations developed. The Romans had conquered Europe and stumbled onto one of the world’s largest mercury mines. Mercury comes from an ore called cinnabar. The quality of the Romans’ metallurgy was vastly superior to anything anyone had. That was why the Roman legions had superior weaponry.
What does Mercury Waste Solutions do?
We reclaim mercury out of consumer, industrial, and commercial products to reduce the liability associated with its use. There are so many different waste streams for industrial processes using mercury. Our plant in Wisconsin is the largest of its kind. It took 15 years to build and is geared up for large-scale production. Sadly, only a small amount of mercury is being reclaimed today. The rest is going into hazardous landfills or being exported to Canadian or Mexican landfills. To date, Mercury Waste Solutions, by all measures, has not been a great success. After 15 years, we are only now bringing it to fruition. People like me usually don’t do that—we don’t build a field of dreams and hope they come. When starting this, we had no idea what a massive undertaking this would be to invent a new industry, put a plant up, and help create laws to stimulate demand.
Do you own this company 100 percent?
Virtually. Management and directors and my children’s trust control some. It has lost money 11 of 15 years. Sales are growing and were up approximately 40 percent last year. We have spent a lot of time investing and positioning it for the future. The current plant in Wisconsin is approximately 120,000 sq. ft.
Where do you see this company in ten years?
We believe we are at the cusp of growing demand. Our primary limitation for growth is transportation. The federal government in 2008 amended the Solid Waste Act to allow onsite waste treatment, which before was cost prohibitive. For example, General Electric is being forced to dredge 40 miles of the Hudson River to get out PCBs left over from industrial processes. However, there is expected to be a huge amount of mercury in it. When dredging, they won’t be shipping 200 million tons of contaminated soil to Wisconsin. They will have to treat it onsite. For treatments like that, we are going to start a field services unit in the next 18 months. Another growth area will be in the coal-fired power industry. Mercury is a natural by-product of burning coal. The majority of mercury air pollution comes from coal-fired power plants. This is why mercury advisories exist on taking fish in the Boundary Waters. It got there from coal-fired power plants from China to North Dakota.
You reclaim more than mercury.
We reclaim precious metals as well. For instance, mining companies have residuals. With gold at $1,100 an ounce, a company can turn waste into a lucrative asset. A recent Canadian client was taking a production line out at a mine and decided to scrap out all the residuals and send them to us. They were full of gold. We under-priced our share at 2 percent of net asset value, which totaled more than $3 million. There are sites all over California with lead, cadmium and arsenic. With the onsite rule change, companies will consider investing to reclaim value now and therefore reduce contamination later.
What about the safety of mercury?
It certainly is a concern. No hard evidence exists linking mercury used in childhood vaccines with the explosion of autism in kids. But imagine injecting a known neurotoxin in a 50 percent mercury solution into a kid—often multiple times during their childhood. Common sense dictates that can’t be good. There is no empirical evidence—but I contend it doesn’t make sense. Also, silver dental amalgams contain 50 percent mercury. Mercury vapor analyzers can pick up mercury down to the nanogram level in your mouth even if you have only three or four silver fillings. How smart is it to take a 50 percent mercury amalgam and bury it in your tooth a few inches from your brain, when it’s a neurotoxin?
Mercury is very dangerous. How vulnerable do you think large supplies could be to a terrorist attack? And how vulnerable are people while handling broken fluorescent lamps?
Your first question hits on the core of an emerging issue. Mercury Waste Solutions reclaims up to 150,000 pounds of mercury a year. We’re one of the nation’s largest generators of elemental mercury. But once mercury is reclaimed and becomes an element, it’s unregulated. Until recently, you could sell mercury to anyone. No inventory records were kept. After 2001 and the anthrax attacks raised awareness of domestic threats, the federal government wanted to get rid of it. The federal government has 11 million pounds of mercury in its strategic reserve dating back to World War II. It costs money to hold and it was dangerous.
There is a website I can go to today that can teach you how to make a substance called mercury fulminate, which is a substance that could make the Oklahoma City bomb look like a dud. We didn’t build our plant in Wisconsin with the ability to prevent an armed incursion from people wanting to steal and weaponize it. I became concerned about the proliferation of elemental mercury without regulations and controls. We had people sending it to us through UPS in leaking milk bottles. We needed a tougher packaging requirement.
In 2003, the Department of Homeland Security invited my general counsel and me to Washington and the FBI Building. We went into a room within a room within a room, and had to strip off cell phones and belt buckles and watches. We articulated our concerns to physicists. In our opinion, it wasn’t a question of whether, but when a terrorist would strike. We discussed with them the importance of protecting the industrial and chemical infrastructure of the country, including metal firms such as ours. That conversation may have led to a government investigation that concluded we needed to figure out a solution to having a better way of insuring it won’t be released into the environment. I met with the Department of Defense and the EPA for two years to deal with this issue. In the meantime, a Maine congressman and Sen. Obama introduced a bill banning the exportation of mercury after 2013, which means if you don’t have a legitimate domestic source you must provide it back to the government. It was signed into law in December 2008.
You’ve donated money over the years to political causes. What particular issue most prompts you to send a check?
I wish I had it all back. I am a Green Republican believing in public sector investment and promulgating laws to encourage business and industry to do the right thing. Some people would say some of our companies are in the sustainability movement. Indeed they are, but they got there by default.
I thought certain people in the political arena had the vision to embrace what we’re doing. The last (Bush) administration gave lip service yet put no effort into it. Which was sad. But so was the Clinton Administration. Mr. Gore, who is a Nobel Prize-winning environmentalist, stood by while their administration actually relaxed rules concerning landfill restrictions for mercury. However, we are proud of staying the course. I hope to live long enough to see it come to fruition. (Laughter.) The company is doing well and we have dominant market share. And my investment in Mercury Waste Solutions has introduced me to many different successful opportunities.
The government came to us in 2002 because the anthrax attack had scared them. What they learned was all common carriers, such as UPS, could tell you where they dropped off a package, but not where it had been picked up. We had invented in 1998 a container for fluorescent lamp disposal called LampTracker that evolved into a software company. If that lamp in your office goes out today, where are you going to put it? Most people stuff them in the mechanical room next to a central heating source, so that if it breaks, mercury vapor enters air ducts.
Our product gave people a safe and effective way to store lamps and easily return them. We built a software company around it that used this powerful tracking mechanism. UPS came to us, and asked, Can we license this from you? We said yes and UPS made us their exclusive vendor. That business was perfectly positioned and Waste Management bought it from us in 2007. They are planning to use our original tracking software to track all sorts of items in their system.
How did you get your pet cougar?
My former wife brought it home and passed it off as a Siamese kitten and I believed her. I found out it wasn’t one when I took it to the vet. It was one of the great practical jokes ever perpetuated; needless to say, I was surprised. I thought it would be a novelty until it reached 70 pounds. It lived with us and then we moved it to a farm, where it lived another 14 years. She finally passed away last year.
Why live in Minnetonka and not Mankato?
Most of my businesses are based in the Metro. I have a former wife and two children there, and I’m a dad with full-shared custody. I need to be close to them and involved in their activities. I’ve lived in the Metro more than 20 years, yet I’m here at least two days a week. Mankato is a great town. It’s been very good to my family. I have never been interested in completely severing my ties here.
Tell me about your wine cellars.
I am interested in the art and culture of wine. I have a large amount of knowledge about a specific variety of wine—French Burgundy, which is like saying you know a lot about one organism in the ocean and not much else. I find it fun and fascinating. I’m a member of the Chevalier du Tastevin Society and have been to France for the induction dinner. I collect wines and have several cellars. The cellar in Mankato has about 1,800 bottles.
Editor Daniel J. Vance writes from Vernon Center.
Vapors Bagged Up
CONNECT: Tell us about Vapor-Lok, another of your companies?
BUSCHER: This is the one we are most excited about. Over the years, we learned there weren’t any packaging standards for heavy metals, so we started an eight-year quest to come up with a vapor-containing product. We invented one and introduced it in 2004 and received a U.S. patent on it in December 2009. We hope to get Canadian and European patents this summer. We learned in our business, and in sponsored research at the University of Minnesota, the importance of this issue. We are focusing our efforts on trying to establish packaging standards with the federal government and states.
It is currently illegal to put fluorescent lamps in the garbage. If one breaks and gets into your carpet, there is no effective way to clean it. Vacuuming spreads vapors. If one breaks in your car, you’re screwed. Therefore, VaporLok has evolved into a health and safety product, which is designed to help prevent this problem. We are working to create this market through establishing and enforcing environmental rules. The State of Washington just passed the first packaging standards for transporting spent lamps in the US. Effective 2013, Congress has banned the manufacturing of incandescent bulbs to promote energy conservation—however, we then will be filling the ecosystem with lamps containing mercury.
Right now, we have 14 SKUs that could grow to 1,400. Not including CFLs, it is estimated there are more than a billion lamps sold annually and five billion in service. Less than 20 percent are being recycled. This is potentially a huge market with lots of recurring revenue attached and we are attempting to position our products accordingly. We believe VaporLok is positioned in the right place at the right time.