The New Wave of Wealth Creation: SNL

Reid Nagle, circa 2007. Photo credit: The Hook.

Reid Nagle, circa 2007. Photo credit: The Hook.

by James A. Bacon

When most Virginians hear the letters “SNL,” they think Saturday Night Live. Perhaps in the future, they’ll think SNL Financial, the Charlottesville-based market research firm just purchased by McGraw Hill Financial for $2.225 billion.

New Mountain Capital, the New York-based private equity firm that purchased 60% of the company in 2011, will grab the lion’s share of that sum. But founder Reid Nagle other senior managers will take much of the rest — about $890 million. That’s a lot of wealth creation for a company that few Virginians had ever heard of.

SNL is a new-era enterprise that deploys Big Data to create massive wealth. The company provides reports on seven key business sectors, drawing upon a global workforce of 3,000 in 23 offices in 10 companies. Four hundred employees are located in the Charlottesville headquarters and another 50 in the Innsbrook Office Park in Richmond. CEO Mike Chinn described SNL’s business model to the Wall Street Journal this way:

We’ve developed a pretty efficient machine for both gathering and selling information. How you collect that information is the same whether it’s a bank branch or a coal mine or a power plant.

Nagle founded the company in 1987 because he couldn’t get a job after working as CFO for the notorious corporate takeover artist Ivan Boesky, who was convicted for insider trading. After two years in New Jersey, Nagle moved the company to Charlottesville, according to a 2007 profile in The Hook. It was not the kind of company that would catch the attention of economic developers. Around that time Nagle nearly ran out of money. “I wasn’t going to make payroll,” he told The Hook. An unsolicited $100,000 infusion saved the day, and he was able to raise another $300,000.

SNL officials told the Daily Progress that revenues had increased every year since its founding in 1987. Launched with a focus on the Savings & Loan industry, the company branched out to other business sectors, aided by acquisitions of boutique research firms. Nagle said in 2011 he would use the cash infusion from New Mountain Capital to continue growth, product development and “provide liquidity to existing shareholders.” It’s not clear from published reports what percentage of the non-New Mountain Capital shares were owned by Nagle, Chinn and other Virginia-based SNL executives, but it was likely a significant number. In 2011 Nagle had described himself as the “second largest shareholder” after New Mountain.

Bacon’s bottom line: Much of Virginia’s wealth creation is invisible to the media and public policy makers. No one would have targeted SNL for corporate recruitment in 1989 when the company was living hand-to-mouth. When asked in 2007 why he located the business in Charlottesville, did Nagle cite Virginia’s, ports, highways, low taxes or business incentives? No. He replied: “Quality of life and access to bright people from PVCC, Eastern Mennonite, UVA, JMU, W&M, Virginia Tech, and other Virginia colleges and universities.”

Remember that: Quality of life and human capital drive SNL-style wealth creation.