This week, we speak with Scott Sperling, Co-Chief Executive Officer of private equity firm Thomas. H. Lee. The Co-CEO is a member of the firm’s management and investment committees. From 1974 to 2006, THL raised more than $22 billion in assets across 6 institutional private equity funds, completing more than 100 investments in excess of $125 billion in aggregate PE purchases. Their flagship fund has more than $5B in it, and their Automation Fund has about $900 million in LP assets.
He explains how Private Equity has changed over time — from when he was running Alts for the Harvard endowment. When he began there in 1984, there were almost no alternative investments, and by the time he exited the endowment 11 years later, they made up about 20% of holdings. Today, Alts are commonplace at endowments. However, valuations are much higher, and both recent and expected returns have fallen.
We discuss some of the bigger milestones in Private Equity, including Snapple, Warner Music, TRW, and Dunkin — all THL deals. Snapple became a model for lots of other transactions in the PE industry: Identify a company whose growth can be accelerated, redeploy those assets in a way that creates that positive return, then allows the market to revalue the firm. Sperling also describes how pricing in private markets currently ranges from “fair to frothy.”
Some of his favorite books is here; A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Carson Block of Muddy Waters. The firm is known for its scathing in-depth research reports and shorts of various companies, several of which have collapsed.
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