Transcript: Michael Fisch



The transcript from this week’s, MiB: Michael Fisch, American Securities, is below.

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00:00:00 [Speaker Changed] This is Masters in business with Barry Ritholtz on Bloomberg Radio.

00:00:07 [Barry Ritholtz] This week on the podcast, I have an extra special guest. Michael Fish is co-founder and CEO of American Securities. They’re one of the older private equity firms around, been been in business since 1994. They run over $27 billion in, in assets. If you’re at all interested in what it’s like to, to run a private equity firm that doesn’t just buy up companies and parcel them out, but rather partners with management, keeps the teams in place on the companies they buy and, and just facilitates the improvement of the company, how it operates, how they’re able to bring expertise both in along with capital and whatever necessary debt is, as well as a, a network of experts. Then I think you’re gonna find this to be a fascinating conversation. There. There aren’t a lot of companies, and there aren’t a lot of people that have the historical perspective on the rise of private equity like Michael Fish does. I found this conversation to really be intriguing and I think you will also, with, with no further ado, my discussion with American Security, CEO, Michael Fish.

00:01:24 [Michael Fisch] Thank you Barry. It’s a pleasure to be here.

Barry Ritholtz: 00:01:26 [Speaker Changed] It it’s a pleasure to have you. So, so let’s talk a little bit about your, your background ba in economics from Dartmouth. You get a Stanford MBA. What was the original career plan? Were you always thinking about going into finance?

Michael Fisch: 00:01:39 [Speaker Changed] The original career plan was to be employed and provide a safety net for my mother and my two sisters. Right. But if I had a plan as to how to do that when I went to college, it was learn as much as I could, as fast as I could and get a ba and then become an accountant and a lawyer. ’cause then I figure I could always be employed either managing the numbers or doing law and get those two degrees.

Barry Ritholtz: 00:02:02 [Speaker Changed] That, that’s not the direction you ended up going though. What, what was it that made you say, Hey, this finance thing looks like it’s fun and interesting?

Michael Fisch: 00:02:11 [Speaker Changed] Well, it’s, you know, like life. It, it’s a serendipitous series of things. I met a terrific man at Dartmouth named John Hennessy Jr. He was the ex dean of the Tuck school, the business school at Dartmouth College. And I took a freshman seminar with him because I needed a course and he became a mentor and he once asked me what you just asked me, and I explained to him, get the CPA get the law degree, I’d always be employable. And he kind of said,

Barry Ritholtz: 00:02:36 [Speaker Changed] Hmm, aim higher.

Michael Fisch: 00:02:37 [Speaker Changed] He said, Have you thought about an MBA?

Barry Ritholtz: 00:02:39 [Speaker Changed] Really? That’s very interesting. Says the person at Tuck Business School.

Michael Fisch: 00:02:44 [Speaker Changed] Exactly. And, and he ultimately encouraged me to apply to the three, two program. They had a dormant program left over from the Korean War. You know, business schools, of course have favored people with experience.

Barry Ritholtz: 00:02:58 [Speaker Changed] So five years gives you undergraduate and graduate. Yes. Is that the concept? You

Michael Fisch: 00:03:02 [Speaker Changed] Basically do three years as an undergrad. You apply to the Tuck school if you get in, and it hadn’t taken anyone in over a decade, then you do your senior year effectively as a first year MBA do the second year, and you get both degrees in five years. Wow. And he encouraged me to apply. He wrote a recommendation for me, and I guess surprisingly, not surprisingly, after that I did get in and

Barry Ritholtz: 00:03:24 [Speaker Changed] Then, but you went to Stanford? Not Tuck.

Michael Fisch: 00:03:27 [Speaker Changed] So I trotted down the street to, called his assistant, made an appointment all sweaty and nervous and went to thank him for his gracious recommendation. And he said, in, in the way of good mentors, well, do you want to go? And I’m thinking, he’s the ex dean of the business school. Like this is a trick question. And I gave him the deer in the headlights look. And he said, well, let me let, let’s let, let me imagine. We got three letters here. We got a letter to get into, tuck, a letter to get into Harvard, and a letter to get into Stanford. And I said, well, and I thought to myself, well, I know he went to Harvard, right? And he said, Dean of Tuck, this is a trick question. And I said something like, well, I guess Harvard or Stanford. And he said, well, then we’re done. And I said, but I’m not into Harvard and Stanford. He said, well, you, you will be.

Barry Ritholtz: 00:04:16 [Speaker Changed] That’s very funny. So, so in between Dartmouth and Stanford, you worked for Goldman Sachs doing m and a early eighties. How was that, how did that help prepare your path to private equity?

Michael Fisch: 00:04:31 [Speaker Changed] Well, that same man, the next year I trotted down and, and he said, well, okay, we’re applying to Harvard and Stanford, aren’t you? And I’ll, when do I write my letter of recommendation? So he did. And I was fortunate to be accepted to both. And that was very important because when this was the dawning of what is now a big analyst program across the country in all banks and investment banks. But back then, in 1983, the entire analyst program of Goldman Sachs was 25 people. Wow. Amazing. And that was a big expansion from the prior year before. And it had only been in existence for two years. So Wall Street was so much smaller. Right. Barry, you remember back in 1983, Goldman Sachs had about 30,000 total employees. 1500

Barry Ritholtz: 00:05:15 [Speaker Changed] Professionals. They were private partnership, they weren’t even public.Yep. Very different

Michael Fisch: 00:05:19 [Speaker Changed] World. And the entire merger department of Goldman Sachs in 1983 was 32 people.

Barry Ritholtz: 00:05:26 [Speaker Changed] That’s amazing.

Michael Fisch: 00:05:27 [Speaker Changed] And I like, I like to say none were lower to the ground than me a first year analyst, which meant I was below ground.

Barry Ritholtz: 00:05:33 [Speaker Changed] Right. And how did you end up at, at Bain and Company in Paris? What was, what was that like?

Michael Fisch: 00:05:39 [Speaker Changed] Well, in the time that I was working at Goldman Sachs in mergers, there were a bunch of big public companies who were on, we were on m and a retainer, they call it. So the public companies looking to buy lots of acquisitions and they would have us running the numbers with their people for them as they would have Bain and Company in two of these situations doing the strategic work alongside their management team. So I got to know the work and we would jointly make presentations to the senior management team or their board if a deal went far. And I got to see firsthand what Bain was doing in strategic consulting and understand their view of business separate from the numbers. And so when I did go out to Stanford, I wanted to spend my summer learning that better and in Paris. And Bain was kind enough to offer me a job to facilitate.

Barry Ritholtz: 00:06:29 [Speaker Changed] I I have to imagine that Paris in the mid eighties was just delightful.

Michael Fisch: 00:06:36 [Speaker Changed] It was not tough duty. I was very lucky to be there and grateful all summer.

Barry Ritholtz: 00:06:41 [Speaker Changed] So, so you come out of Stanford, you, you enter the LBO world, what we now call essentially private credit and private equity. What was it like in, in the late 1980s? How to be the Wild West? It really wasn’t a mature industry the way it is today.

Michael Fisch: 00:07:01 [Speaker Changed] Well, Barry, again, like Wall Street, it was all so much smaller in 1983, by my reckoning, the entire global institutional private equity business was less than a billion dollars of committed capital.

Barry Ritholtz: 00:07:12 [Speaker Changed] That’s unbelievable. The large, that’s nothing.

Michael Fisch: 00:07:15 [Speaker Changed] The largest fund then was KKR with $175 million. The second largest fund was Forman little with 150.

Barry Ritholtz: 00:07:23 [Speaker Changed] I mean, these are transaction level today. These are, those entire funds are like partial transaction.

Michael Fisch: 00:07:31 [Speaker Changed] They’d be less than, I’m sure, 10 or 20% of what KKR would put into many private equity deals.

Barry Ritholtz: 00:07:37 [Speaker Changed] So you’re doing LBO, you’re doing m and a. How did those experiences lead to a career in private equity?

Michael Fisch: 00:07:45 [Speaker Changed] So there was almost no m and a activity. There was no m and a departments in any investment bank really until the very late seventies. Because the, today where we talk about return on equity, your margins, what’s your stock price back then if, if you were in business in, you know, the real world, they said how many people worked for you? And if you started your career on a line became a line manager or foreman became a plant manager maybe, or a division manager. So on up the line, if people ask you how many people work for you, what do you mean? And you say, well, ISI sold a business, you know, I had a thousand, but now I’m at, you know, 800 when you bury, you’re not a good manager. Right? I I thought you were a manager. So literally nobody sold any of the only things that got sold were bankruptcies.

00:08:30 The odd company that went bankrupt would need to get sold. But there wasn’t an active m
and a business, there wasn’t a leveraged finance business. All the things we know now. So when I was at
Goldman Sachs doing m and a from 83 to 85, there came to be some people looking at the m and abusiness was started to boom, be a fraction of what it is now. But there came to be, in certain situations, buyers that were bootstrap, buyers that were, we would call ’em today, they then leveraged buyout financiers. And now we call it the private equity industry. And so I came to see some of these entities at the very early stages. KKR would be one, but there were others and a lot of entrepreneurs trying to do the same thing. ’cause wealthy families were often these bootstrap buyers. And honestly it was almost like a religious war between two views of the world EPS earnings per share that all public companies would look at to evaluate mergers and cashflow. ebit DA, which didn’t exist as a term, believe it or not back then. But EBITDA cashflow was how these, these bootstrap buyers would look at it. And this seemed kind of interesting and new and different. And I became interested in how they did what they did and how they valued it and the differences between that and ebitda. So I’m sorry, then EEPS.

00:09:54 [Speaker Changed] So in 1994, you and your co-founder Chuck Klein launch, what is the present version of American Securities? What was the catalyst for launching the firm then? What kind of business were you hoping to build?

00:10:10 [Speaker Changed] Well, it was more than just Chuck and I. So we had the great gift of the Rosenwald family. So I had worked for two private equity firms when I got outta Stanford. So I, I’d really gotten a little bit of experience. I was still young, hope I still am young today, but I’d gotten a little bit of experience and I met Chuck, and Chuck was then the senior financial advisor to the William Rosenwald
family and the William Rosenwald family. Julius was the genius behind Sears Roebuck. And so they had large s from the Rosenwald fortune.

00:10:44 [Speaker Changed] So the, in other words, this after building, helping to build Sears and run Sears for a number of years, this was a, we would call that today a family office of, of

00:10:54 [Speaker Changed] A, it absolutely was. It was called WRFA, William Rosenwald Family Associates. Julius Rosenwald, who was the Eminence breeze behind the growth of Sears, the way Ray Crock was with McDonald Genius for the catalog and, and downtown department stores. Sears ultimately got taken public. He passed away in the 1930s. Bill was his youngest son. Bill separated his money from that of his siblings and came to New York and right after World War II set up his family office modeled along the lines of the Rockefeller family. And, and he founded the name, he registered
the name American Securities Corporation, the first corporate owned broker dealer. All the other ones had been private partnerships, but he had capital and didn’t wanna have it at risk. And that family office had done what were then called bootstraps all sorts of investments, not just the stocks and bonds, common of wealthy families of the day, but actually buying businesses. Some very, very successful businesses

00:11:55 [Speaker Changed] That were still private,

00:11:57 [Speaker Changed] That were private when they bought them. Now one of them is public and has a market equity market cap of $35 billion. Right. But Chuck was their senior financial advisor. So he’s buying, selling stocks. And Chuck and I hit it off on our first breakfast on the Upper East Side here in New York. And he kindly asked me if I would come join him saying that he would, if I, he wanted me to come join him. He was 55, he wanted to retire when he’s 60 families, take a while to get used to somebody. So he wanted me to work with him and then he’d retire. And I said to Chuck, I really like you, but that’s not really what I want to do, but I got a different idea. You be my partner, we’ll set up a private equity firm and the Rosenwald family will be our lead investor and that’s what I wanna do.00:12:49 [Speaker Changed] And everybody signed on and said, let’s go. That that’s the launch of the modern version of American Securities.

00:12:55 [Speaker Changed] It’s more complicated than that. ’cause Chuck was a very cautious investor. So what Chuck actually said was, okay, well come work with me for a year and assuming that works out well, then we’ll go raise this private equity firm. That’s pretty reason. Right. So I joined the Rosenwald family in the spring of 1993 and we, we did some investing together for the first year and we raised our private equity fund the next year.

00:13:18 [Speaker Changed] I almost feel compelled to point out to younger listeners who may not be familiar with what Sears was back in the day, but I’m not exaggerating when I say Sears was the Amazon of its time. It was America’s largest retailer. Every major city, every major town had a Sears. They were dominant, weren’t they?

00:13:42 [Speaker Changed] Oh, absolutely. I like to say I hadn’t thought about thinking about Amazon. I
like to say they created the Walton esque fortune Okay. Of the first half of the 19 hundreds because
they were Walmart at least, and maybe Amazon too. They had a one-third market share of certain
product sales in the entire country.

00:13:59 [Speaker Changed] It’s unbelievable.

00:14:00 [Speaker Changed] And they were also an amazing, they, they picked Julius successfully leveraged two really great trends. One was the urbanization of America and the downtown department store, which was so prevalent then. And then almost on a different axis, the catalog, which which was mailed, the Sears catalog, was mailed to homes across the country. And it allowed anyone in any community of any background to buy exactly what the city slickers were buying or vice versa. And that was, and they were interestingly, I think it’s true to say the first non-utility non railroad that was thought stable enough to be allowed to be a public company.

00:14:44 [Speaker Changed] Huh. Really

00:14:45 [Speaker Changed] Interesting. All the utilities and railroads at the beginning of the stock market were thought stable enough.

00:14:50 [Speaker Changed] So, so last question about that, that’s really fascinating and, and there’s a whole long history of, of things that Sears spun out. I think the Discover card came from Sears and Allstate Insurance and a couple of banks. I mean, it was just one different entity after another.

00:15:11 [Speaker Changed] That’s absolutely true. And the family separately is responsible. The Rosenwald family for Blue Cross and Blue Shield. Oh really? For the Museum of Science and Industry in Chicago. Julius Rosenwald was an important trustee of Tuskegee University and friend of, I think it’s Booker t Washington. I mean, the family’s philanthropic legacy is staggering.

00:15:35 [Speaker Changed] Hmm. That, that’s really fascinating. You know, I, it, it’s funny, I’m very aware of the audience age and it’s a range from people listening who might be in college or grad school, and people who have, are, are retired. And I sort of feel like, all right, some of you youngsters may not know this was literally the biggest retailer of its day. Whether you want to compare it to Walmart for the stores or Amazon, the catalog, not all that different from online shopping. They were just massive and failed to pivot when, when the time came. So, hey, everything, everything is temporary. Right. Lastquestion about the launch of the firm. So 94, it, it’s still early days for private equity, not a lot of transactions, lot of, not a lot of money under management. When you are out pitching this to institutional investors in the middle of a giant bull market, let me add inequities. What, what was, what was the response? Did people understand that this was a different type of investing and potentially a diversifier? Or did they look at you kind of funny?

00:16:48 [Speaker Changed] Well, Barry to, to paint where we were in the arc of private equity. So as we were talking before, it didn’t, it didn’t exist until the very late seventies at best. And then was, you know, from five firms to 10 firms to a hundred firms in the 1980s. And so it was growing. And when we went to raise our first fund, again, we had the great benefit of the support of the William Rosenwald family. They were committed lead investor. But I had been involved in some transactions and had, and those transactions had happily gone well. Chuck Klein and the family had been involved in a bunch of transactions. So we had some form of a track record that we could talk to people about and a very specific investment objective about what we were planning to do. And so there were certainly, there weren’t that many. And we did talk to a lot of people, but we were grateful to have a college endowment, a a publicly traded insurance company, a publicly traded company, corporations pension fund, and some wealthy individuals join our first fund, which was a mighty $71.4 million at the final closing.

00:18:00 [Speaker Changed] So, so you mentioned you had some specific objectives back in 1994. What were those objectives?

00:18:08 [Speaker Changed] Well, building on the, the investment legacy of the Rosenwald family and some of the things that I had been doing in thinking about, we agreed that we were only gonna buy the market leading company, the number one market share company in its niche. I mean, obviously these would be modest sized companies given the size of our fund. But the number one market share company, we would look to only buy that company in industry, which was GDP growth or better. We would look to only support the existing CEO. We wanted to support the

00:18:41 [Speaker Changed] Meaning you’re not coming in cleaning house and installing your own guys.
You are looking for a management team we you wanna work with.

00:18:47 [Speaker Changed] We had then, and we have still today a relationship focus and, you know,
changing just, and it’s practical changing executives is risky. We believed that if we’re coming in and, and
feel aligned and simpatico with the management team and particularly the CEO running the business
that delivered the earnings that we’re valuing the business on, if we could just help them be the same or
better, we’d have only good outcomes for investors. And why take the risk of changing management?
We’d rather just look for a new situation. And, and we wanted to have relatively modest leverage. We,
we tended at the beginning to capitalize our companies with less debt than other investors.

00:19:29 [Speaker Changed] Huh. Really, really intriguing. So let’s talk a little bit about $27 billion, 180
full-time professionals. What is the secret to successfully growing a private equity firm for you’re coming
up on your 30th year?

00:19:47 [Speaker Changed] Great people. You know, I like to say money is the ultimate commodity. So
our product, if you will, is money. That’s what we invest. And so if we’re gonna outperform for ourinvestors, it’s gonna be the people that we’ve attracted our investment philosophy and maybe some
processes that we’ve employed.

00:20:04 [Speaker Changed] So, so you’ve done plenty of deals over that 30 year period. What stands
out? Anything really memorable? Any, any transactions that stick with you?

00:20:16 [Speaker Changed] You know, when I think about that, we’ve certainly had the, the great
pleasure to be involved with some great businesses, but it’s really the people that stick out the most.
It’s, you know, life is people and we are in the people, business managers, investors, lenders, bankers,
the whole ecosystem. And it’s the special relationships which we’re proud to have created. And some of
the CEOs from our very first fund, our very first deals, you know, 28 years ago, are still close friends of
mine, I’ll be, be going to Florida to spend a weekend with one of our first CEOs and his wife staying with
them next month.

00:20:52 [Speaker Changed] Huh. That, that’s really interesting. So, so let’s stay focused on that concept
of people and, and partnering with management rather than just taking over a company and, and
cleaning house. Is this relatively uncommon in the industry? I have to imagine other, other companies
see the value of this or, or when you first started doing this, was it kind of a, a one-off?

00:21:20 [Speaker Changed] We, we weren’t really sure what anyone else was doing at the beginning.
You’re just kind of doing it and hoping it works out, right? As it turns out, you’re absolutely right. There
is a consulting firm which did a study a few years ago that 25% of the CEOs are gone at closing in most
really the average private equity transaction. Wow. 50% are gone by two years and only 25% are there
after four years. In contrast to that. Now for our 30 year existence, our, what I call CEO win rate is over
80%. Meaning

00:21:54 [Speaker Changed] 80%

00:21:55 [Speaker Changed] Of the men and women who are running the business before we showed
up, we’re running it at exit or are running it today if we still own it.

00:22:02 [Speaker Changed] So this is really very different. If, if the typical firm, they’re in half the
situations, they’re gone either at closing or, or two years later,

00:22:13 [Speaker Changed] We are walking the talk in terms of management partnership and we really
believe in it. So,

00:22:17 [Speaker Changed] So when you are evaluating a company, this is more than EBITDA or
earnings per share or something like that, you are really doing your due diligence on the management
team and how effective they are. And hey, are these people we want to get into bed with and do
business with? All,

00:22:33 [Speaker Changed] All those things we have, we, we add a very important management
dimension to the basic, you know, product services, customers, raw material suppliers and so on.

00:22:42 [Speaker Changed] How, how do you evaluate that? ’cause that’s, listen, when you look at
ebitda, it’s numbers on a, on a Excel spreadsheet or Google sheets or whatever you’re using. When
you’re in evaluating people, it’s much squishier and qualitative. How do you make that that, how do,
how do you institutionalize that process?

23:04 [Speaker Changed] Well, you know, it’s, it’s, it’s very, it’s very bespoke. Every person is
different, different of our colleagues are different. Even though we all share the same belief in CEO
partnership and management team partnership. And it’s really just deciding you wanna work together.
We’re not perfect. Our management teams aren’t perfect, but can we make, I like to say my favorite
equation is one plus one equals three. Can we work with a management team and together be great
partners and do something different together? And we bring certain resources that some other firms
don’t have. The largest group of our 180 people that you cited are our so-called Resources group. These
are full-time operating professionals. They’re not virtual, they’re not consultants, they’re not 10 99,
they’re W2 colleagues. And so we have a lot of resources we can bring to our companies in purchasing
procurement strategy, it, hr, you name it. And some, some executives are excited by that. They want the
help. They, they want a fresh set of eyes on certain problems or extra, extra arms and legs on problems.
And some people say, you know, we got that. We, we know what we’re doing and you just put up the
money and we’re better partners for the former than the latter.
00:24:18 [Speaker Changed] So you describe a lot of your investments as platform investments and
you’ve made 78 of these platform investments over the last 30 years. Tell us a little bit bit about that
phrase and, and then we’ll get into the subsequent 305 add-on investments that, that followed.

00:24:40 [Speaker Changed] Well, a, a platform investment for us is really the first big investment. It’s,
we’re investing in a company with the management team. We’re typically the control investor. So we’ll
own more than 51%, sometimes almost a hundred percent of the company. But the management will
always be an investor with us. And that is, and that first unique investment is a so-called platform. Some
investments will never have add-on acquisitions. They can grow organically or other ways, but many
acquisitions do find smaller competitors or sometimes mergers of equals. And we then build them with
add-on what are called add-on acquisitions into the existing platform. Hmm. And so that 300 would be a
lot of add-ons and sometimes they’re, they’re very small, sometimes they’re material, it just depends on
the company.

00:25:22 [Speaker Changed] So when you are putting money into a company, is this, you’re obviously
buying shares from somebody, are you also providing a a, a level of operating capital? How much in a
typical structure, what is previous owners selling and what is money that goes for for future

00:25:42 [Speaker Changed] It, it greatly depends. The interesting thing about us is we are very
attractive to founders, CEOs, almost half of the investments in our most recent fund, half of the
companies we’ve purchased, we purchased from founder CEOs who continue to be the CEO and in many
cases rolled over an enormous amount of money into this company that we now control where they’re
still being the CEO. So I like to think of those as very choosy investors. They really care about their
company ’cause they founded it. They really care about their company because they’re running it and
they really care about their company ’cause they’re gonna maintain a very big personal investment. And
in a lot of those situations, they are happy and excited to partner with us as we are them. And I think
they’re attracted by the resources we bring other than money. So the second part of your question on
what is the capital structure and what’s the money typically the capital structure, the money that we put
up. And oftentimes lenders, if there’s, if it’s a debt-free business goes to selling shareholders. But as part
of that, of course you want to capitalize the company with undrawn lines of credit. so-called revolvers or
delayed draw term loans, other terms of like that. So there’s liquidity to run the business on a day-to-day basis. You know, survive a rainy day and also grow the business as makes sense if it is buy add-on
acquisition or new customer acquisitions or new plants we’re building, whatever.

00:27:11 [Speaker Changed] So, so I wanna separate the platform, initial investments with the add-ons.
What are you looking for when you’re making a a platform investment? What is it that gets you excited
about a particular company or not so excited and saying, hey, this isn’t exactly for us.

00:27:29 [Speaker Changed] So going back to what we started 30 years ago, we’re looking for the
number one market share player or

00:27:34 [Speaker Changed] So that’s persistent. In other words, the original ideas are still driving your,
your investment strategies. We

00:27:41 [Speaker Changed] Work really hard to get better tactically and execution wise and with our
scale advantages now, but the fundamental investment philosophy hasn’t changed. We’re looking for
that market share leader, which has a sustainable competitive advantage. We hope that we can invest
behind and see stability so that there won’t be a loss of capital

00:28:00 [Speaker Changed] And, and above average GDP

00:28:02 [Speaker Changed] Growth. And we’re looking for that company to exist, as you said, in an
industry that is growing at GDP or better, it’s now we use terms like is there a tailwind?

00:28:13 [Speaker Changed] Huh? So, so we’ll talk a little bit about sectors in, in a few moments.

00:28:19 [Speaker Changed] I’m sorry Barry and I have to add, and we’re looking to back the existing
management team. They,

00:28:23 [Speaker Changed] They’re gonna stick around, right?

00:28:24 [Speaker Changed] We want, we want the CEO to want to be our partner. I mean we, we, we
obviously know a lot of managers, but we really get excited if the o is gonna be our partner going

00:28:33 [Speaker Changed] Forward. So, so competitive edge better than average growth, a
management team you like, that doesn’t sound like the worst sort of investment that those sound like
pretty attractive things. How many companies are out there that check all your boxes?

00:28:51 [Speaker Changed] You, I mean quite a, I mean it’s, it’s a lot or a little depending on how big
your screen is, but we, it depends on the year, but we will typically see 350 to 450 companies that look
like they might be suitable. This number is a rough guess, but we probably do very detailed work
sometimes outside consulting firms and other advisors on maybe 40 of those. And we will make, you
know, final contract offers on probably around 10. That’s rough guess. And it changes every year. And,
and we’re only buying, I should say us headquartered businesses. We, that’s all we’ve ever aspired to do.
And it’s

00:29:35 [Speaker Changed] Nothing overseas. All, all here.

00:29:37 [Speaker Changed] Many of our companies have international operations. Some are truly
global companies, some are not. But the key thing for us is that they’re us headquartered because this is
where we know people, we know the laws, we know the language, we should have a competitive
advantage and we can be close and still try to have a family life. If we’re traveling all over the world,there should be someone who has our advantages, and I like to say Beijing, Berlin, Buenos Aires and Bombay. That should be not us. Whereas we have those advantages here as American securities.

00:30:07 [Speaker Changed] And so when you look hence the name and, and so when you look at doing
any of those 305 add-ons at that point you’re familiar with, much more familiar with the company.
You’ve already put prior capital into it. What are you looking to accomplish with with those add-ons? Is
it just a matter of getting liquidity to insiders who want some and you enlarge your position? Or is it hey,
they could use a little more capital and, and we’re happy to participate?

00:30:35 [Speaker Changed] So the add-ons are all about building the existing business or the platform,
initial investment to use what the phrase you were using. And so there, it’s not about a capital, it’s not
about getting liquidity for anyone who’s an existing investor. Sometimes there will be a smaller
competitor that the company wants to sell to us. Sometimes there will be a likes size business in an
adjacent industry where there’s synergies that we can save money on purchasing, let’s say by having a
bigger scale platform. It, it really depends on the company. So

00:31:09 [Speaker Changed] You guys have been doing this sort of platform investment and add-on
investment pretty much from the beginning. Have you seen other companies, kind of other private
equity firms seemingly imitate or, or at least has this said differently, has this strategy become more
popular over the years?

00:31:28 [Speaker Changed] Oh, I think absolutely Barry. I think, I think almost everybody in private
equity, generally when they make their first investment, they’re looking at what might be able to
acquire in addition investment bankers always market this now in their, in their materials. When you’re
looking at a company, if this company can grow by buying all these companies, this is real or imagined.
But it gets marketed and, and really it’s something I think everyone in the private equity industry is
pretty much thinking about every time they make an initial investment is their growth through
acquisition as well as organic. Hmm.

00:32:01 [Speaker Changed] Really, really intriguing. So, so let’s talk about the modern world and, and
what you’re dealing with. I I have a quote of yours that I really liked. 500 basis points of rate increases,
changes a lot. Can you explain to us, yes. 500 bips it does change a lot. What does it mean for, for your

00:32:21 [Speaker Changed] Well, 18 months ago, just to put this in perspective, 18 months ago, private
equity firms generally could borrow senior debt for their companies at around six, six and a quarter
percent. All in. So, so if, so if you borrowed a hundred dollars of debt, you paid $6 and 25 cents, let’s say
of interest every year on that debt

00:32:47 [Speaker Changed] That, that was whatever, I forget the name of what replaced L-I-B-O-R plus
3% or so, something like that. Two and a half percent

00:32:54 [Speaker Changed] Software has replaced LIOR. And then basically it was L-I-B-O-R software at
about four 50 depends on the perceived credit quality of the company and, and syndication markets at
that time. So it was basically a, the initial base rate was almost zero, zero to 50 basis points with
software plus that four 50, let’s say and, and fees amortized in and you get to let’s say six, six and a
00:33:22 [Speaker Changed] And, and today

00:33:23 [Speaker Changed] And 18 months later that your people like us are paying more like 10 and a

00:33:30 [Speaker Changed] That’s a big number.

00:33:31 [Speaker Changed] And that’s the 5% more or 500 basis points you were talking about. So
instead of paying $6 and 25 cents, you’re now paying $10 and 25 cents in interest. And you know, it’s
either a lot or a little depending on whether you have the money or not, right? If, if one didn’t capitalize
the capital structure planning to have a cushion that was that big, that higher interest rate can be a
barrier to continuing to pay interest or amortize, you know, pay back that debt over time. And there are
other problems like inflation where, and supply chain issues, both of which, cause many companies even
healthy growing companies to need more cash for working capital. You know, if you were selling
something where the raw material cost used to be a dollar and because of inflation after a couple years,
it’s now a dollar 25, that’s 25% more money in working capital for the same number of units. And if you
were, your supply chains might have come from Asia and it takes longer because they’re not quite as
efficient, harder to get containers. So you actually need more units. Th this can add up as well. So
between interest and working capital, even companies that are flat or growing can have cashflow
problems if they didn’t plan to have enough liquidity.

00:34:49 [Speaker Changed] So when we look at the public markets, most of the major public
corporations that were carrying any sort of debt, all refinanced before this run up in rates. So what
they’re carrying is fairly low interest rates. What did you see in the private sector were people taking
advantage of low rates to, to, you know, recapitalize whatever their obligations were at the lowest
possible carrying costs?

00:35:16 [Speaker Changed] Well, public or private Barry, the companies are always refinancing. You
have a first issue is are you refinancing with floating rate debt or fixed rate debt? So if I had a five year
senior debt credit facility of let’s say L-I-B-O-R, then software now plus four 50 that, whether, whether I
refinanced it now or then that that’s five and a half, six, sorry, six and a quarter percent debt, that’s now
10 and a quarter. But if I issued bonds or fixed rate debt, then I would be insulated from their rate
increase. So it’s, it’s firstly, did you issue fixed rate debt or floating? And if it was floating, some people
still bought hedges. The hedge market’s pretty efficient for two, three years. Hard to hedge farther than
that, right? And so when those hedges run out, even if you were conservative and so you really have
been boring at six and a quarter for the last 18 months as rates have come up when your hedge runs out
it’s gonna be 10 and and a quarter. If rates stay the same as they are today,

00:36:14 [Speaker Changed] I mean most companies are not Apple. I remember Apple floated a bond
deal at like two, two and a quarter, some crazy number

00:36:21 [Speaker Changed] For 30 years,

00:36:22 [Speaker Changed] Right? Sold a ton of it. I’m gonna imagine private companies don’t have that
sort of ability to float debt, but they certainly can issue some sort of a fixed rate. Did you see like what
was the fixed rate world like on the private side when things were dirt cheap?00:36:42 [Speaker Changed] Typically on the private side 18 months ago you wouldn’t have borrowed but few people borrowed first lien in the private markets they would sometimes issue bonds. And so in one company we know, well that company managed to issue 6% bonds. So that was fixed rate, 6%

00:37:06 [Speaker Changed] Sound sounds attractive 18 months ago. Now it looks like a bargain for

00:37:11 [Speaker Changed] Yes, it was attractive 18 months ago ’cause it was fixed rate. If you were
conservative you had no risk. And now, now that same company, if it came to market, would be issuing
those bonds for at least 12%.

00:37:24 [Speaker Changed] So we’ve seen a lot of, again, in the public markets, multiple compressions,
stocks were pretty pricey in the, in the low rate era rates have gone up. We’re starting to see multiple
compression. How, how are the higher rates affecting valuations amongst private companies?

00:37:43 [Speaker Changed] So there’s two issues that are affecting valuations. One is the amount, just
the, what’s called the quantum, the amount of debt you can borrow expressed as a multiple of your free
cash flow or your EBIT DA until 18 months ago, a a reasonably solid stable business could borrow
between six and six and a half times it’s trailing ebit DA and sometimes Proform projected this year it’ll
be a little higher. You could borrow that same number off what you hope to achieve in the year you’re
in. Now the, now that six, six and a half is more like five for a good company and it could be four and a
half if the company is perceived to have a little bit of a blemish. And the adjustments that might move it
higher are harder to, for lenders to support. So one thing that constrains value is you fundamentally, if
all things being equal, if you bought a company with six times leverage three or four years ago and now
a private equity firm is trying to sell it, it probably cannot sell it with that much leverage.

00:38:49 The buyer is gonna be having five times and that means more equity. And if you have the same
equity, if you have a bigger equity check, that will be in a lower rate of return in the equity that can
impact price. And as we’ve talked a lot about the higher interest rate is also a big impact. ’cause instead
of paying in the a hundred dollars of debt at six 50, let’s say six 50 of interest a year, now it’s 10 50
because rates are higher. So those two things constrain value where earnings hasn’t, even if earnings
grown and it may make it hard to get all of the money out where in a sale today if earnings are flat or
only up a little bit.

00:39:24 [Speaker Changed] So, so let’s look at valuation in a historical perspective. And again, most of
my frame of reference are the public markets. Pre-financial crisis stocks were at least reasonably priced
and certainly before the mid nineties reasonably priced. And then since the financial crisis, everything
seems to have gotten everything priced in dollars and credit seems to have gotten more expensive,
including stocks. Did you see anything take place similarly in private markets when we were looking at
the nineties, the two thousands, the 2010s,

00:40:01 [Speaker Changed] Oh there’s so many FAEs forces going on Barry, right? I mean now and, and
just think about the big impact of the five or six largest tech companies as a percent of the growth in
stock markets. And the average company, particularly smaller public companies are down, not up even
though the stock market’s up. So at any one time I like to say no one should ever invest in us because
they think we’re good macro economists because macro economists are often wrong, especially at
inflection points when we need ’em to be right. That particular company at a moment in time with its forces and its management team. And that’s what we spend all of our time trying to analyze. We try to be Mike macro aware, but really micro-focused.

00:40:47 [Speaker Changed] Right. That makes a lot of sense. And look at the financial crisis, middle of
2008, most economists didn’t see a recession coming even though we were right in the middle of the
worst one in a long time. So micro macro aware, micro focused. I i I like that description. So let, let’s talk
about some of the challenges of the current environment. Bankruptcies just hit a 13 year high. What
sort of risks does this create for your portfolio companies? Or is this really companies that aren’t doing
as well that eventually succumb to the more challenging environment?

00:41:32 [Speaker Changed] It’s it’s all facts and circumstances. Certainly you’re absolutely right that
bankruptcies are up and most people think they’re gonna keep rising and I think they’re right. And that’s
nothing more than we’ve just talked about the cash needs of the average business for more money and
inventory, for higher interest rates and in some many businesses constrained growth. And at some point
that can, that can reach a breaking point. And so those forces will have bankruptcies rise just as lower
interest rates will have that abate in the natural cycle of business. Sure.

00:42:07 [Speaker Changed] And and my assumption is since you’re looking at companies and
management teams, you’re probably not all that interested in, in these bankrupt companies or
distressed assets. Doesn’t seem to really fit the way I, I think of your model.

00:42:22 [Speaker Changed] There are, there are many private equity firms that focus on, so-called
bankruptcy distressed and whatnot and private credit providers. We are trying to avoid those and trying
to buy, you know, good business on the journey from good to great or great to greater. Once in a while
we will look at what I’ll call good company bad balance sheet. The fundamental company is a good
company and has been, it has all the characters who like market leadership, margins, stability, some
tailwinds and a great management team, but it just had too much debt. So we may try to provide an
investment to a company like that where when it comes out of bankruptcy or its debt problem, it’s a
great company with the right capital structure, but most of our, most of our things are not that.

00:43:07 [Speaker Changed] That, that, that’s really interesting. So let’s talk a little bit about the private
equity industry. We saw a lot of investors kind of rush in in 2022 when public markets, stocks and bonds
were, were doing poorly. And and since then there’s been lots of talk about how, how we price private
holdings. What do you think about this chatter about extend and pretend or quarterly marks not being
very accurate or precise? And I’m not referring to any of your companies, I’m talking generally this has
been chatter that that’s been in a lot of, lot of news.

00:43:52 [Speaker Changed] So private equity as you were talking about before, has been growing now
for 35 years. So as the ecosystem keeps growing, there are more companies owned by private equity,
there are more good things and there are sometimes more bad things. So it’s just, it’s just growing. So I
think the trend to more people investing in private equity has grown dramatically and it’s, it’s continuing
to grow. And the institutional investors often are thinking if you’re a big state pension fund, I want 10%,
20%. If you’re some college endowment’s, 40% in private equity, but whatever is that percentage,
they’re targeting that and they’ve allocated their assets to have that percentage invested in private
equity. So two big forces that have that affect all of these institutions is one, what’s the value of those
private equity investments? So if you targeted, if you had a dollar to invest and you targeted 10% inprivate equity and those investments doubled, now you have 20 cents in private equity instead of 10 on your dollar.

00:45:01 So you’re quote over allocated. That’s really good in a sense because your private equity
portfolios are up, but it’s still a problem because you’re overallocated so you stop making new
commitments. The same thing happens in a different way with your dollar. If that dollar is based on the
value of all of your holdings in the stock market, say drops by 10%, now you only got 90 cents. If your
private equity is at 10 cents, you’re over allocated and if it’s at 20 you got a real problem. And it’s really
both those factors, they’re called the numerator and the denominator effect that has caused some
institutions to slow down their commitments to private equity to get those back in balance. Because as
you know, the stock market was down not this year but last year. And private equity values continue to
be up. So that’s one set of forces.

00:45:54 The second thing you raised is, you know, how is private equity valued? The stock market gets
valued every day, every stock you can see when it trades every tick, right? The way private equity gets
valued and all private equity firms in the United States with more than $150 million of capital under
management are registered with the SEC. And one of the requirements is that all private equity firms
value their holdings every quarter. And that at least annually, those evaluations are typically subjected
to audit as part of the audit process. The auditors look at those valuations. Now they’re private
companies. So you’re, you got what a timing lag if you will. So every quarter, so let’s say on March 31st,
the quarter ends, private equity firms takes time to get numbers from your companies. And so there’s
typically 45 days where you try to figure out what the value was on March 31st and then you send those
values to your investors.

00:46:51 So if you’re invested in private equity, March 31 by May 15th, you’ll get to know what the
private equity firm valued those investments on. So that’s a lag, right? So people talk about the lag and
that’s one inherent issue. And the second is, since it’s not, if we know what’s trading in the public
market, so you know that that was the trade yesterday, whether someone paid too much or too little,
you know, that was the trade. And as we say, for every, for every buyer who thinks they’re getting a
deal, there’s a seller who is happy with the price. So there’s a, a market, the valuations being done by
each private equity firm, you don’t really have that market test except when it’s sold. And so some
people talk about is the value real? My personal belief in general, it’s very real. The SEC comes and looks
at it, the auditors bless it. And investors are sophisticated in general, so they’re pretty real, although
people can cast dispersions. But often that’s the lag happening. You know, if if if you’re, if if in if at April
30th after this notion of March 31, the market dropped 10%, you say my private equity stuff’s down
10%. Well the valuation you get May 15th is as of March 31, right? It’s not gonna be shown down. ’cause
it’s not supposed to

00:48:07 [Speaker Changed] Be, you won’t get that till the next quarter. So

00:48:09 [Speaker Changed] The third thing just, I mean just say the last thing. While the institutions
have backed up new commitments in private equity, which is actually seems to be thawing as we’re
speaking individuals, individual investors are dramatically underinvested in private equity versus
institutions. And that is an even bigger pool of capital, if you will, on the sidelines or now trying to invest
in private equity. And so that’s a another wave of flow. So most people expect private equity to keep
growing. So,00:48:38 [Speaker Changed] So you mentioned transactions are obviously the easiest way to, to measure valuation. What are you seeing in terms of deal making? Are, are private equity firms still
making as many investments as they were in recent years? And and what are you seeing on the other
side? What about exits?

00:48:57 [Speaker Changed] You know, we had a, a detailed conversation a few moments ago about
interest rates and their impact and you were talking about some companies declaring bankruptcy more
often. And I think that trend continues and in terms of volume, deal volume is about half of what it was
two years ago. Meaning

00:49:17 [Speaker Changed] New investments into existing

00:49:19 [Speaker Changed] Companies and, and sales both ’cause they’re, they’re two sides of the
same coin often, I mean there are, you can take companies public to exit and you can sell to public
companies, but the, the private buyer to private buyer is, is an active, active market and it’s roughly
down 50%. So new investments are down and realizations are down, but the ones that are happening
are actually happening at prices close to, if not entirely as much as they were 18, 24 months ago. So

00:49:51 [Speaker Changed] Prices are holding up just total volume is

00:49:54 [Speaker Changed] So far, prices are holding up. Now, obviously

00:49:58 [Speaker Changed] There, there’s an implication there that the best companies are getting a
price. And if you have a little, a little hair on the deal or a blemish, not so much

00:50:08 [Speaker Changed] Barry, you, you, you, you show yourself to be an astute observer or keen
understanding of how the world works. That’s exactly what happens. The, the average we see, which
let’s say is down maybe a half a multiple point, maybe three quarters of multiple point is com this year
compared to two years ago, is only the ones that sold, which are going to be the better companies.
Right? So the multiple drop is a little more than shown in the numbers. Quality adjusted.

00:50:36 [Speaker Changed] You’re Exactly right. Right? IIII look at the world through the lens that everything is survivorship bias so that you’re seeing the winners, you’re not seeing the ones that didn’t close. And, and that is, that’s something that’s never, that’s never far from my thoughts. So, so let’s focus on, on some of the sectors that American Securities really likes. You’re big in services, you’re, you’re big in consumer and healthcare, but you’re especially formidable in industrials. Tell us about those sectors and, and what’s been the appeal?

00:51:08 [Speaker Changed] Well, you’re absolutely right. For the 30 year history of the firm, roughly
60% of our investments have been in, so-called industrials and the rest have been consumer services
and healthcare care with respect to industrials. I’m not sure why it is the case, but lots of people don’t
find it sexy.

00:51:31 [Speaker Changed] I mean, you think about what a big industrial manufacturer does, it, it’s
hard, it’s dirty, it’s complicated. As opposed to some new software app that all the kids love. There’s a
very different set of audiences for those businesses.

00:51:50 [Speaker Changed] There is, but you know, we need our industrial base and interestingly in this
country, it actually grows faster than the overall GDP by a point or two for the last 20 years. It’s,00:52:03 [Speaker Changed] That’s amazing.

00:52:04 [Speaker Changed] It’s a vibrant source of transactions and it’s been very successful for us. And
we have to some extent built our resources group and some of our internal functions to help those
management teams and those companies be better that are industrial companies. And the thing that’s
we like about it is ’cause we’re very focused on creating the best risk adjusted returns we can. So we like
stable businesses and we, when we do our due diligence with a, with an established business industrial
business, if you will, you can understand its manufacturing process and how that compares to its
competitors. You can understand its suppliers and how it purchases raw materials and how that
compares favorably or not to competitors. And you can understand the customers and particularly if
you’re buying the number one market share player, you can really see the industry and know what
customers are thinking.

00:52:55 So we see stability in that. And in a relatively large number of situations, we’re able to see the
indicia of a successful investment equity investment. We hope because of that stability and the ability to
do due diligence, where other people in the venture world, for example, are just looking at how big is
the runway, right? And if we build it, they will come and, and God bless ’em, they, many of those folks
have done terrific investing for their investors. But that’s not what we do. We’re looking at what is and,
and what can continue to be the case and how might we be able to help management make it better.
00:53:28 [Speaker Changed] So, so you mentioned industrials have been growing faster than GDP over
the past 20 years, an era as we previously discussed, of, of very low interest rates. What does that mean
for the next 10 or 20 years for industrials? How do you think about the sector today in a higher inflation,
higher interest rate environment? Well,

00:53:50 [Speaker Changed] You know, all businesses are dealing in, in a, in an active market, right?
They have active competitors. Their customers are thinking how to do the best for themselves,
suppliers, likewise. And so the forces that will have made a company survive and perhaps thrive over the
last 20 years are likely to be pretty consistent in the product of market-based forces. And so the really
good companies will, should keep doing well, irrespective of the environment. Sometimes it’s easier,
sometimes it’s harder, but again, it’s more the microeconomic forces that are gonna matter for that
company than a general macroeconomic something.

00:54:27 [Speaker Changed] So let me, let me tack in a slightly different direction. A a lot of your site
talks about citizenship being a good corporate steward and discussions of diversity and inclusion,
philanthropy, ESG. How do you work that sort of focus into what you do on the private equity side?

00:54:49 [Speaker Changed] Well, some of it’s, some of it’s related and some of it enables the other
stuff. So we grew out of the Rosenwald family. The Rosenwald family had a terrific philanthropic legacy
and were terrific citizens and cared about communities and we try to do the same. So we, we have lots
of programs that are philanthropic that are enabled by the success of our businesses. We give us a fixed
percent of, of, of our annual profits to, to charities every year as an example. But there are other things
that we’re trying to do every day with our businesses, you know, so-called ESG, environmental, social
and governance factors, we think are not only good for the planet, but they enable EBITDA a growth.
And so being a good steward is about being efficient. You don’t wanna waste energy and you wanna
reduce it if you can. You, you wanna, you don’t, certainly don’t want your employees to get hurt on the
job. So every monthly book from every one of our companies for years and years and years starts withsafety. It’s the most important thing. We want employees that are showing up to know that they and their loved ones know are in a safe environment. I mean, and this seems like how everyone should be acting, but we, and I hope they are, we certainly are too.

00:55:59 [Speaker Changed] There’s been a lot of studies on governance and it turns out that
companies, and there’s a little bit of a chicken and egg question here, issue here, but companies that
have broad governance with a variety of people in, in board positions and senior management positions
tend to outperform, at least in the public markets. Companies that, for example, have no women on
their boards of directors. Do you ever think about this when you’re considering an investment or is that
the sort of thing that gets facilitated post-investment?

00:56:36 [Speaker Changed] Well, we think about, we think about being a good steward and a good corporate citizen and investing in businesses that enable us to do that. Going in period, full stop. The boards, every one of our companies has an independent board. So the CEOs on the board typically we’re the controlling shareholders who are on the board, but we actually create a unique board for every company and try to model the best of diversity in all its forms and diverse members on those boards.

00:57:03 [Speaker Changed] So this isn’t just the sort of thing that is, you know, green, green dressing or whatever, greenwashing is the phrase of the day. There’s an actual corporate advantage to having a diverse board. Is that, is that a fair way to look at it.

00:57:19 [Speaker Changed] I think, I think the, the studies you cite show that diversity is profitable, okay. For diversity is profitable for investors. And the great thing about being a private company is there’s a whole reduced liability structure for outside directors. So we often find, and I think this is broadly true for the private equity industry, there is a lot of people who would, who are great people and very experienced and can add value to boards that are actively interested in joining the boards of private companies, maybe even more so than public companies.

00:57:50 [Speaker Changed] Alright, so let me shift gears again. You were a lecturer, you began at Stanford in 2006. You’re still doing that? Well,

00:57:59 [Speaker Changed] It’s, it’s really one day a year. There was a, a guest Lecturer

00:58:03 [Speaker Changed] A terrific man. When professor when I was there, I became his research assistant and he asked me to, to come one day and talk about private equity. So I, I go to Stanford one day a year since 2006.

00:58:15 [Speaker Changed] And, and you’re involved in a number of other philanthropies, the 1162 Foundation, the Atlantic Council. There’s, it’s just a run of this Northwell Health Board of trustees of Princeton Theological Seminary. Tell, tell us a little bit about what you do on the philanthropic side.

00:58:37 [Speaker Changed] Well, you know, being a good corporate citizen isn’t just talking about it. You gotta walk the talk. And so I think it’s important to give of one’s time and one’s treasure to these institutions. And I’m, I’m proud to be able to do it.00:58:52 [Speaker Changed] So I only have you for a few more minutes. Let, let’s jump to our speed round and just ask you some of the same questions we ask all of our guests. Starting with what, what have you been streaming these days? Tell us what’s kept you entertained?

00:59:08 [Speaker Changed] Well, Barry, I watch so little personal media of any form. What I, what I do watch is typically with my kids. And the Witcher is a big fan favorite for them as our whatever Star Wars spinoff at the moment.

00:59:25 [Speaker Changed] Let’s talk about mentors. You mentioned one of your early mentors who helped shape your career.

00:59:32 [Speaker Changed] Oh, I’ve, I’ve been blessed with so many. I, I’d feel bad naming some, but I, I mentioned a couple of PhD professors. There’s people I’ve worked with. There’s, you know, Chuck Klein with whom I founded American Securities, who’s a dear, dear, mentor, and important figure in my life. But there’s, I’m really blessed with a lot of people who’ve tried to help me.

00:59:50 [Speaker Changed] Let’s talk about books. What are some of your favorites and what are you reading right now?

00:59:54 [Speaker Changed] You know, pleasure reading is, is a sad casualty of my day job, but occasionally I do get to steal some time. There’s a terrific book that’s so elegant and peaceful called A Gentleman in Moscow about a man held in a hotel for decades. That is a really a read I would recommend to other people who’s given to me by a colleague of mine. And I’m currently reading Outlive by Peter Atia, which is about, you know, living longer and, and living healthfully.

01:00:29 [Speaker Changed] Interesting. Our final two questions. What sort of advice would you give a recent college graduate interested in a career in private equity or investing?

01:00:39 [Speaker Changed] I think the mo the two most important things for a career in anything is do you like the work and do you like the people? And I, and I tell my kids that and I tell everyone I meet, you know, don’t, whatever it is, tech, private equity, something else. Don’t get caught up in the hype. Do you like the work? Go try it or understand what your friends or more people, more senior are doing. And do you like the work? It’s, you can’t like private equity if you don’t like modeling and numbers. So do you like the work? And make sure you work with people you like because life is people and if you love the people you work with, you’ll be learning and growing and happy every day. And if you don’t, it doesn’t matter what you’re doing, you’re not gonna be happy.

01:01:20 [Speaker Changed] And our final question, what do you know about the world of private equity today? You wish you knew back in 1994 when you were first launching your firm?

01:01:31 [Speaker Changed] I think it would, it is amazing to me and probably to most of the other people who started in private equity in 1980s, that this has become a massive industry, honestly. I thought, and I think most of the other people doing it thought we were just, we just saw the world a little bit different and there were a bunch of companies which had cash flow characteristics different than their EPS characteristics. And so we could buy some of these companies and, and have fun working with the management teams and that this, you know, little side niche has become so huge is, is really shocking to me. Huh.

01:02:09 [Speaker Changed] Really, really fascinating. Michael, thank you for being so generous with your time. We have been speaking with Michael Fish. He is the CEO of American Securities, a $27 billion private equity firm. If you enjoy this conversation, well feel free to check out any of our previous 500 discussions we’ve had over the past nine years. You can find those at iTunes, Spotify, YouTube, wherever you get your favorite podcast. Sign up for our daily reading Follow me on Twitter at ritholtz. Follow all of the Bloomberg family of podcasts on Twitter at podcast. I would be remiss if I did not thank the crack team who helps me put these conversations together each week. Meredith Frank is
my audio engineer. Atika Val Bru is my project manager. Anna Luke is my producer. Sean Russo is my researcher. I’m Barry Ritholtz. You’ve been listening to Masters in Business on Bloomberg Radio.



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