YouSaid · the spoken record

Aaron Sack

lines on the record: 41
first: 2023-04-27
most recent: 2023-04-27
sittings or episodes: 1
sources: podcast

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“Logic to that ratio, the power of listening, gathering information, reading a room through ears, through eyes, subtle clues. You can really absorb a lot, wait to talk till you've really formed a worthwhile point of view. Aaron, thanks so much for the time and sharing this.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Whole lot of restricted stock units, which declined a lot. That was a tough moment, but we made it through and learned a lot. What teaching from your parents has most stayed with you? I mean, just the work ethic that comes from blue-collar type backgrounds is absolutely the most important element of myself. And my business life and really my very being. I come from coal miners in Scranton, Pennsylvania and electricians down at the Marcus Hook refineries. And hard work was how you major your way in America. Aaron, last one, what life lesson have you learned that you wish you knew a lot earlier in life? I probably talked too much. I probably thought I had a lot of stuff that should be heard in a room. And I think that started pretty early in my career and the cliche that God gave us two years, two eyes, one mouth, probably.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, and be incredibly ethical and fair and principled and nice and invest in people and do business the right way. And he had a big impact on me as well. What was the most challenging moment in your career or life? Could be right now because I really do think that this is a seminal moment for private equity investors. thinking very hard about ways we're going to continue to deliver value commensurate with the past. So I think this is a difficult period. I really do. But I was in my office on a Sunday in 2008 in the fall, September, watching people carry boxes out of Lehman Brothers, which is diagonally across Broadway from us, and only a day or two later it was flashing this hideous, bright Barclays blue. And it felt like the world might end. And then I just made a very bad mistake joining Morgan Stanley and taking”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“And having a lot of reasons as to why that's okay, and you should not really draw too much from past performance. Rather, trust the next three years or four years. Oh, and by the way, there's a tremendous amount of wealth transfer happening based solely on that assumption. Which two people have had the biggest impact on your professional life? Early in my career, it was a guy named Chris Kirby, who was a managing director at Cowan and Company who took a chance on me, as we discussed early on. I had no right being a financial analyst. And he really made me believe that I could actually do this and that might even be good at it. In fact, he once told me when I went off to Wharton, he said, I think you're going to end up a partner at Goldman Sachs, and we haven't kept in great touch, but I can tell him I've done even better because I'm at Morgan Stanley. The other guy was more recent. It's Art Penn, who runs Pennant Park and formerly ran Apollo's BDC. And the reason for that is not so much pure business, but more, you can be very successful to really.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“And energy and positivity that comes through alignment with mission driven organizations. For example, we just acquired a business called Emlar Swim Schools. My partner David Thompson did. Its mission, founded by a woman named Jan Emler, was to stop so many kids from dying in backyard swimming pools and at YMCAs because no one was teaching kids how to swim at a very early age. This is a business whose mission is to teach children through professionalized multi-site curriculum how to survive if they fall in the water, how to swim better. Those are just better places to be in life. It doesn't make them great businesses and doesn't guarantee success, which certainly feel an energy there like you're doing something that's worthwhile. What's your biggest investment pet peeve? Being shown a five-year financial model where the future looks very different than the past?”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Long expansion because it's certainly not going to be terribly vibrant, but it could be a 10 year slow expansion during which new business formation happens. Entrepreneurs will continue to want to diversify their risk and sell stakes in their businesses. Don't forget, trillion dollars of dry powder out there. No one gets paid to kind of naval gaze, talk about the market while your capital is paying fees. So people are going to have to get back at it. And I think that's going to happen relatively soon. Aaron, I can't let you go without asking a couple of fun closing questions. So what is your favorite hobby or activity outside of work and family? I really enjoy fly fishing, both saltwater and freshwater. I love to do that. That's got to be way up there. I couldn't decide that for listening to jazz, but one of the two. What type of investment do you gravitate to like a moth to the flame? I mentioned just the excitement.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“And not take some lessons out with you. We may be there again. We kind of went right through the pandemic. I thought that was the next end of day's event. We emerged stronger than ever. Now we're at a different place. It feels like a more pedestrian slowing of business conditions with two twists. Number one, inflation, which none of us has lived through, unless you were really hard at it back with Paul Volcker in the 80s and I was not playing Nintendo or something. And number two, I don't think we can afford back to zero interest rate environment. So past downturns have had this wonderful cushioning effect of the Fed taking short-term rates precipitously down and throwing money back at the problem. I don't think we can do that right now. We're going to have to kind of work it out without that wonderful crutch. And the good news could be a”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Swath of the American culture, and there is nothing more passion inspiring than the animal health space. So for all those reasons, it was really my favorite experience. We touched a little bit on some of your thoughts of how the market could shake out in a tougher time than it's been. We'd love to just broaden it out and ask for your perspectives on both mid-market private equity and competitive positioning going forward. We don't really know what this next era of private equity looks like, but it'll most likely be quite different. And the reason I say that is because I love that a big portion of our team has lived now through two crashes. Many of us were investing or at least in finance 00 to 02. Saw what a recession looks like and saw what post-recession recovery looks like. Now take the financial crisis. I was new to Morgan Stanley. That was not a lot of fun. You can't live through that and not be changed in some way.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Before it, which cracks me up, but the better we did, the more of the upside above certain gaudy returns went back to the founding doctors. That's ultimately what got us the deal because they saw a partner who said, let's create win-wins versus heads we win, tails you lose. And it came together over a long period of time. It was brutal. We had to build forensically the financial and accounting division. But it really combined a lot of interpersonal and financial and just market type skills and commercial energy and it ties together. I think all that's great about middle market private equity investing. And by the way, I love investing in mission-driven type businesses. So we've done that in early childhood education with cadence education and with the learning care group. We own a Planet Fitness franchisee with people who are truly dedicated to improving the health and livelihood of a certain”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Brilliant entrepreneurial minds I've run into. And we, of course, arrive with Blue Blazers. Bad idea. You had Birkenstocks and a tie-dye shirt. But fast forward six months, we kept at it and convinced him to take a 51% investment by us. Here's why it's so important. Number one, there was a moment in that where he had decided to go with someone else. I called him out of the blue and sense that it was gone and guilt tripped him and went down to see him and we hugged it out and got ourselves back in the pole position. Number two, our junior guys found it. That's so exciting to me. It's such a great moment in somebody's career. Number three, they didn't want to take our money because they believed so much in the upside. And so we ended up having to structure a deal that was more creative than anything we ever done, that had all kinds of ratchets, which we sometimes affectionately call, let's call it insurance. There's often a word, Yiddish word that comes.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Your deals. My defining deal in my career for so many reasons was the courtship stalking maybe of an Austin, Texas-based veterinary management company called Pathway Veterinary Partners that was founded by a wonderful entrepreneur and veterinary doctor himself, Dr. Jason Troutwein. Here's why I think it's so seminal and so important. Number one, our junior team found it by just beating the bushes, talking to experts, understanding veterinary was a really interesting, immature sector for professional private equity ownership. This was back in 14 and 15. They got the first meeting. They got the second meeting. I blew them off. I ultimately went to Austin because it was too small of a business yet every month. It got more interesting and met with someone that I would characterize as somewhere between Yoda, a surf dude, and one of the most”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Something like the mid low teens, same store, same unit sales, just through a much more efficient, robust sales and marketing engine. My partner, Jim Halland, who came from Dunbradstreet, American Express complex selling organizations, has really established an expertise here in Salesforce effectiveness, Salesforce design, looking at the architecture of Salesforce, how do you go to market, whether it's optimized for success, what changes need to be made. And that's been really great to watch. And then ultimately The most wonderful weapon in middle market investing is add an acquisitions. I do not see that slowing. The ability to really drive meaningful add-on acquisitions that add scale, add geographic depth and reach and can be leveraged over the existing fixed cost infrastructure. I'd love to walk through one of your favorite examples of one of”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I mentioned operating partners. That's one element of what we do. We have also operating principles. So we have a team now of six going on seven. And in addition, we enlist former executives from our portfolio companies who are now looking for value-added board positions. And so we do try to group hug the value creation process, structure it, document it, measure it. Among the different lenses of improvement, where have you found the most success over time? It's been striking to watch what you can do to the top line of a company through leveraging fairly simple digital marketing analysis, lead gen, very simple stuff that is not typically the domain expertise of a small scrappier middle market business. It's really easy to implement. It doesn't take a huge IT investment, and you're taking organic growth rates that were maybe 8 or 9 percent.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Plan for one of your portfolio companies. Yeah, we just kind of wing it. We have a repository of what must now be thousands of pages of value creation plans. These are typically 60 to 100 page PowerPoint documents that focus on the four or five levers that we've identified during due diligence that are going to move the needle during our investment period. And then we track those meticulously with KPIs, monthly, quarterly, in some cases weekly. The operating partner and the investing partners work together to define what success is going to look like. We may have different areas of expertise along the way in terms of who drives which of those components. But pretty quickly, even pre-closing, it transitions to the operating partner and the management team co-authoring. How do you get from good to great? Starts with 100 day plan, which is how do we get out of the blocks extremely well, extremely successfully, but it's really about the next four or five years.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we think real value creation comes from that kind of expertise and we're willing to share the upside. I feel like we work really hard to have the same returns as a lot of other good private equity managers who haven't taken that quite as seriously. Personally, I think the rising tide has lifted all boats, and that's all fair. But I think the next couple years, you're going to see a dispersion of returns. People who are still exiting investments at frothy mark-to-market multiples, returning liquidity to investors, showing that they've done that through intense focus on operations and value creation, not because the market's really robust. That's the way it should be. So I am cautiously optimistic that we're going to now perform because we put a ton of work into it. And it's been frustrating to see everyone do so well. When you buy a company and you're teamed up with the operating partner, how do you create that game?”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Portfolio companies and are convinced, yeah, I'm sure other people probably have to take their marks down a little bit. It's a tough economy, not us. We do need a resumption of a more constructive credit market to unlock a little bit of transaction flow. So you start to have more efficiency in processes. I think that's a little ways away. So what it means is people are going to have to have the courage of their convictions to over equitize investments and generate their returns through something other than financial engineering, which by the way has never really been a private equity calling card, to be really honest. But here's what I would like to say. We've been waiting for this moment for a long time because we work exhaustively on value creation planning and we've incorporated operating partners who are full members of our investment committee and in our carry pool and joined at the hip with us.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, it's a very different, more discerning market, but it's one we actually are very comfortable operating in What did you see in both the pricing and the financing markets? We are putting more equity in than we historically have, but I also just want to correct one misconception, which I just love. You can't read an article on private equity. They don't insert the tagline. Private equity firms acquire businesses mostly using debt. Show me one of those. I would love some of that. That's never been the way it is in middle market private equity. Certainly not the way it is now. So the financing was there. It was interested. It was constructive, but it was senior only through something like three-ish turns of EBITDA, not seven or eight or nine or whatever people out there reading about private equity think we do. And we put a lot of our own equity in and the management team and the seller's role quite a bit. So you see more creativity, you see more skin in the game, and that's exactly where we should be in the cycle. What do you think that implies for your expectations of returns going forward? That's a great question. The problem here is private equity professionals fall in love with their own.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of people. Think about that. We're in an environment where bankers who are partners are trying to be efficient with managed team's time, not waste a lot of time, and basically select from highly pre-qualified people for efficiency, speed, certainty, and pricing. One of seven, been there, we know Rezi services, we have a good reputation. Our team here is great. They downselected to two parties with substantial work yet to be done, such was their level of confidence of the remaining two parties. One of them would get there in a very real way. And that's exactly what happened. That is a very different process dynamic. The bar is very high to be included in a small handful of people. Contrast that with three or four years ago, the wider net you cast, the more people who are desperate to put money out the door, the better chance you had a silly outsized buyer who may or may not have been qualified to acquire the business, getting you that outperformance on an exit.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Multi site animal health platform, and it was complicated, complex, and it took forever. That's a much more, I would say, intensive labor, time experiment. You leverage everyone you've ever met with an expertise in the sector. You collect opinions, you collect expert advice, you draft the best athlete who can help you understand the business model, and then you throw as many arms and legs and bodies on the deal that the deal team can afford so that everyone has some kind of sense of ownership in a new deal. If you look at this recent deal, this Minnesota roofer, what are the deal dynamics in the market today? Fascinating. Very small group of people invited to meet the owners, owned by a regional smaller private equity fund. Talented investment banker who covers the space, knew the seven to ten private equity funds that have been around this sector, by the way. That is a minuscule number.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Models. So, what happens when you focus on a sector is you develop an expertise, you have pattern recognition, you draw on past experience, you compare, contrast, you use your historical diligence built up over five, six, seven years of focusing on a subsector, that flows very naturally into a due diligence assignment. So the team and our investment committee knew what to do, knew what to look for, knew what could look like, knew what great looked like, knew where this company stood, was able to uncover their deficiencies, their strengths, et cetera, using a well-worn path. The diligence bar is much higher on something where you're kind of prospecting and it's a new subvertical, for example. The first time we did a veterinary deal was for a business name pathway veterinary alliance, and it was in 2015. And while we had been around the vet space trying to find something actionable, the diligence was Herculean because it was our first such”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“After Stanford Business School, Eric Cantor only does industrial services. David Thompson does education services. So we are very focused by vertical. Otherwise, you don't really have street cred, and that's incredibly important. How does your diligence process work on a deal? Maybe walk through an example, think of a recent deal and the type of due diligence you did on it. Here's what's critical to your second question. The most recent investment we approved at Investment Committee and has signed, and so we'll close within the next few weeks, is in the residential services industry. It is a roofing contractor of all places, Minnesota, North Dakota, Denver. The diligence there was we were truly differentiated with an angle because we own already in our current portfolio two distributed residential services businesses that have very similar”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really trying to pick up on when you're talking to executives early and often what motivates them? What are they really like? I also lean heavily on operating partners who themselves were C-suite executives, whether CEOs, presidents, divisional vice presidents, they have an uncanny ability to connect with management teams and really assess them. And we've gotten programmatic and scientific about it where we'll have behavioral assessments as part of our due diligence. So it's all got to check out. How have you organized your investment effort across either those services horizontally or vertically? The concept of being a generalist is very out of vogue. Frankly, it's a tough story. So over the years, all of our partners have effectively developed niche vertical focus. So we only have one partner, Adam Shaw, who covers residential services and B2B business service human capital management. He's excellent. Steve Rogers has only done healthcare since”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have staffed our team for 15 years with senior operating professionals. So now 30% of our senior team is purely operations focused. So are these companies and is their leadership open to objective, sometimes difficult feedback implementation of strategic change? That's important to us as well. Is this a partnership? Are these people who really want to work with us and grow? How do you assess the quality of the management team, both their own capability and this lens that you said of are they willing to work with you to make change? I think if you're in the industry long enough, you develop pattern recognition. And I go back to some of my first principles in terms of what allowed me to survive early in banking when I was clearly out of place. I think the power perception, the ability to read a room, the ability to understand how people interact with others, what vibes are they giving off, there's a lot of in-person learning that you're”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Healthcare services and industrial services space. So starting with that type of business you're targeting, what are the other things you look for in businesses? Fragmentation, better AAM players in a C of B's and B minuses in a very fragmented market that has opportunity to kind of add scale through add-on acquisitions. So the ability to leverage organic growth through add-ons, whether that be a series of very programmatic acquisitions or whether it be four or five meaningful ones over the course of four years, we love having that additional lever of growth. Obviously, this goes without saying, but talented management teams that are open to new ideas and to augmentation of their existing leadership, are you open-minded to change? Do you want partnership? We do employ a very serious operational approach. I, as you can tell, I've shown you all my cards. Drop me in a factory. Hopefully I can find the exit. As a result, we...”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“And maybe start with, you mentioned middle market, you mentioned founder own businesses. What are your core investment principles that you look at when you're talking about? Focus on a few very sacrosanct things. Number one, we focus almost exclusively on services industries. It's a very large portion, 70% or so of GDP. From a top line perspective, organic growth, many multiples of GDP. We try to take the cycle out of our investing and look for things that are growing, ticking market share in industries that are winning. That could look like B2B services where you're taking pain points out of SMEs. It can be human capital management. It can be multi-site consumer services. In the past, we've been very successful and recently residential services professionalizing traditionally analog business models with modern sophisticated, scaled operations, sales and marketing, lead gen, leveraging digital technology to make these businesses better. That's important. We do that in the business services, consumer services.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“And David Miller, who runs private credit and equity within the investment management division, they've done a great job at insulating the investment teams from the volatility of an investment banking organization. However, in a rough environment with a huge balance sheet mistake, do I really think that our investment funds are fully immune from some of the macro noise that comes with being part of a big institution? Probably not. That's kind of the balance. I think we don't live to some of the same ecosies of standalone highly successful middlemarket biofunds. So we're not firing up the Gulf Stream to go down to Louisiana for a plant tour. By the way, I don't think that's a good idea anyway. Not a great look. So more restrained, I would say, in terms of some of the perks of what comes with being a private equity investor. But for the most part, it's a net benefit. Let's turn to the investment process.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our debt funds, our colleagues in trading desks, they want to help each other. And so we derive a lot of benefit from those intellectual synergies. I actually really like it. And I think our team really likes it. That's two. Number three, we can recruit amazing talent. Often we're picking them right out of the investment banking division, and I don't know how close you pay attention to what it's like to get a job at a Goldman or a Morgan or a JP Morgan these days, but we're talking about extraordinary junior talent, really impressive people, really great work ethic, and we put them in positions to fail or succeed, and we have our pick of the litter is what I believe. So that's all very positive. And I think that we really try to leverage and benefit from that as much as we can, almost on a daily basis. How about drawbacks? It is a large organization where we are not the biggest revenue contributor, far from it. So while the investment management division run by Denver,”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Rivers and mountains and hills that are the middle market private equity diaspora. I'm not taking pot shots because they're really good investors and they're very smart. However, it's dizzying. Who's good? Who's a good partner? They all look and dress the same. So here's a positive. They kind of know Morgan Stanley. They know it to be a very respected institution, particularly in recent years with some of what James Gorman has done post-financial crisis. The firm is in a great position. We have a very good reputation. We actually lead with that. And it gives us a conversation. It's a conversation starter. You may not love it, but you're going to talk to us and allow us a chance to explain what we do and what Morgan Stanley brings to the table. It's different. Number one, number two, this is a firm, and I can say this now having worked at Goldman, Apollo, and other places. The culture's fantastic here. It's collaborative, it's collegial, it's low ego. People from other divisions, whether it's equity research, macroeconomics, fixed income research.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Illiquid founder and family owned businesses where we typically take 50 to 60, 70 percent of the equity ownership, partner with them for a number of years, transform the businesses organically into acquisition. So a lot like freestanding Park Avenue, Madison Avenue, private equity funds. We just have a slightly different brand architecture and set of resources. I'd love to talk through the pluses and minuses of a business like this within a large organization like Morgan Stanley. Why don't we start with the positive benefits you feel you derive from being here compared to being independent? It is in middle market private equity when you're focusing on fairly tightly held businesses located around the United States, not in New York, not in LA, San Francisco generally. It is very difficult for a business owner to differentiate and distinguish between all of the varieties of rocks and trees and lakes.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Former Goldman partner named Steve Trevor to help restart Morgan Stanley's private equity business back in 07. And what I would say is what you learn is you really want to be in an organization not from the ground up, but pretty early days if you're going to have a meaningful impact and have some acceleration to your career. So when I had an opportunity to go to Morgan, which was a brand and an institution I valued and respected with smart people at an early moment in the restart of the private equity effort, that was really enticing. And I've been here since 16th year. So what's that business today? Morgan Stanley Private Equity is a pretty focused, disciplined middle market private equity platform. So despite the large backing support brand of a global institution like Morgan Stanley, ultimately we are trying to find smaller investments.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who someone I watched with awe in terms of commercial hustle and Hutzpah and just work ethic and now he's gone to phenomenal things at Redbird Capital. I was surrounded by a lot of talent. I saw what great and good really looks like. And I was last in in a group of five very talented peers in a class. I'm the guy who asked to come in. I read T Leaves pretty well and I thought my career might best advance somewhere else. So what happened from there? I went to work for Apollo for some former Goldman folks and then another guy named Art Penn, whom I admire very deeply who now runs a credit investment firm called Penn and Park and learned a lot about private credit. And I was brought in as kind of transitional equity slash debt so I could invest hybrid preferred equity adding a little bit of beta to their debt portfolio in middle market and really enjoyed it, but then got picked off by...”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Trade it up. I ever eager to, I think, keep learning and advancing. I asked if I could do a rotation in Goldman's merchant banking division. They're a very talented group of private equity investors, PIA was called. And what you learn at Goldman is when you raise your hand and leave the people who are your sponsors, you're breaking snow on your own now. And that was an interesting lesson. And I did get into PIA, which gave me entree to private equity, which really has always been a lot of talented bankers have always really yearned for the buy side. It's always had this halo. And sure, there I was following the sheep. And I was brave enough to ask for that and I got it. And I performed okay, but I learned and I was surrounded by some really excellent talent. Many of now who've gone on to tremendous success, Doug Lundal, who went to New Mountain Capital, mentor Jerry Cardinal.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Maybe late 2000. And it was the following. Thanks old economy, we'll take it from here. And it was an ad for something like Robertson Stevens or Hamburg Request or some high-flying shop. A year later, that looked really stupid. And the more of those kinds of humbling lessons that you can learn earlier in your career where markets change brutally and it becomes about surviving and not chasing what's hot at that moment, but taking a longer-term perspective to me that was Goldman Sachs, I could have gone to some startup and done who knows what and priced my options that eventually would have been worth a hamburger. But going to Goldman, to me, felt safe and it felt like a long-term career move and a place I could weather storms. So I adapted a pretty early risk antenna that could kind of sniff out maybe bullshit a little bit. and stick with things that have been around for a while. So how'd you get from Goldman to Morgan Stanley?”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“I love the culture. I love the training. I love the intellect. I love the absurdity of the lifestyle at that time. And I bought in pretty hard and went back there after business school, which was very unpopular in March, February of 2000. You were really viewed quite negatively and unimaginatively if you were going back into these when you could be working at pets.com. So circle back now just from that perspective of doing something that previously to that point in time had been very popular. It was kind of unpopular when tech was going wild. You could probably say the same thing of, say, two years ago, if not today. What did you learn from having done that? Well, you become deeply skeptical of trends that are suddenly these watershed moments where the future's not going to be anything like the past. And so leave all that behind. And what I can say left a great impression on me was the FT ran an ad.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“I also didn't know a lot. I was making it up as I went. Therefore, there came a time where I could either recommit to becoming a full-time member of Cowen's Technology Investment Banking Group, which, by the way, would have been going right into the tech recession of 99001, or take a pause and actually go to business school and teach myself all the stuff that I never learned. So I threw myself into the hottest cauldron I could find for a non numerate thinker and went to Wharton and majored in finance and minored in accounting. And I kind of did my penance and I loved it. From there, I had tons of optionality. And that really was very much a door opening career-enhancing step back for me. How'd you decide what to do coming out of Wharton? There were a lot of people I really liked and admired from college, friends, peers who were at Goldman. I did a summer associate position in the M&A Department at Goldman Sachs, and I absolutely loved it. I loved everything about it.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“And learn more, it becomes a little bit exhilarating. And I think I probably left a pretty positive impression, which then got me roped into some more interesting assignments. I was also fluent in French, and we had this great aspiration of opening an office in London to conquer the European tech scene. And I got tapped early and I went. So I went to London and helped set up an office. And I just kept raising my hand and moving up. What was your path from there forward into where you had today in private equity? There was a moment in which I asked myself, am I really going to be an effective technology advisor investment banker? I don't have a background that suggests that I should. I was learning a ton to this day. I can recite the geography of early semiconductors using field programmable gate arrays and early risk language that enabled things like ARM. And it was fascinating. But that was not going to be my niche.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Play out through those early stages of your career? I stood out probably as not having had quite a cookie cutter educational background. One of the things you learned in a liberal arts education, I tell my kids this today, is at its core is critical thinking. While it may not be the most analytical practice, if you can learn to think critically, process different kinds of information, assess what's true, what's not true, form an argument, support it. I did all that in a finance context, which was different. And I think I impressed upon people a level of maybe maturity, academic maturity, professional maturity, because this was new for me. I wasn't made to do this. And so I approached everything with almost a childlike intellectual curiosity and zeal. And that becomes kind of infectious even today when I work with younger professionals who have a spark where they want to keep pushing something and do better.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just much better qualified people with engineering degrees from Stanford and Cal Berkeley and more ever. But I could process a lot of disparate knowledge and make it cohesive and write about it. And so I became a go-to for taking a bunch of abstract technology lingo financial analysis and effectively generating content for institutional investors or for other intermediaries and do it in a really probably well-written way, which you'll learn is a lot of people really don't write very well. Today it's worse than ever. Maybe chat bots will bail us out of that, but people can't write. So if you can write early in your career, you can actually make a niche for yourself in distilling a lot of complex information into readable content. How did that thread clearly get you in the door, allows you to have some value early on that's different from the other people around you?”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Intent on going to law school. I did a year, and I'm grateful I did at a corporate law firm in San Francisco where I was surrounded by abject misery and despair and was warned against going into corporate law. And this is no joke. It happened to dovetail with a period of incredible expansion in Silicon Valley investment banking IPOs, Hamperton Quist, Robert and Stevens. It was the place to be. They needed warm bodies. I literally dropped my resume at Cowan Company. which was located at 345 California in the same elevator bank. And because of the desperation for people with a pulse, I got a job. And from there on, I really enjoyed finance and the investing culture and kind of stuck with it. What did you most take to in those early days? I was never going to lead the pack in terms of scintillating financial analysis.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“Thanks so much for joining me. My pleasure. Thanks for having me. Take me all the way back to how you first got into this business. Sure. That's a long way back, but I was absolutely an accidental transplant from a heavily liberal arts background in college. I went to Dartmouth College. I was an English and French major. I had no clue what investment banking was. I certainly had no clue what private equity was, nor did I ever intend or want to be in such a profession. However, through osmosis, I learned a little bit as we got toward junior, senior year about what my peers were going off to do, and it sounded very interesting, but probably not for me. A little bit more left brain and applied for some advertising and marketing jobs and did not get them went to France on a Fulbright scholarship and was wandering around Paris while my friends were at Morgan Stanley working 20 hours a day. A few years later,”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source
“I guessed on today's sponsored insight is Aaron Sack, the head of Morgan Stanley Capital Partners. Morgan Stanley Investment Management's Middle Market Private Equity Business Our conversation covers Aaron's path to Morgan Stanley 16 years ago, the strengths and weaknesses of investing under the umbrella of the bank, and his team's investment principles and approach across sourcing, due diligence, dealmaking, and operational improvements. We close discussing the current market dynamics, competitive positioning, and Aaron's favorite investment example. Please enjoy my conversation with Aaron Sack.”
2023-04-27 · Capital Allocators · Aaron Sack – Branded Middle Market Investing at Morgan Stanley (Capital Allocators, EP.311) · IDENTIFIED FROM THE TRANSCRIPT · source