YouSaid · the spoken record

Chuck Davis

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73
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2021-08-09
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2021-08-09
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1
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podcast

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  1. “You saw some kid Pole Vault 12 feet. I think you'd be blown away. How did that kid go full speed down a track with enormous pole, sticking a little hole, bend it, and jump his whole body over twice as high as his height? And I would say to you, Ted, that's great, but that kid's struggling to make his high school track team, the world record is over 20 feet. When we meet an owner-operator in one of these segments, and let's just say for argument's sake, there's 20 competitors in the sector.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Well, everyone here, there's about 60 investment professionals supported by a tremendous team that includes about 120 people in total in finance and accounting and legal and compliance and IT. The investment professionals are all assigned to a small handful of these subsectors or sectors. And their job, we joke that we do in three or four or five years what McKinsey does in three to five weeks. We basically go out We call on all the companies we go to the conferences we read the newsletters we meet with the competitors, the suppliers, the customers, the McKinsey consultant that knows the business and everyone we can meet with and we are looking for what we call the 20 foot pole vaultar and the 20 foot pole vaulter Ted is if you came from Mars and I took you to a high school track meet and”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “That was really caring and sharing and teamwork and camaraderie oriented. So everything at StonePoint from the compensation structure to the sharing of the carry to the way businesses are assigned to the fact that every deal we try to do has a devil's advocate. Everyone here feeds from the same trough. Everyone's in this together. The concentric circles of those subsectors, and we're doing deals today that were in parallel universes to the things we were looking at 20 years ago. And that has added enormously to our capability and flexibility where we put our clients and our investors' money.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Like general practitioners in medicine and the like, we thought the industry was going to evolve. So we wanted to specialize in financial services broadly defined. We definitely put enormous emphasis on the owner operator. Again, when I look at my dad and the way he backed owner operators, that was really critical to us. We decided that we wanted to hire and train and mentor and build from within because people that come laterally have a different way of doing things and we wanted to have this elongated bass backwards investing where you do your homework ahead of time and you really know what you want to do. And then when the opportunity comes, you can move instantly. But when you see an opportunity you haven't done the multi-year study of, then we're pretty plotting about that. And we wanted to do it in a culture.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Well, again, a lot of debate and discussion among Steve, Jim, Nick, David, and myself particularly, with others, and by the way, many people have now contributed enormously to the evolution of that question because we continue to evolve and the segments and the sectors that we cover, which are now 70 different subsectors inside of 12 general areas, that has evolved. And basically, we started with a number of key concepts. And I'll just give you a handful of them. And obviously this is an oversimplification. We wanted to figure out what we would go after. And we wanted to start this proactive multi-year outbound targeted search. We really wanted to specialize because it seemed like private equity was like investment banking where it was going into specialization and generalist funds.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Investors and the platform change the name from MMC Capital to Stone Point Capital and take the ownership of the firm. And that was in many ways a wonderful thing because we now controlled our own destiny and Marsh was a great partner and we certainly had a good experience with them and they're good friends to this day. But that was a pivotal event in the development of Stone Point Capital.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “That's really how the financial services segmentation developed. It came from a pretty narrow product and was broadened from the 1998 period. We were very lucky when we joined that Jim Carrey was here, had been here briefly, and he's spectacular and partnered today. And we went out and recruited David Wormouth. And so David and Jim, Steve, and Nick and I really set the strategy in 1998, 99, 2000 that has basically made us what we are today over 23 years. We were happily working inside of the Martian McLennan Network until 2004 when Elliot Spitzer sued Marshall McLennan for bid rigging, which we had nothing to do with, and so we were given the opportunity to spin out, take the track record, the team, the...”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “And that fund was mostly invested by the time we came in. So Steve and Nick and I joined. And we joined with the understanding that Trident had a one-trick pony. It was the best trick in the rodeo by far. They were the best provider of capital to the property cash insurance industry. But there were many, many periods of time when that was not necessary, when the wind didn't blow, the earth didn't move, rates were not compelling. So we made a deal with Marsha McLennan that we would take on the Trident funds if they would let us broaden to all financial services. So we could do bank deals, credit deals, processing, brokerage, distribution, claims adjusting. They were excited about that. And we joined.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “We didn't really make that decision, it was kind of made for us in the sense that Marsha McLennan had a private equity firm that they owned jointly with JP Morgan. And it was set up to basically put capacity into the property casy insurance market after a hurricane or an earthquake or there was a dislocation. And they had set up de novo companies in the 80s called ACE and Excel in Bermuda. And then they set up a company called Mid Ocean after Hurricane Andrew in 1992. And then in 1994, they said, why don't we have a fund? Because it's taking us a year to raise the money and set up a company. If we had a fund, we could address the dislocation, the imbalance quickly. So they set up a fund called the Trident Funds. And it was a $667 million fund.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “And third party investors and the like, and that's how we ended up combining with Marshall McLennan to take on the Trident funds.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “I was one of the happiest partners at Goldman Sachs, and I definitely could have stayed there for my whole life. And I believe that in many ways I was too in love. And I ended up spending three and a half years as a senior advisor working on a handful of projects for Goldman. And during that three and a half years, Steve Friedman, who had also left the partnership at Goldman, he had run the firm. And Nick Serbe, who was an analyst that had rotated out of the three-year analyst program, the three of us had a little virtual firm. We named it Catamount Capital, the Vermont State Animal, believed to be extinct. But there were three Catamounts walking around. And we were doing a lot of really interesting deals with our own money without any sort of resources beyond ourselves. And we did that for the late 1995 up until 1998. And it was going well. We were having fun, but we were thinking it would be good to have offices and computers and someone to get you a cup of coffee.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “themselves and went to their boss for their bonus, Goldman divided the clients up, gang tackled the opportunity, specialized quicker than others, and I thought that model really fit for private equity, which really is the way StonePoint is set up today.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Of a proactive multi-year outbound targeted search, and it's kind of slow twitch muscle investing because you spend years studying a sector, meeting people, interacting with them, learning, adding value, developing relationships before you ever write a check. Goldman's model was the same in the sense that you called on companies for years and years, and then all of a sudden they got something to do and you were the last one to call on them or they had your name and number or they felt comfortable with you. And Goldman started getting more and more and more business and competitors are wondering how Goldman was doing it. And a lot of it had to do with a multi-year relationship development plan, which was very expensive because you had duplication of functions on Wall Street. Most people went out, found a piece of business, and then processed.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Well, one of the brilliant things that Goldman Sachs did, and John Whitehead was the father of it, was separating relationship management from transaction execution and actually having a group that was called the New Business Department cold calling companies. And no one did that back in the 50s and 60s. You had a relationship with your banker and you came to Wall Street and asked them how to finance your next capital expenditure. Goldman was actually cold calling. And the fact that the firm was proactively outbound targeting searching for clients really was a model that moved the firm from a good firm to a firm that really had a spectacular multi-decade run. And the lessons from that at a stone point where we have a strategy.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “I felt more comfortable in than others. And once you switch from the corporate finance department because Goldman separated relationship management from transaction execution. So after spending four years executing transactions, I was moved to the new business department where my job was to build relationships and bring all the products and services of the firm to bear to meet the client's needs, then your role becomes quite different and that was a role I was better suited for in many ways than actually doing the blocking and tackling of the technical aspects of the deals.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “You go to a Goldman now, you're in a product group, an industry group, or a region. Back then, that didn't exist. And so there was a nation merger department. There was no capital markets group. And basically you worked on all types of transactions for all industries and all companies and all geographies. We didn't have a big international business in the beginning, but eventually all of us got involved in lots of different things. Everyone tended to find areas of specialization and focus. One of the jokes was you do one deal in a sector and you know something, you do two deals and you're an expert and you do three deals and you're the dominant player in it. And so my experience evolved from all types of companies. I tended to spend most of my time in the United States, which most people did back then. And eventually there were certain sectors.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Analysts, there were no computers, everything was done by hand. The young people got to go to the board meetings and got to be involved with the CEOs and CFOs on the most important decisions they made. So for years and years, getting those reps and that cumulative knowledge of how people make decisions and then watching those decisions play out favorably or unfavorably was just an amazing experience. And because the firm was so small, everybody at that time got enormous amount of exposure and reps to those kinds of situations. And so it was invaluable. And I must say, I loved it. I loved virtually every minute of my 20 plus years there.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “I think I was very lucky to select Goldman because in the mid 70s they were not the firm. They became in the 80s and 90s and I can't say I had any clairvoyance. I just felt like there's a buzz, there's a vibe, there's an energy at this firm that doesn't seem to exist at some other firms. The rigor at Goldman and the creative tension and the desire to be successful and the competitive nature of the business was extraordinary, but the internal camaraderie at that firm back when it was small and private in the seventies and early eighties really was no different than a great sports team and it was a huddle you wanted to be in. It was a team bus you wanted to ride on and I just learned so much from the people there who would take you under their wing and mentor you and then from the clients and the great thing about investment banking, particularly back then.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “That's a good question. I think it was part of it was maturity, part of it was metabolic makeup, slowed down a little bit. And I think most of it was I discovered that when I like something, I could concentrate and be good at it. When I didn't like something, I had a hard time. Not being bored or not getting uncomfortable and being unable to focus. And when I found Wall Street and finance and business and numbers and the same competitive environment that I found on athletic fields, which I loved sports, then my interest became very much a passion and I was able to concentrate and focus and hopefully prevail through some challenging experiences.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “And then there were some really good businesses that seemed to grow and develop. But the second thing I learned from him was the people are even more important than the business. There were many people that he backed in tough businesses that did well. And there were many people that were in good businesses that were not capable and they didn't do well. So those lessons were just invaluable. When you ask about my early education,”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Much a collective effort of a lot of people. I was very fortunate to grow up in a small town in Vermont. My father was a banker and he started as a teller and worked his way up to be the CEO. And I had the privilege of going around with him to see his clients. And I learned so much from him because he would tell me here's who we're going to go see. Here's what he's like. And then I would watch him talk. I'd be 8, 10, 12, 14 years old. And then after we'd leave, he would explain to me what just happened. And I learned a couple things that were just invaluable later on in business life. One was there are easy, good businesses and there are tough, difficult businesses and some of the difficult businesses my father dealt with were farming contractor construction people one location restaurant.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “To. By the way, today's story is about Stone Point Capital, and it's really a story about team and collegiality and cooperation and gang tackling. So I'm happy to talk about myself a little bit, but really StonePoint Capital is really.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Private equity masters miniseries concludes with Chuck Davis, the CEO and chairman of the investment committee at Stonepoint Capitol. StonePoint has invested $21 billion across 135 businesses all in the financial services industry. Prior to joining StonePoint's predecessor entity at Marsh McClellan 23 years ago, Chuck was a partner at Goldman Sachs where he spent the prior 23 years culminating in serving as head of investment banking services worldwide. Our conversation covers Chuck's time at Goldman Sachs, his transition to private equity, and the formation of Stone Point Capital. We then turn to the firm's multi-year outbound targeted search for the best executives and financial services, work with portfolio companies, activity in the asset management sector, and management of StonePoint.”

    2021-08-09 · Capital Allocators · Private Equity Masters 8 – Chuck Davis – Stone Point Capital (Capital Allocators, EP.207) · IDENTIFIED FROM THE TRANSCRIPT · source