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David Abrams

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2023-03-23
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2023-03-23
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  1. “So when you moved it to Apollo, you had that principal mentality, that ability to commit capital. But at the time, as you said, you wouldn't have had the broad infrastructure of a global business like Credit Suisse. How did you fill in the aspects of what you had doing inside of a bank when you went to this nascent business at Apollo?”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Business. That was what I'll call pre financial crisis, post financial crisis. You can't do this anymore. That's why these businesses don't exist inside banks. So that was really the biggest issue for us.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “At Credit Swiss, when fundamentally they don't want to own these assets. And a year later I took my entire business to Apollo, which was transformational, but I was in the right place at the right time. Apollo at that point was basically a US private equity firm. It just opened an office in London. They were trying to expand. And when I started talking to Apollo, it was pretty clear that building this business inside an alternative investment firm, which is used to understanding making long-term investments in private equity and how to acquire that kind of capital, it made a lot more sense. And over time, less and less of the banks today have smaller prop in principal businesses. This was a long time ago before at least a financial crisis and a lot of the regulation. So some of the big banks were run like hedge funds. I mean, look, we saw what happened. Lehman went out of business. Bear went out of business.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “The benefits are if you can find a way to leverage all the different parts of the organization, you can build a business where you really have a lot of other people that are helping you build it. And that's one of the keys to starting a business, right? You just can't hire 50 people to do everything. So we will leverage it off at the private bank. We were leveraging off of the investment bankers to make introductions for us. So that was definitely one of the advantages leveraging the infrastructure. The disadvantages of being inside, at least an investment bank, were for us capital when you're looking at making investments in distressed assets. Banks are normally trying to get rid of assets off their balance sheets that are illiquid and problematic, that don't require 100% capital reserves. So that was ultimately one of the issues that became a seminal moment for me was how can we keep building a principal business?”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Amount of distress in non-performing loans they had in their balance sheets. And there was a shift in this part of the distress market. Originally it started in Asia in the late 90s when you had financial crisis in southeastern Asian countries and then it moved up to bigger economies like Japan and Korea. And most of those markets were dominated by U.S. investment banks that were using proprietary capital to buy assets off the financial institutions' balance sheets. And they built really big businesses. And then that trend started happening in Europe. A lot of the advisory teams and some of the investment principles moved from Asia to Europe. At Credit Suisse, we just had a competitive advantage in Europe, Germany specifically. And so I said, let's focus on that market where we had an advantage versus other markets.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Well, it was really simple. It started with regulatory changes. Germany had state guarantees, which meant they were triple-A rated no matter what their balance sheet looked like. And when the EU was formed, the concept, which still exists today of a level playing field. So governments just can't subsidize an industry in their country because it's unfair to the other industries in other countries. So when those federal guarantees went away, it was a little bit of the wow. Germany has these problems, everybody else has them too. But this was the first wave of what you'll call the, it wasn't even called the sovereign debt crisis, and it was just deleveraging. So this was the early 2000s. And those trends continued, and you saw some other green shoots. And then obviously what happened, the financial crisis was just the next wave. And because banks are regulated, it was easy to see the”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “This is the team I'd like to hire to build out our German distress business. The messaging was, if you really want to do this and your wife Nicole is okay with it, that's fine. So all of a sudden we're in the German distress business and my trips to Europe became not just a couple days a week, it became a very big challenge going back and forth with three kids on the age of five building these relationships in Germany and trying to understand how you can find ways to take advantage of what was happening across the German banking system. It was an unbelievable learning experience, but I also realized that if I can do this, there's not a lot of things I can't do. And it takes a lot of work, but we put a really good business together and ultimately I moved to London in 2005 with my family. Because it was just too hard commuting.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Business while sitting in my seat at 25th and Parker Credit Swiss. It wasn't really a formal plan, but I started investigating it by traveling over to Europe a couple days a month and then realized with Germany being Europe's biggest economy, that was the market that I was going to plant my flag in. I don't speak a lick of German, tried to learn it, was not easy. So I started commuting to Germany. And one day I walked onto the trading floor at Credit Swiss, Levin Madison Avenue, and I had five people following me. And they were all from the distress group of a bank called Commerce Bank. So this is 2004. And I walked into Bennett Goodman's office and Doug Ostrover came in and I introduced them to them barely spoke English. And I basically said,”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “And we just had a great business, and it was a lot of fun. I have lifelong friends from there. Most of them have gone off and done really great things. But that had set the stage for the future growth of my career. I saw this opportunity emerging in Europe as the European banks were forced to delever as part of the formation of the European Union. And it was a market that didn't have transparency. It didn't have liquidity versus the traditional markets I had been involved with where the SEC was instituting more liquidity and transparency through trading system called TRACE. So I made a decision that the business I had been involved with in the growth trajectory was not in my favor and that I needed to figure out what the next stage of my career was. And I literally decided I was going to go build a European destruction.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Assets in the market. It just seemed like the guys that were there, I knew we had a lot of pieces and we could come in and we could just build something really special. And when I look back on it, I feel as if in that period it was kind of getting into the 90s. I felt like I was playing on the Michael Jordan Chicago Bulls who always use the analogy. I was very happy to be John Paxon or Steve Kerr or Luke Longley. We had a bunch of people that were Michael Jordans.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “A hospital and said to Nicole that I changed my mind, I'm going to DLJ. I don't remember the conversation, but I don't think it went over too well. I went to DLJ with nothing more than we got a great business. Here's the phone. Here's how we're going to do it. Let's go build it. And it was one of the best decisions I ever made. And we built an unbelievable business at DLJ, which ultimately was then absorbed into Credit Suisse, which is an even bigger, better business. And that really led to all the future things I did in my career. What caused you to change your mind? Doug's pretty persuasive. I think it was the opportunity to be more of an entrepreneur. Bear Stearns had a really elite distress group. They had come out of the financial crisis. They were already actively in distress. And DLJ was really a leader in high-yield bond underwriting, but they didn't have a business that took advantage of distress.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Want to give you a really quick anecdote. I actually had accepted a job to go back to Bear Stearns to be their distressed efforts. This is 1996. My oldest son, my first son was born leap year day 1996, so February 29th. And I had accepted a job to go to Bear Stearns in the distress group. And it actually had a guarantee on it. And for someone that was becoming a first-time parent, I was like, wow, this is great. A little bit of stability in my life. There's a gentleman who was running the business at DLJ named Doug Ostrover. And Doug had called me up the day my son was born. And he said, before you formally accept the job, come down to DLJ, which at that time was all the way down on Broadway near Wall Street. So I took the subway down. I think it was the evening my son was born when all our parents were in the hospital. I needed a break anyway. Came back.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Well, it's interesting. I actually worked for Drexel when I was in college. I spent a year working on the floor of the commodities exchange in New York. So think of trading places. That's where I worked. It was really an unbelievable experience. I was a runner working for Drexel. And then when Drexel went out of business, I was connected with some of the people that set up new firms that came out of it. And I thought it was a good extension of investment banking experience to go into the restructuring world. And that led to the career path. But the firm the Argosy group was definitely not a brand name. It was a small firm. There were seven of us when I started. And ultimately, that business many years later was purchased by CIBC.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Did financial restructurings of all these highly levered deals that came out of the junk bond boom. And that went on for several years. And then I migrated into distress sales and trading. And that became my next career path, having had the valuation and restructuring experience and then started getting involved in principal investing and trading.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “I was very early. I was on the sidelines when the world blew up in 89-90. I remember being around the first time I saw somebody lose their job. I was at Bear Stearns. And it's a really unsettling thing for a 23-year-old to see a vice president that you're working with not be around anymore. And that was my first taste of how it really works, quote unquote, the real world. But as our business slowed down, had started seeing what was going on in kind of a new industry, which was the financial restructuring world. And I actually went to go work for a boutique, which is a spinoff of Drexel. And some firms like Apollo became principal investors. And the firm I went to called the Argosy Group was a financial advisor restructuring firm. This is for Hulan or J. Alex even existed.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “And their business was buying up the assets that they had been the investment bank for that actually raised the money and issued all the junk bonds. And you can go through a long list of firms that were really founded out of the financial crisis. Many of them came at a Drexel and took advantage of an opportunity. And then once that happened, people started realizing as the markets recovered, we can do the same thing with fresh pools of capital to buy assets and lever them up. And that really became when private equity started to boom. What was your path watching this?”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “David, great to see you. Ted, good morning. Why don't you take me back to your early days getting into the financial world? Wow. Late 80s. Pretty much a different world. When I talk to people about that, I say, oh, did you ever see Wall Street? They like Wolf of Wall Street. I'm like, no. Wall Street. It's got nothing to do with the Wolf of Wall Street. But when I started the industry, there really was no alternatives industry per se. My career began as the savings along Crisis Hit. Drexel went out of business and there had been a lot of buyouts done and leveraged deals, but they really weren't private equity funds. I saw the formation of capital in the alternative space really taking advantage of a lot of the problems that had emanated from the junk bond crisis. And a firm I eventually went to work for Apollo came out of Drexel.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “My guest on today's sponsor Insight is David Abrams, the founding partner of Velocity Capital Management. Velocity is a newly formed firm that focuses on investing with founders to build best-in-class sports, media, and entertainment companies. Our conversation covers David's background, long experience in distressed investing on Wall Street and at Apollo, and personal investments in sports-related businesses that led to serving as chief investment officer of Harris Blitzer's sports and entertainment. We then turn to the formation of Velocity, the firm's focus, deal sourcing, diligence process, value-added ownership, and example of its investment in the X games. Please enjoy my conversation with David Abrams.”

    2023-03-23 · Capital Allocators · David Abrams – Sports Ecosystem Investing at Velocity (Capital Allocators, EP. 303) · IDENTIFIED FROM THE TRANSCRIPT · source