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Jonathan S. Lavine

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2022-04-08

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2022-04-08

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1. “So we clearly didn't see as much distress as we thought we were going to see because we thought everything was going to be distress. I mean, when you put yourself back in March of 2020, nobody had any idea what was going on. I remember being on debate where we were wondering whether we would have our offices closed until Memorial Day or Labor Day.”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

2. “Time working with companies all over the globe on very structured sources of debt and capital to help them make sure that they could ride through a second wave, a third wave.”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

3. “At the expense of riskier assets, and if you got the default picture correct, which fortunately we did, and the team did a great job thinking about how much money companies would need and how they would access cash if they needed it. And we said we could take a little more risk. We are not going to just buy double B's and ride the interest rate decline waves. And that was the right decision. And then lastly, events like 08 like 2020, like the dot-com boom, they leave some scars. And we saw a lot of companies that had just gotten through that wanted to shore up their capital structures and said, you know what? Having too much senior bank debt with covenants or not enough equity or perhaps they wanted preferred stock, but we spent a lot of time.”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

4. “Because they're averages. Secondly, there were different needs by geography, and those needs continue today, where in Europe in particular, banks still had to shed lots and lots of bad assets, and it became increasingly important to clean up their balance sheets. In the U.S., there were a lot of industries, airlines, restaurants that did not recover the same way. We obviously made a very high-profile airline investment with Virgin Australia in Australia, which we bought in partnership with our private equity team out of bankruptcy. While there was a recovery, there was some sense that people did not fully believe it was over. And therefore, there was a reticence to deploy new capital. We saw periods of time where the safer assets were way overpriced.”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

5. “So, the credit markets were as volatile for a while as the equity markets, although I always remind people volatility implies going up and down, and they were going straight down. And if at that time that as a leader of the firm and the managing directors who had seen different cycles before had to make sure that the team focused on first principles, what would happen over the long run with these companies be able to pay us back? How much cash could they burn? How long could this last? And we were able to find opportunities and had near record deployment during that period of time because the recovery was industry specific. So not everything came back at the same time. As you know, indices, stock market indices, credit indices,”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

6. “When we may decide, you know what, we need time diversity or industry diversity or we're not entirely certain what the vision ahead is. And we will slow down a little bit. And I think what we do really well philosophically is we understand the difference between pricing risk and understanding uncertainty. There's famous economist named Knight who wrote back in the 20s and 30s about understanding that trying to quantify the difference between risk and uncertainty. And you can price and quantify risk. You have to learn to live and mitigate uncertainty. And you need to understand the difference between the two.”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

7. “I use a driving analogy a lot to try to explain what we mean about this. You can cause as many accidents going 15 miles an hour in the right lane on a highway as you can driving 125 miles an hour in the left lane. You have to know when to put on the gas, when to slow down, and you drive differently on different stretches of highways at different times during the day. And that applies to investing. You have to know that sometimes you have a view of the market that may be different than others. You have confidence that that view is well considered and analyzed. And therefore, you might choose to put on a little more risk. You may choose to lean in when everybody else is running away. There are also other times.”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

8. “The co managing partner role is the equivalent of being the co-CEO, but our firm is a partnership. And we chose not to put the title CEO on the leaders of the firm because it is a partnership. We are lead partners. We do not run the firm top down. We are an old-fashioned partnership where the voices of all the partners matter. Everybody is a leader and everybody needs to contribute. That said, it falls on myself and my co-managing partner, John Coniton, to help drive strategy at the firm, to help make sure that our expansion is being done in a thoughtful way. There's standards across the firm. And as a real organizing force among our partners as we deliver Results for our investors and drive the business forward. It's really a reflection. Sorry.”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

9. “It was all about did we pick good credits? Were they paying their interest and would they ultimately be capable of paying back when they were supposed to?”

   2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

10. “One of the important things in credit is you get paid back at the end if you made good selections. Nobody likes price volatility, but I highlight that all those things I just described had no impact on how much pizza people were buying. And therefore, we lent money to a pizza company, and those bonds and loans went up and down. But at the end of the day, that company went public and we got paid back. Realizing to filter out the signal versus the noise or filter out the noise versus the signal is a really, really important part of credit investing. When we do distress investing, that's more of a hybrid and you think more about enterprise value and what does it take to get paid back. But in the part of our business that's a lending business, and back then we had mostly just the lending business.”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

11. “It's interesting. So I still remember the first bond trade I did. I bought Riverwood bonds at about $95 on the dollar. And they went up to about $105. And I said, wow, this is going to be an easy business. There were several things I did not realize at the time. One, I knew nothing about trading, and the first thing we did in our first year is hire a great trader, a guy named Jamie Kellogg, who was with us for 20 years. And two, people forget that in August of 1998, Russia defaulted. And that put a shock wave through the bond markets. So we were already dealing with turbulence when the dot-com bubble hit. And then shortly after the dot-com bubble, obviously we had 9-11. And what we learned through that period of time is actually”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

12. “Story for why they picked me is I think Mitt thought that I was senior enough to be credible and young enough to be expendable if it didn't work. But fortunately we never had to test that hypothesis.”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

13. “A debt firm, and we didn't want people to misread when we were buying the debt of LBOs sponsored by other sponsors. We put a different name on it. It's always been part of Bain Capital. But Sankey is a lighthouse in Massachusetts, and we thought stability was a good symbol. And we kept that name for a while because we weren't sure how people would think about us buying their debt. Ultimately, obviously, firms like ours having debt affiliates became quite mainstream. And in about seven years ago, we changed the name to bank capital credit. Our public equity business had the name Brookside. We changed the name of that to Bain Capital Public Equity. And, you know, I joke that that is the official story. The unofficial”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

14. “Other or a few of our peers or competitors were doing the same thing, but we were one of the first to do this. And although the equity markets were hot at the time, we invest for very long periods of time. And therefore, it wasn't like we saw a two-year window or at any time one asset was better than the other. We thought that we had a sustainable advantage in this space. The market was changing profoundly at the time the concept of a syndicated bank loan was very, very new. CLOs weren't even around yet. We did one of the first CLOs in 1999. And we decided that institutionally it was worth doing. That said, it was so unusual for a private equity firm to have particular”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

15. “The firm believed that what we did, our approach to investing was applicable to multiple asset classes. And we made the strategic decision in the mid-90s to expand both across asset classes and geographies, not all at once. So in the mid-90s, we founded a public equity business, and I founded the credit business. And the general belief was that we had been successful in investing in the equity of leveraged companies. And therefore, you would think that we would be able to apply that skill to the debt of levered companies. My experience from Drexel and the fact that I had worked on a bunch of our financings previously at Van Capital made me a logical choice to start that business. At the time, there were really no”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

16. “I think it did in my heart. I think there were two things. I think it played better to my skill. Certain entrepreneurial bent, the ability to combine what I had learned at Rexel. As a consultant, and that is the heritage of the firm, obviously the firm started as a spinoff from the consulting firm Bain& Company. So the approach to investing made sense to me. It made sense to me on a fundamental basis how you think about looking at companies. And it was also differentiated because at the time, nobody was approaching investing that way. While the firm was quite small, there was an energy and”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

17. “We're trying to quote beef up a little bit. I think the firm had fewer than 20 investors. And we want somebody with consulting and banking experience. Are you interested in talking to us? And I literally came over on a Friday, met virtually everybody, came back the following Monday, met Romney interviewed me and made me an offer. And I tell people, I accepted it because it felt right.”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

18. “The second year of business school, because my clients were local, I was able to actually work part time in that office the second year of business school. I had accepted the offer. I went back there. My wife actually was working at a different consulting firm. She was at BCG. But there was part of me that always thought I would get back to some form of finance or investing. being capital in early 1993 was raising its first institutional fund. Historically, we were less than 10 years old and historically had basically had high net worth funds. And we were jumping from $120 million fund to a $300 million fund, which at the time seemed enormous. And I got a call from somebody I knew here.”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

19. “So, when I went to business school, a couple of things happened. One is because I didn't have traditional undergraduate economics or finance or accounting, I really only knew about finance because that's where I wound up. And so I learned so much more about the strategic aspects of business. Second of all, I met my wife the third day of business school, and we discussed where we wanted to be, and we wanted to be in Boston. And at the time, there weren't a lot of finance jobs in Boston. And I had the good fortune of meeting the people from the McKinsey Boston office, which was quite small at the time. I was able to go there as a summer, really found the work interesting, and probably even more so the people were truly extraordinary people, great teachers, really, you know, intellectually curious.”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

20. “Worked at Drexel Burnham just short of two years between business school and college because obviously Drexel didn't make it the full two years, but it was an amazing experience before I went to business school.”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source

21. “Interestingly enough, I actually didn't study economics as an undergrad. I studied political science and English literature. And I took one economics course, I think that that's why I'm so good at always reducing things to basic supply and demand, because that's how far I got. And I was into Columbia Law School and I was planning on attending. And a friend of mine said, you know, these investment banks now have analyst programs and they claim they're just looking for smart people and you don't need to know anything. And I thought I was smart. And I still wasn't sure. I said, well, I'm going to law school. And I'll never forget. She said to me, well, there's free food. And I said, well, free food, I'll definitely show up. And I literally showed up, interviewed with a few places, was fortunate enough to get some offers, and I decided to go to Drexel Burnham.”

    2022-04-08 · Masters in Business · Jonathan S. Lavine on Private Equity Investing (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source