YouSaid · the spoken record

Paul Salem

lines on the record: 82
first: 2021-02-01
most recent: 2021-02-01
sittings or episodes: 1
sources: podcast

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“By five o'clock, I had called some of my best contacts, and I had raised $1.1 billion to go buy debt. And all I did was email a list of 10 portfolio companies. They could have gone out and bought it themselves if they wanted to, but we brought them the idea. And they said, yeah, we'll invest in your debt fund. And that's how we got into credit. And I can honestly tell you, I had never bought any debt in my life. We're sellers a debt. So I called up my friend Tommy Gann, who was at Deutsche Bank, and I said, Tommy, I just raised $1.1 billion to go buy debt. You interested, and before I even said interested, he said yes.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“18 to 20 percent IRR. And if you're sitting at your desk, I'm going to send you an email right now. I'm going to list 10 provenance portfolio companies where the debt's trading. If we just go buy the debt and it trades back up to part, you're going to make an 18.6% rate of return. I remember that because that's exactly what happened. We returned 18.6%. And I'll never forget this investor. He said, you know what? I'm a $50 million investor in your $12 billion fund. How about if I give you $200 million and start a debt fund? Like, okay, I said, Yes, let's do it. So that was on a Wednesday afternoon at 2 o'clock.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“We had this new big $12 billion fund, and we were trying to figure out how to deploy it. And our own portfolio company's debt was trading at 60, 65 cents on adult senior debt. And this is 2009. And I called up one of our LPs and I said, he's a close friend. And I said, listen. We have this $12 billion fund. Why wouldn't we just go buy some senior debt? No one knows the company's better than us, and I can get you”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so as you write bigger checks, you're writing, you're investing in later stage companies. And so we kind of grew up that way. And it's funny, I look back a lot and say, okay, was it smart to grow so fast? And I think the private equity firm that has outsized returns and stays at, pick a number, a billion dollars and never grows, it's hard to attract young talent because the older folks get a little embedded and it's hard for the younger ones to break through. So the only way they can break through is if you keep on growing the firm. And that's the key is you got to keep on growing the firm. So people who say, well, we show discipline and we don't raise more money than we can manage. Most great firms just keep on getting money thrown at them. It's almost hard to say no. And so we kind of grew up with that. And then back in 2007, we had raised a bunch of money and then the world fell apart in 2008 and 2009. And so I think just good investment.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was probably one of Goldman's best deals ever, too. And yet we only committed 10 million. And it was that arrogance of that other firm that they missed out on one of the best deals in private equity history. And you still see that today because there's so much money. People are always trying to elbow everyone out. It used to be a lot more collegial back then. And now it's a little more competitive. It's a lot more competitive now. And it's just massive amounts of equity chasing deals. So I think today it's even more important you need to have some kind of specialty niche. You just have to.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so it's a great example. We were never big enough to usually just write the check. So we always had to partner with folks. And so we would win over the entrepreneur before any non-specialized firm. And a great example is Goldman Sachs. We did more deals with Goldman Sachs PIA at private equity division of Goldman Sachs than any other private equity firm because they knew we weren't a threat. We would win over the entrepreneur. It was funny, the very first deal we did, my partner Jonathan Nelson did it with John Stanton. He committed $10 million. He's the first person to commit to this guy, John Stanton. And then he went to two other firms. John was trying to raise $70 million. And one of the firms says, we'll do the $70 million or we won't do it. It's either us or nobody else. And then Goldman said to him, well, we don't know the problems, guys, but if you want them in for $10 million, sure.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Curious what the competitive landscape was like throughout in that you were specialists, but these were also very good businesses that other private equity firms might want to buy participate in. So how did that play out over the years?”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Go head to head with a New York well known private equity firm, we would always win because we were the nice guys. I always thought, you know what, we're going to be partners with these people. You better like them. They better like you. And it was amazing how private equity gets a bad rap because of the outsized egos. And the truth is... Some of it's well deserved. And we just made a living being the nice guys. And maybe because we were in Providence, Rhode Island, and we kind of kept a low profile and we just did our job. And that worked out pretty well for us. And then we moved over to London and still at that time back in 1999, there were no specialist private equity firms. And so we were fishing in a pond that was just ripe for picking.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the funny thing is hiring folks to Providence, Rhode Island wasn't the easiest thing. Plenty of people to hire in New York and plenty of people to hire in Boston. And so my pitch used to be to the young guys and women. I said, live in Boston, take Amtrak. And that's what they used to do. And to this day, they still, a lot of them commute from the Boston area. Because when you're young and single, Providence is a great place to raise a family, not the greatest place to be a young buck. And so it was actually hiring and growing the firm. It wasn't the easiest thing, but we made it work and we would never get the person who got the job offer from Blackstone or KKR. And we actually liked that. We got the hungrier and scrappier person. I did a ton of the hiring. And you hire a certain type of person, you can build a culture. And we always had this culture where we were kind of known as the good guys. We were the little guys from Providence. And whenever I was...”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Even Warren Buffett says size is the enemy of returns. But it's okay because if you make a double digit IRR in today's world, you're doing pretty well. But I think size is hard to manage those outsized returns. And I've never done the analysis, but I'm sure plenty of folks have done it. When you go from fund one to fund 10, you're going to have a dip in there. And you can look at all the firms that have had those dips. And we were one of them. And now we're back. Problem secretary is doing great now. And our fund size is about $6 billion.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Look back now, this was 2007. So we started raising the money in 2006, 2007. The world's on fire. Everything's going up. And our returns were pretty good. They were spectacular. And I remember getting yelled at by LPs because we were cutting them back on the investment. We went out to raise $8 billion. So the funds kept on doubling. And we had about $18 billion of demand. And we kept on just saying no. And it's almost like the more people say no, the more they want you, and it was just crazy days. And so did we take too much money? Yeah, probably. But it's hard if you look back and you say, did you make a mistake? And I guess what happens is the bigger you get, the harder it is to make the proper returns. And I see the same mistake everyone else is making because fun size just keep on getting bigger, bigger, bigger.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Want to roll through a little bit of the evolution of Providence. You mentioned this gap between fund three and fund four. You don't every day see, okay, we're growing, we're 2 billion, oh, now we're at 12 billion. And so what was going on then, like on the inside of the firm to give you the confidence that you could put that kind of money to work?”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“We still make mistakes where a hedge fund is operating from the outside in, we're operating from the inside, and it's just a much better way to invest. I've always been a big believer that private equity is just a much, much better business than the hedge fund business.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stuff like competitive access providers or CELEX. And because we were early in these industries, we were able to get outsized returns. And I think in today's private equity world, if you don't have a competitive advantage, it's really hard to make outsized returns. And people are doing it in software as a service now. And you're just seeing it all over that. Don't have a competitive advantage, it's almost impossible to make an outsized return. Private equity is a great business if we want to step back. I mean, think about it. I always say we get to buy companies with inside information. We sign an NDA, we get as perfect information as you possibly can get.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was knowledge. And if we had just done cable TV, just that we would have made a fortune as well. And just being really good in an industry that was a big user of capital, huge user of capital. And it was the right industry at the right time. And when you think of John Malone and what he did and Amos Hoster at Continental Cable, we were just playing in that pool. And that turned out that pool was huge. Not only was it big in the United States, but I moved over to London 1999 to open up our European office. And we own the most cable TV in Europe than anybody at the time. And we made more money in Europe on cable TV than we ever did in the United States. And we had just an amazing track record. And just in cable TV, we had an amazing track record in wireless communications. And then we started doing...”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, when you think back to that specialty, right, there are business reasons to do it. As you said, there are sort of knowledge and network reasons to do it. What was the original impetus for why it worked?”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we were kind of the first to really be specialized. And I guess the one thing I guess we proved is having some kind of angle and investing really pays off. And now everyone's a specialist, get specialist energy fund, specialist this. But we were early pioneers in being specialist media partners and going to hand it to my partners, Jonathan Nelson and Glenn Kramer for coming up with that idea.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“And we went out and bought Spectrum and the auctions against the big guys Verizon AT&T, and VoiceDream was sold to T-Mobile for $50 billion. And that's what I learned early on that when you back the right CEO, and John Stanton was the right CEO, you can make outsized returns. And that really helped put Providence Equity on the map. And our first fund was $171 million. Our next fund was $363 million. And then we went to $980 million, $2.2 billion. And then our fourth fund was $12 billion. And we just grew like crazy. And it was funny because no one thought being a specialist private equity investor was a good idea.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“McCau and John had the silly idea that farmers in rural parts of America would want cell phones. And he bought up all these licenses in Pacific Northwest for nothing, and it became Western Wireless. Western wireless he sold for $18 billion to Altel. But he also started a company with our money and a couple other investors, a company called VoiceDream.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“I went to Las Vegas, which is the first time I'd ever been to Las Vegas, which we'll end up tying back into now being the chairman of the board of the largest casino company in Vegas. And then I ended up going to Providence at the time it's called Providence Ventures, became Providence Equity Partners. And there were two founding partners, and then this other guy who just graduated from Harvard Business School a couple years before me named Glenn Kramer, and then me. And I was the junior guy. We had $171 million, and the name of the fund was Providence Media Partners because we were going to be specialists in media. And I really didn't have a media background, but my partners had been big in cable TV and broadcast TV, and we started getting into cellular communications. And our first deal at Providence Equity, as we committed $10 million to a company called Pacific Northwest Cellular. And we were back in a guy named John Stanton. And John used to work for Credit.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“And he goes, What are you doing? I go, I'm going to this place called Providence Ventures. And he goes, Why are you doing that? Why do you want to be a small fish in a small pond when you can potentially be a big fish in a big pond here in New York? I said, well, I think I'm just a small fish type of guy. And it was funny because we just finished the roadshow and I'd never been in a private plane before, but we were doing the roadshow in a private plane. And I said to my boss, I go, listen, I just dropped these guys off in their headquarters in San Diego. I got this private plane. What should I do with it? And he kind of said, Well, I don't know. Do what do you want? The plane's coming back to New York. So I had the plane drop me off in Las Vegas.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I was on a roadshow from Morgan Stanley. We were taking Foodmaker Public. I was jack in the box and Chi Chi's Mexican food. And I got the phone call saying, hey, we're actually interested in bringing you on board at Providence Ventures. And I called my boss at Morgan Stanley, and I said, hey, I just helped complete this Foodmaker IPO. I'm quitting.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“And literally, they still only had 50 million from Proof. I think my partners had done a thousand meetings and had a thousand no's. They just couldn't raise money because first time fund is hard. And so when I graduated from business school, they weren't hiring anyone because there was no fund. I would call 401-751-1700, which was the phone number. I would just call it. And I would talk to a receptionist. I've talked to occasional one of the two partners I knew. And I'd say, hey, how's fundraising going? I say, well, it's still not there. So, after about nine months at Morgan Stanley, they had raised $171 million.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Go up and see them, and I literally, my pitch was I will not go to business school, I will come work for you. And my partner, Jonathan Nelson, said, Listen, I got a $50 million commitment from Prue. Why don't you go to business school and then keep in touch? So I was thinking, okay, it's a polite blow-off, but yet they really were just starting. So I go to Harvard Business School and I call them after the first year and they say, Fundraising is not going as well as we thought. They still had 50 million from And then I graduate from Harvard Business School.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“And I would say to my boss, Go, Why are you doing this? He says, Well, we'll get deal flow when they would buy a company, Pre would do the senior debt, the subordinated debt, and even a piece of preferred. And then I would do the model, and I would say, wait, wait, if this deal goes great, prudential gets all their debt paid back, and then these guys get this thing called the carried interest and they make a ton of money. And my boss literally goes, Paul, you don't want to be me. You want to be them. That's all I needed to know. And from that moment on, I wanted to be in private equity. I'm about to go to Harvard Business School and I see that credentials committing $50 million to these guys that used to be at Narragansett Capital now starting their own firm and the firm was called at the time Providence Ventures. So two of them went to Brown. I thought, wow, they went to Brown Harvard Business School.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“And the reason why I knew about him is because my job before Harvard Business School was working for prudential insurance company and prudential insurance company was the biggest institutional investor investing in the very first private equity funds. And when I was at Prue, I happened to be lucky enough to be working with a guy who was funding KKR, Blackstone, and then over in London, Electric Candover and Schroeder Ventures. And so I'm this junior guy go into meetings and Prudential is giving $50,000, $100 million checks to these LBO guys.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bang talk. I was like, yeah, I hopped on a plane and lived on my buddy's couch and joined Morgan Stanley. And I was at Morgan Stanley for nine months. And I just hated every minute of it. I just knew I didn't want to be a banker. I wanted to be an investor. And I had met the guys at Providence Equity right before business school. This guy named Jonathan Nelson and Greg Barber, and they were going to go out and raise a private equity fund and they were going to be specialists in media.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bangkok Airport. I went to an ATM to take out 50 bucks. And I had insufficient funds. I was like, oh man, this is bad. And I didn't have a job. I had no money. And I called Morgan Stanley Collect because they had offered me a job in January at Harvard Business School. I turned it down. And I called them Collect because I knew the person who would answer was this receptionist named Teresa. And whatever reason, she always liked me. And I was always super friendly to her. She manned the switchboard. Collect call from Paul Salem and Teresa picked it up and she was so excited to talk to me. She didn't even think about taking on the charges. And I said, hey, you got to put me in touch with this woman who offered me a job last January because I thought I was going to get a job in private equity. And she says, well, you know, Paul, I made 10 offers and nine accepted you the only one not to accept. So I shouldn't do this, but I'll offer you a job. Can you be in New York next week? And I was in.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“At McCowen DeLou, they interviewed us 13 different times and they had us do a site test. And so my buddy said, geez, you know what? Anyone who interviews you for 13 straight times and they can't make a decision, I don't think I want to work there. He got the job offer. He turned it down like he said he would. I'm thinking I'm in. So then I don't hear a week and a half goes by, call up the firm and they say, well, we reviewed your psychological profile and we decide you wouldn't be a good fit for this firm. And so I didn't even get the job. So I was like, oh, that sucked. I ended up graduating Harvard Business School without a job. And like most smart people, I decided to go to Thailand with my girlfriend and go scuba diving. And I figured, you know what, I'll figure something out. And we're diving all through the Pacific Ocean, went to a place called Palau and Truck Lagoon, did these amazing dives, flying back through.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, actually, it goes back to Harvard Business School, where I graduated in 1991, and we're in the middle of a Gulf War, and it was three of us. I remember sitting at the gym at Shad Hul and at Harvard Business School. And I kept on telling everybody that I'm going into leverage bios. Private equity wasn't even really the word. And there was two other guys. We were sitting around. And I think I got a prize because I actually got the most interviews of anyone at private equity firms. And I actually couldn't get a job. And I'll never forget, I was sitting in a hot tub with a buddy of mine, and there was this firm in Connecticut called Kid Camp. Two guys, one named Kid, one named Cam. And I interviewed with him. And then there was another firm called McCowan Deleu. And I was interviewing with them. And it turns out my buddy and I were both interviewing with both. I'm thinking, all right, maybe he gets one. I get one. And that would be great. And so we were both interviewing.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our conversation covers Paul's entry to the business, the benefits of specialization, Providence's nice sky advantage, and the development of the firm over three decades. We then turn to the competitive landscape for deals, value of operating partners, evolution of private equity, advice for allocators in the space, and life after stepping away from the business. Please enjoy my conversation with Paul Salem and stay tuned for the miniseries of Masters in Private Equity. Please enjoy my conversation with Paul Salem and stay tuned for the miniseries Private Equity Masters. Paul, thanks so much for doing this with me.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today's show is a preview of a miniseries coming in a few months, where I'll be speaking with some of the preeminent leaders in private equity to learn more about what the continuing insatiable interest in the asset class is all about. My guest is Paul Salem, a senior managing director emeritus at Providence Equity. Providence is a premier private equity and asset management firm focused on media, communications, education, software, and services with $49 billion in asset commitments. Paul joined Provence when it was $171 million media-focused boutique in 1992 and became an integral part of the firm's growth and success ever since until retiring a year ago. Paul considers himself the luckiest guy in the world, which you can hear more about in a TED talk he delivered a few years ago.”
2021-02-01 · Capital Allocators · Private Equity Masters: Paul Salem – Providence Equity Partners (Capital Allocators, EP.175) · IDENTIFIED FROM THE TRANSCRIPT · source