YouSaid · the spoken record

Steven Klinsky

lines on the record: 90
first: 2023-01-20
most recent: 2023-01-20
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“So, for example, there were giant disasters after I left Force Middle. Force Middle was doing great when I left. After I left, they changed their strategy and went into what were called CLEX, these alternative telephone companies that were supposed to. That was a super hot theme in the year 1999 and 2000. And so after I left to start New Mountain, they migrated into that. And that whole industry was very hot and then blew up.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Have secular growth for the next ten years, and there are some industries that are inherently subject to changing conditions. Oil prices go up or down, fashion retail goes in and out, unlike, for example, selling an ingredient for pharmaceuticals where they need the ingredient and you're speced in by the FDA. So, I mean, there are good industries and bad industries that from the point of view of safety and growth. And the biggest mistakes in private equity in my 40 years observation is when the industry melts underneath you.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, what I can say, and this is getting maybe ahead of it to get into new mountain strategy, but when I broke off to start New Mountain. It was really based on two principles defensive growth and business building. Defensive growth. Defensive growth. This is like a defensive growth and business building. What I mean by that, even more important than number one versus number three. There are some industries that have the wind at their back.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, he's done fine. He did very well with it. And so we had a lot of great. We had Department 56 Christmas ornaments. We had all sorts of deals. So it wasn't one specific industry, but we went from kind of junkie cheap companies to I viewed the general instrument being the model for what Force Middle was about. What's kind of interesting is...”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Which Ted personally loved and led, went through some tough times and ended up being a huge success. We had Ziff Davis magazines that we sold to Mr. Sun and started Masioshi's son's career. He bought in because he had spotted it and got him kind of into the internet and all that through. So he's a view of you.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“That when we found it was a very messed up conglomerate doing racetrack tote boards and defense electronics, but buried within it was the best cable and satellite television equipment business in the world. And people thought the Japanese were going to destroy all American electronics. We had a different opinion, I can tell you why, that we could fight back. And it went from about a billion of value to 20 billion value over the course of the 90s. And that was what I worked closest on over the 90s. And so the other great deals we did in the 90s, though, Gulfstream Jet”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Where did you focus? Yeah. So the big long term story with Force Malittle as investors, and it was a great firm. We were the second biggest firm, but I think we had the highest returns, was in the 80s, it was about kind of any company that looked cheap with a lot of debt. Obviously, there was the 1987 crash of the stock market, but there was a recession in 88 where what we could see was our high-quality companies that were market leaders did fine. And the number three auto parts elastomer company lost all market share. And the transaction that I'm most proud of in the 90s was a company called General Instrument.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“We use all that knowledge to buy the next fairly small company and build it. So it is so different from where I was with Force Madle or where I was even when I started my firm by myself. I didn't have the strength. The key is to build, think of private equity as a business that builds businesses and make that business engine stronger and stronger. And it's a better form of governance because you're like a family business since you don't have 90-day reporting. You don't have to worry about third parties. You can be very rational, but you're no longer constrained to just a few investment bankers. You can now be a very strong operation. And that's been a 40-year transition.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Get to that. I think that transition has been steadily happening for the 40 years. I've been in private equity for 40 years now And one thing I try to say is that private equity has evolved from a form of finance into a form of business So, in 1981, when interest rates were there and everything was started, it was about, you know, and I was one of the four, for example, four investment bankers having a lot of Hutzpah and saying, let's borrow some money and go for it. Today, it's extremely differently. My organization owns companies that employ, I think, 67,000 people. We would be roughly 83 in the Fortune 500 if we were one entity.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“It's only in hides that you realized how wonderful or terrible the conditions were. And bad news usually leads to good opportunities and good news usually leads to problems. I mean, so you just have to live through all this stuff. I will say when there were fewer firms, so I was effectively, there had Ted and Nick Forstman, Brian Little had retired from the firm. I was the next senior. So for years, I was kind of like the Turkish merchant in the Suk where the sellers would come and lay all their goods out in front and say, you can look at this company and this company and this company. And I'd say, no, no, no, show me another company. Today, private equity is so much more professional. And my firm, which is not as famous as Forrest Millitt, but it's much bigger and the industry is much bigger. You know, we have 200 people. We're proactively super deep in specific industries like life science supplies where we're incredibly knowledgeable. And it's gone from kind of the small generalist to really sophisticated business building organizations who use, frankly, much less debt as a percentage of the capital structure. Now you might have 60.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“The truth is, it always feels competitive no matter where you are in history or any given time. It never feels that easy or that important. It's only in history.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Because let's say it's 60 cents out of 100 until 40 cents is lost, the senior debt is safe, then the junk debt or mezzanine debt may be the next 20 cents. In the old days, and so if it's worth 80 cents on the dollar, they're safe. And then the equity is the bottom 20. But if it goes up to $2, they've made a dollar on 20 cents. So it's just like real estate, but it was done in the corporate world. And there's just different risks and return possibilities. You know, the thing with debt is you can only make your interest rate with equity, you're unlimited on how much you can make, but you're the first person to lose money if you do a bad.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, the best way to understand private equity is just to think about if you're buying a house. It's really using the principles everyone used in real estate over in the corporate world. So if you're a real estate guy and you're buying a building, you would have a mortgage and then put up your own money or maybe you would have a first mortgage and then a second mortgage so you could put up less money. And if you're really good at improving the building or you just get lucky then inflation raises the value of the building by having used debt, all the gain goes to that thin strip that is the equity. But of course, if the value drops, the first thing that gets lost is the equity. So the senior debt is the safest.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“And so he was creating that market and he both lent to great companies like the cable companies that grew to be giants and to some people who were kind of more questionable character, who gave business a bad name. So that was the alternative. And then Force Mittle didn't use, we were the one from that didn't use Milken. We had our own fund. And so we were kind of the white shoe alternative to Milken and all those ships.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it is kind of venture capital numbers because the dollars were so small. So it was a tiny compared to what private equity yesterday, but very high returns. So that started everyone going into the field after the initial 20 firms, Carlisle started, Blackstone started, and they're very transparent. They saw the success of these other firms and said, why can't we do that too? So in the mid-80s, lots of people started to enter as new firms that became great and kept growing. Milken started junk bonds around the mid-80s saying, hey, and he had done, I think, serious academic work that the credit ratings were too conservative. And if you just only went into AAAs, you were giving up return.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is not bad. It's not the $5 trillion of gains private equity makes today, but it was very eye-opening. Or William, you know, there was a very famous deal, Gibson greeting cards. Where, like a half a million of equity went to 40 million. I mean, those were the, that's what got people all excited.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“$80 million deal with 10 million of equity that went up to $800 million of value. So $10 million became $800 million. It's 80 times your money”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Force Madlittle started around or a little bit few years before then, and they started without junk bonds. It used to be the commercial banks would lend the senior debt and the insurance companies like Prudential would lend what was called the mezzanine debt. There was no junk debt available in the market Force Malittle created instead of going to insurance companies raised its own fund for the mezzanine debt. That they could have the banks themselves and then force some little equity. So that's how it all started. The initial deals were small in dollars, but incredibly high returns. Like we owned a company called Tops Chewing Gum back in the baseball card craze. Sure.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“And incredibly depressed market, super high interest rates. So the initial idea of leveraged buyouts, very high inflation, was really was financial engineering, truthfully back in those days, because if you had 95 parts debt and five parts equity and 10% inflation, you could triple your equity with no unit growth at all. And interest rates were coming down after Volker and Reagan broke inflation and the stock market was going up. So that's where private equity started. As really was foreign investment bankers in a room having the nerve to borrow money when other people had been kind of beaten down for 13 years.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Unpopular. Well, also, just to give a little historical perspective on how much things have changed, and there is an economic backdrop to all of this stuff. So my first day at work was October 1, 1981 at Goldman Sachs. The highest interest rates in U.S. history were literally the day before I started work. September 30, 1981. I think the tenure treasury was fifteen point eight four percent. So when we're at 3.7% tenure treasuries, it is nowhere near kind of the situation. There had been stagflation where the stock market was lower in 81 than it had been in 1968”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so I joined an 84 as a younger version of a partner I made as an associate partner I made full general partner by 86. And so I was there for their glory years of the 80s and the 90s. I was there from 84 to 99 in their best, best years. And so I did live through things like barbarians at the gate. I was a partner for that. I have one line in the book where I say Ross Johnson is totally insane and leave the book. I actually spent about four months night and day working on it, but I'm happy my line was not pay anything, borrow anything. I'm very happy with my line. I'm on page 259 if your listeners want to check it out. And we were also the White Knight. We were the kind of the anti-milk and junk bond guy. So we were the White Knight on Revlon. We had some great success in the 80s and then the 90s were even better.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“I come from a family business background and private equity really is a combination if you do it right is a combination of the family business mentality of a small group of people who own the business but also the best aspects of a big company where today we have tremendous resources that a family could never have. But you do have that family business mentality when you own a business if you're a good private equity firm.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, again, it gives you an owner's mentality. A really good investment banker has that mentality anyways because they just want to give great wise advice, a bad investment banker just wants to get deals done and doesn't care much. But as a private equity owner, again, first of all, you do invest heavily of your own money in the transactions, plus you have additional ownership through the... The carried interest, the profit's interest. And so”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the key thing to me was the thing about being in a private equity shop versus an investment bank is that you are the owner of the company. I mean, even when I was at Goldman Sachs doing private equity work, it's more equivalent or merger work. It's much more equivalent to being a housebroker. Than owning the house. So you sell a lot of houses and you get commission on what you sell, but when you're in private equity, you own the business, you control it, you're responsible for it, you have real ownership in it. As a member of Force Malittle, I had true ownership in that company that I never had as an investment banker Goldman Sachs. So that was the attraction to.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there were only 20 private equity firms in the world in 1984. There are now over 5,000. I also just finished being the chairman of the private equity industry, something called the American Investment Council. But there used to only be 20 private equity firms. KKR was the biggest with 400 million of assets and eight people. And Force Middle was the second biggest with 200 million of assets and four professionals. And they hired me in as the fifth professional. And by 90s, two guys had left, so it was the two Forceman brothers and I was the most senior guy in the 90s. But it was very small, very new and obviously a great time to enter the field.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I started a Goldman in 81 doing mostly raid work and traditional merger and seller work. The LBO group has probably started in 82, and it was already a big success in 84 when I got quartered away by Force Melittle. They poached me away.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“It was a $12 million paper and plastic bag company that the guy said, you know, the bag in Tootsie with the ice cream, that was my bag. He was a great entrepreneur. And it was a half a million dollar investment from the firm. And I worked on it. And the two CEOs of the firm watched over me, the head of mergers, and everyone watched over me. Everyone was very concerned with this deal because there was a half a million of the partner's money. So it was very early days and all this stuff. So it was a good time. It was like going to Silicon Valley the day transistors were invented or sometimes very good timing.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“We all fit in one room for the Christmas photo every year. And I mean, it was literally like the size of a law firm, not a giant global institution. And the first deal they ever did with the partner's own money was a company called Trinity Paper Bag.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“I helped bring in the idea they were starting to get topical and they set up a two person group with a guy named Fred Eckert as a vice president and me as the associate. So we were the original LBO group of Goldman Sachs. And we were supposed to do three million of revenue. We did 30 million. It just took off very fast. And what we were doing was. Basically, advising Goldman Families and stuff. I did work on the very first principal investment that Goldman ever did. And Goldman was the size of a law firm back then. People forget how much things.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“They said we've never done one. You can be the LBO guy. It's like saying, I want to be the wheat farmer on the moon. There was no competition. Go ahead. So there was no LBO that had ever been done at Goldman Sachs when I...”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“If I was going to be in corporate, I'd rather be the client than the lawyer. And so I joined Goldman in there. It was a 12-person merger department. And it's just in the days when the... The takeover wars were very hot, and Goldman was the firm defending everyone against raids, and Morgan Stanley was doing the raids. So I joined Goldman in their merger department, but said, I'd like to be your LBO guy. They said, we've never done a leverage development.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“So I thought about, and I did work for Larry Tribe and Conlaw for some really? Yeah. It was between corporate law and investment banking, and I decided.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“But he was one year ahead. I'm just saying, I realized I had a picture of Oliver Wendell Holmes above my desk and I was incredibly earnest and intent. And I said, well, I'm all right, but there's some really, it's probably not going to be me as the Supreme Court justice.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“No, he was one year older than me, so if I see John, I would say hello, Mr. Justice Roberts. You don't know me. That's what I would say to Mr. Justice Roberts. But in school.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I decided I thought about corporate law. I wanted to be a Supreme Court justice, and then I realized John Roberts, who was a year ahead of me, was the guy who was going to be.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“In 79, it was the first leverage buyout of a public company. And so it was a whole new idea. I found it very interesting. I had no work experience in anything. So I thought, boy, what an interesting idea. We had sold the family business maybe buy another family business one day through a leverage buyout. So I did my thesis on how leveraged buyouts work from the legal and the business side. And I might have been the first person coming out of graduate school saying, I want to be a private equity specialist.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“You do a thesis especially for the JDMBA program. You get admitted into each school individually. But you finish in four years instead of five, and you write a special thesis, a JD MBA thesis that has law and business. And what was interesting was the first leverage buyout of a public company happened when I was in graduate school. KKR took a Stock exchange company called Hudie Private, and it was the first time there had been”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm a big fan of both of them and a big fan of the JDMBO program and involved with both schools still today. You know, I thought The law school is much more traditionally academic, so I thought I was learning a lot there. The business school, I was only 21 years old. I was like the age of a college senior, and I didn't think I was learning anything. In hindsight, I learned a ton at the business school and at the law school both. I'm a big fan of multidisciplinary approaches. So they've both been great for me.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“And well, thank you. Thanks for the condolences. And my family had a business. My grandfather and grandmother had a store for 30 years in Detroit called Alberts where they sold women's clothes and had been built into a chain by my dad and my uncle. So I was the youngest of five brothers and cousins and they wanted him to go into the business. And I also had a real love for constitutional law and political philosophy. So I actually went to both kind of the business school to kind of do a family obligation and the law school because I Really love constitutional law at that point.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source
“I come from the Detroit area, Michigan. I was a public school kid, went to University of Michigan and studied both economics and philosophy. Sorry.”
2023-01-20 · Masters in Business · Steven Klinsky on Building Businesses · IDENTIFIED FROM THE TRANSCRIPT · source