5 Questions with Steven Rattner, Quadrangle Group

Quadrangle Group today announced that it is opening new offices in Silicon Valley and Hong Kong. The former will be staffed by former Yahoo chief operating officer Daniel Rosenweig, while the latter will open next year with former TVG Capital partner Edward Sippel at the helm. So peHUB has five questions for Steven Rattner, Quadrangle co-founder and managing principal.

1. Quadrangle already had offices in New York and London. Why expand further?

Rattner: Our view is that, particularly as a sector-focused fund, it’s important to be very broad in terms of the geography we operate in. Asia is obviously an increasing part of what’s going on in the world, and we also believe that it’s essential to be on the ground in terms of deal sourcing and investing. Silicon Valley was attractive on a couple of levels. It’s far enough from New York that a small team was additive, and we were able to attract Dan Rosenweig, who we’ve known for a long time.

2. Is the expansion to Silicon Valley an indication that Quadrangle might begin looking at earlier-stage media deals?

Rattner:We are not going to begin investing in early-stage companies. But we do believe that new media companies are becoming more mature and, therefore, not early-stage anymore. For example, we just took public a new media company called Dice. It happens to be based in New York, but we would have been happy to invest had it been in Silicon Valley. As the so-called new media world continues to mature, we’ll be able to invest better with offices on both coasts.

3. Quadrangle has three practices: Private equity, public equity and distressed debt. Is the distressed debt market a far more attractive place to be right now than in the other two?

Rattner: As of today, the distressed debt market is certainly a better market than it was a month ago. As for whether it’s better than public or private equity, all I can say for the moment is that it’s gotten a lot more attractive…

4. Do you feel what we’ve seen over the past two weeks is just a blip, or is the private equity market cycle heading downward?

Rattner: I think it’s without dispute that the euphoric debt markets are gone for the foreseeable future, so the structure and nature of private equity deals is going to have to change. But I don’t think that’s necessarily all bad. We were living in an irrational, and therefore destructive, environment. It’s not in anyone’s interest for that to continue indefinitely. We needed a correction and now we have it.

For the immediate future, financing new deals – particularly large deals – is quite challenging, because of the amount of forward commitments already out there. It’s reasonable to expect that there will be fewer large private equity deals in the short term.

It’s a cycle, and we’ll work our way through it and hopefully emerge with a private equity industry healthier than it has been recently. I doubt we’ll return to the pace and nature of deals we’ve seen for the first six months of this year – but private equity has been a great business for 25 years, and should continue to be.

5. Do confused people ever ask you for Nets tickets?

Rattner: I don’t get asked for Nets tickets – I’m not sure anyone does – but I do get confused for Bruce Ratner almost every day. My sister is actually doing an ancestry project, and it turns out Bruce and I might actually be related – but we’re not sure yet.

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