Random Ramblings: Compensation, Ford & Tom Lee


As some of you noticed, I was on CNBC again yesterday (twice in one week, after not having been on since 2001). The topic was why public company CEOs are flocking to LBO-backed private companies, with the news tease being David Calhoun’s jump from GE to VNU. My basic message was that private company CEOs don’t have to worry about appeasing Wall Street analysts each quarter, don’t have much regulatory oversight and only have to respond to a limited number of masters. Oh, and they also can get paid a lot of money. Various press reports suggest that Calhoun will receive compensation comparable to the $50m he was making at GE, plus at least $50m more in potential VNU equity. 

*** Ford Motor Co. looks like it could be the next major company on the LBO auction block, and Bloomberg already suggests that One Equity Partners will make a play for both Jaguar and Land Rover. Why One Equity? Because former Ford CEO Jacques Nasser is a senior partner there. It’s all about who you know, which does make me wonder if Clayton, Dubilier & Rice could soon get in on the action. After all, CD&R spent years dogging Ford to sell them Hertz… 

*** Bain Capital and Blackstone Group reportedly have shelved their own proposed bid for Australian retailer Coles Myer, and instead are joining the KKR-led group. So much for doing fewer club deals going forward. First Bain and Apax join the existing Royal Philips semiconductor group, and now this. 

*** Tom Lee’s new firm unveiled its initial roster yesterday, including some names that previously had been reported here. Make sure to note that they’ve got specialists in an array of sectors (retail, financial services, etc.) and that the $100m-$500m figure refers to the amount of equity Lee Equity Partners can put in each deal, not to the total transactional value. 

In other words, Lee has abandoned his initial plan to form a small-cap private equity firm, and instead is looking to recreate his namesake firm in Boston. The firm already has made small, under-the-radar plays in larger deals, but far bigger things are coming.