Advice for Burgeoning Buyout Pros

A large rolodex is crucial factor in expanding for any buyout pro’s career, and business school is one way to start filling it. But as a panel of young buyout pros showed today at Buyouts Madness, it’s not essential.

Joel Osnoss, director at Silver Lake, said business school is great a way to build your networking base. But he opted against it because he was already doing what he loved, planned to be there for the long-term and didn’t want to jeopardize his position by leaving for a year or two for an MBA. 

That clear vision of your career is essential if you do decide against it, said Phil Carpenter, senior managing director and partner at Bear Stearns Merchant Banking Partners, who also did not go to business school. If your station in the firm is not clear, you could lose out on a promotion to someone with that MBA, he said. “Do you see a clear runway?” for your career, he asked.

Business school is a “huge advantage” in gaining contacts, said Karl Peterson, partner at TPG. But ultimately, you have to have long-term relationships and they don’t have to be business school contacts, he said.

Relationships are great, but they’re even better when they’re with executives. The only panelist who did go to business school, Jason Friedman, a managing director at Marathon Asset Management, said part of the reason he opted for business school was to rub elbows with tomorrows CEOs, an investment he said is starting to pay off. Still, Friedman said young professionals have to ask themselves if they’re comfortable with stepping out of their career path for one or two years.

Friedman went on to say that when you’re approaching him or other professionals, know what they and their firm do for a living. “If people do their homework, I’m probably going to be much more willing to talk to them,” he said.  If someone asks him what he does, he’s less likely to follow up with that person down the line, he said.

Peterson, of TPG, had probably the best example of the power of relationships in private equity. The firm met with management at casino operator Harrah’s in January 2006 because it wanted to learn more about gaming, Peterson said. TPG realized it wasn’t ready to propose any deals in the sector at that time, but six months later, when Harrah’s fell short on its earnings by a penny, TPG was poised to acquire the company thanks to the relationship it had built with the company’s executives. These relationships will be all the more important in today’s market, in which you can’t wait for bankers from Goldman Sachs to call you with a deal, he said. Sourcing deals is going to be more difficult and complex and require more sweat equity, he said.

In developing relationships with companies, don’t just seek relationships with executives, said Osnoss, of Silver Lake. Building relationships with junior-level staffers can prove valuable when those staffers get promoted, he said.

As important as having plenty of relationships from which to source deals, it is just as important to have disciplined investment acumen as well, noted Peterson, of TPG. He said he’s seen careers go up in smoke for people with good ideas but whose deals go bad. “I’ve seen some fantastic three-year careers,” he said.