Seemingly out of nowhere, Sun Capital is laying off 10% of its workforce. The turnaround buyout firm—which I was just writing about as having a strong position going into the new year—is cutting 23 from its 200-person staff, a spokesperson confirmed.
This is confusing to me since the firm only last year raised its largest ever fund, oversubscribed by $2 billion. Meanwhile, it is in the midst of prime feeding season for turnaround firms like itself. Sun’s biggest selling point is its massive staff of seasoned turnaround operating experts. Did the firm get ahead of itself in its 2008 ramp-up?
Forget that the firm has seen more of its investments go bankrupt than any other firm—Sun Capital assumes that 10% to 15% of its investments will fail and calculates that into its returns. The firm buys companies that are on the verge of extinction at next-to-nothing prices.
When I asked about the reason for the cuts, a spokesperson for Sun said it’s just like the cuts from other PE firms like Carlyle, 3i, or Blackstone. The cuts are in no particular strategy or region, but “across the board,” she said. Further, when asked if the layoffs indicate the firm will cut its fund size, the spokesperson said they did not. The official statement from the company is:
“We expect our organization to continue to grow in the coming years as it has done each year of our existence. After taking into consideration this reduction in force, we have a larger team today than we had at the start of 2008. This staff reduction, totaling approximately 23 employees or roughly 10% of our workforce, leaves our firm with all the resources needed to continue to focus on the things we do best – investing in turnarounds, underperforming businesses, and special situations, and creating value by bringing our operational expertise and experience to bear. We believe this economic environment offers an excellent opportunity to achieve historic returns for our investors.”
The Deal (sub req.) reported that the layoffs were a “surprise” and that Gary Talarico and Erik Swimmer, managing directors in Sun’s New York office, were among the 23.
UPDATE: Sun has released this statement regarding the departure of Gary Talarico:
“After many years of loyal service to Sun Capital, we are sad to announce that Gary Talarico will be leaving the firm to pursue other commitments and interests. Gary has advised us that his father is gravely ill and that he wants to spend more time with him. In addition, Gary, who has had a longstanding interest in public affairs, is interested in pursuing several opportunities in the public sector at this historical time of challenge which will likely require a significant time commitment away from his responsibilities at Sun Capital. We wish Gary the best in pursuing these opportunities and wish his father a speedy recovery.
“During Gary’s tenure at Sun Capital, he has built strong teams in New York and oversaw the establishment of our Tokyo office. Rodger Krouse commented, “Both during our years as colleagues at Lehman Brothers in the late 80’s and early 90’s and during his tenure at Sun, Gary has been a great colleague and partner and he will be missed.”