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Saturday, January 20, 2007

Irony on the M25

foreign injury The irony of my December 27, 2006 post "Crash and Burn," is both deep and painful.  Only a few days after posting it, I was involved in a rather severe automobile accident on the M25 outside of London.  I only vaguely recollect what happened.  I woke in the hospital and I've only been well enough to type for a day or so.  I am still facing at least an extended hospital stay and perhaps another surgery.  I'm not sure yet if that will be in the UK or the United States.  What does it say about me that one of the first things I typed when finally well enough to was an entry on Going Private?  Is that more disturbing, or that my first thought after coming to was that my best suit was ruined?

Thanks to those readers who have already sent well wishes.  Pray tell, how did you find out?  Though I've managed to have someone type some email replies that I dictated (this is both laborious and time consuming) I regret I cannot answer them all.  It frightens me that news of my real-life incapacitation managed to get to Going Private readers somehow.  I have no idea where the connection between readership and my "real life" managed to form, outside of the kind nurse who took dictation for me.  Perhaps there's an anonymous "in the know" type out there who doesn't want me to know that they know.  Stranger and stranger.  Slightly creepy.

I knew I shouldn't have gone to London.

Friday, January 26, 2007

Twisting the Four Screws of Private Equity

ouch! There is more than just a taste of conceit buried within the ethos (pathos?) surrounding my decision to conduct a job search even while gainfully (richly?) employed.  I am, after all, currently possessed of a position that would doubtless be the envy of any young woman my age who entertain even a passing interest in a career in finance.  It also seems pretty clear that I was hired at a level beyond what my experience would otherwise have commanded and that I enjoy the fruits of my current position in large measure due to luck and the intervention of one highly placed individual in my firm- Armin.  True, in the three reviews since I have been awarded the firm's highest performance rankings and then rewarded with consummate bonuses, raises and praise, but even these accolades do little to instill in me any kind of career satisfaction.  Less so given the less than warm reception the city of London, its driving public (and, indeed the United Kingdom) has purveyed thus far.  (Perhaps I would have a brighter view of the locale if my experience of it included scenery more diverse than the surgical ward and the inside of a hospital room).

So, after even the most trivial reflection, searching for something "better" seems the height of arrogance and pomposity.  Still, I have my reasons.  In fact, over the last several months I feel I have been as pointedly locked into a course pressing me to explore new career options as my right wrist is now locked into the awkward and ungainly position required to bring it back to something resembling a full range of motion (a development which, incidentally, no fewer than four licensed medical professionals have assured me is characterized by a probability which quickly approaches zero).

Faithful readers will be well aware of my views on the importance of "long-term" and operational foci in the practice of buyouts.  "Pure" buyouts are, in my noclamenture at least, suited to two roles.  First, mechanisms either to effect change in corporate governance or corporate strategy that the public markets, or indeed the current ownership structure be it public or private, have not the patience or contrarian wit to support.  Second, capital and governance structures useful for imposing radical fiscal, personnel and strategic disciplines of a sort not viable in more conventional ownership contrivances.  Clearly, a Venn diagram of these classifications endures a non-trivial area of overlap.  These same faithful readers will be acutely aware of my disdain for the use of leveraged buyout transactions to extract "value" by use of leverage alone.  If there are no operational or structural gains to be had or, indeed, if the transaction's sponsors lack the ability or desire to effectuate the transformation to capitalize on these changes, leverage needlessly increases risk and returns little fundamental improvement in the underlying firm.  These "structure only" transactions are opportunistic speculation, not true value enhancing transformations.

The four screws drilled into my bones that both hold my grotesquely swollen wrist in its present position and inflict upon me extreme pain when tampered with (even the most ginger manipulations cause an inadvertent shriek and 5 minutes of uncontrollably pathetic sobs to issue directly from the darkest reaches of my Id) are taunting analogies for my current career paralysis.  They might as well described the quad factors I think essential to private equity targets.

A fundamental structural issue with the target firm.  Be that in the revenue model, the cost structure, the logistics of supply, distribution, or collections, or personnel structure.

A marketplace, product, strategy or investment path that requires a long-term view to effectuate.

The absence of incentives towards fiscal or strategic discipline.

And, finally, the inability of the current capital structure to make radical changes or endure the long-term needs of the firm.

Tamper with any of these elements in the universe of Sub Rosa targets and shooting pains run up and down the cramped arm of my private equity career satisfaction- an, admittedly artificial, construct as painfully immobile and inflexible as a limb perforated in multiple places with pins of surgical steel.

If the first two of the last three transactions undertaken by Sub Rosa pulled at these screws, the last took a hammer to the entire apparatus.  The IRR source for the transaction could be described in a single word:  Leverage.  Not to mention my reticence to leave New York, where I felt I had barely begun to be acclimated, for the likes of the United Kingdom.  Not, mind you, that the United Kingdom is an intrinsically undesirable place, but I spent much of my younger life getting away from Europe.  To be pulled back is distressing.

Of course, the urge to ignore any kind of moral center one is possessed of when surrounded in the buyout business is highly seductive.  Compensation is beyond generous, the business is sexy in the extreme and any dozen score of young professionals with no moral compass at all would be happy to slide in under the lofty altitude of my ethical perch and take my position for 50% of the salary.  Still, it has been enough of a jar to send convulsions through me- the kind that cause me to forward resumes and attend day-long firm interviews.

I've pestered two kinds of firms.  LBO shops with reputations for turnaround projects and hedge funds with activist strategies centered on corporate governance improvement.  Activist funds seems uniquely reserved in their hiring practices.  Recruiters in the business seem steadfastly unhelpful.  I've managed two meager interviews.  My last such, just before my hop over the pond, ran from 8:30 am until 6:00 pm with dinner following hard upon and was chiefly accentuated by one Vice President's pontificating aloud to the effect that women had no place in private equity as they were forced to negotiate with primarily male sell-side types.  I wish that comment would have emerged early in the process so I would not have had to endure 8.5 hours of interviewing to discover the firm a bastion of misogynistic ex-bankers.

As for the others, surely, they talked the "operational talk," but then all LBO firms now-a-days do that.  Most are quite practiced at it, given the many tries they have had during the road show.  It is quite difficult to tell where the philosophical belief ends and the marketing begins.

A close friend and colleague of mine who has on occasion featured in my entries here and has been my lexicon like resource for all things activism, is also searching for a spot in activist hedge funds and, despite being literally the smartest person I know and easily twice as qualified as I would be for an equity analyst position in such a fund, has been frustrated in his efforts for going on 4 months now.  I fear, therefore, that there is little hope for me.  (Job leads and referrals to recruiters actually worth the salt in my tears much appreciated).  I will, I therefore suspect, have to endure Sub Rosa and its new found love for the abandonment of principles in pursuit of the almighty IRR at any cost (including the undertaking transactions with a paltry .75% of interest rate headroom before the breaking of covenants will ensue).  Well, at least I have my health.  Sort of.

Monday, January 29, 2007

Dude at Work

i don't buy it My spies tell me that this is a profile of an experience with Guy ("Let the Good Times Roll") Kawasaki.  I don't doubt it for a half-second.  (Via "The Curse of Guy Kawasaki," on Valleywag).

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