Going Private

Hip To Be Square

Did you know Patrick Bateman had a mini-revival in 2000?

Swim Team

The "fall party" was in September of 2005.  Typically, we host around 200-300 people on the estate for a day of food, wine, socializing, industry gossip, and whatever other trouble people can get in. Before the main party there is always a little party "ex ante."  Since all the outdoor tents, the tables, the liquor, and a good bit of the food are already present, Armin takes advantage of the infrastructure to entertain 30-40 people the night before.  Armin is all about extracting value.

Armin's wife had been making some changes to the landscaping around the Estate's driveway all that week.  Apparently, one has to make these particular changes before frost sets in so there is a huge demand for landscapers just before the winter months.  I have no idea if this is true, but one of the associates, who seems to regard himself as an authority on every subject that might potentially enter into a conversation, mostly I think by liberal use of bullshit, made this claim when I asked why a huge part of the hedges bordering the driveway had been removed and covered with gravel.

I wanted to catch him on his bullshit (I've been wanting to do that for a long time) but as with any of his claims, this one was impossible to verify without obtaining an advanced degree in landscape design and by the time two hours had passed I'd forgotten all about the little promise I made to myself (probably when I was a bit more sober) to look up the latest little stinking tidbit he had offered up.

As it was, I was walking into the main house for a glass of wine right around 5:00 or so.  I had just found the bottle and was starting to pour my first glass of the day when I heard the most alarming scraping sound from outside and then a loud splash.

The teenage daughter of the head of one of the largest hedge funds in the country had driven her brand new Saab straight through the gap in the hedges and right into the swimming pool.

The Bragging Wall

Colin is a Vice President at Sub Rosa.  He is pretty much what one would expect from a Vice President at a private equity firm.  Ivy league (he went to my alma mater but graduated two years earlier than I did and I didn't really know him well there).  Top business school.  Bulge Bracket Investment Banking experience.  One of the "beautiful people."  All the bells and whistles.

It was quite a while after I joined the firm before I started spending very much time in the Midtown offices.  I was afraid at first that this might breed resentment among my colleagues.  In this I was wrong.  Guarded suspicion?  Perhaps.  Resentment?  No.

My office in the Midtown space blew me away when I first saw it.  I had a wonderful view of midtown and the Chrysler building and what struck me as an overly large office with a leather topped work desk (Armin is big on leather topped desks) visitor chairs, a standing roll-top secretary desk by the window and a sofa.  When I first started spending a lot of time there I used to write at the secretary roll-top desk, until I found out it was an authentic 18th century antique.  Now I can't even touch the thing.  It just feels wrong.

I had met Colin a few times before I "moved in" to the offices in Manhattan, but I had never seen his office.  When I knocked on his door to ask him if he had or knew of anyone who had any experience for a particular industry he was on the phone but waved me in anyhow.

As one is prone to do when entering an office for the first time, I glanced around to see what secrets the office held.  I'm not sure I found any but the far wall was literally covered in dozens of framed certificates, diplomas, letters, announcements and such.  I had thought Colin only to be in his early thirties but the sheer scope of these mementos made me think again.  Was this actually his office?

I walked to the nearest framed letter, which looked to be a rather recent edition, and started reading:

Dear Coleen Soandso:

It is my pleasure to inform you that you are being considered for inclusion into the 2006/2007 Manchester Who's Who Among Executive and Professional Woman "Honors Edition" of the registry.

The 2006/2007 edition of the registry will include biographies of our country's most accomplished women.  Recognition of this kind is an honor shared by thousands of executive and professional women throughout America, each year. Inclusion is considered by many as the single highest mark of achievement.

Upon final confirmation, you will be listed among thousands of accomplished women in the Manchester Who's Who Registry.

Colin hung up.  I pointed at the letter with what must have been an amused look on my face.

"Congratulations," I said.  He laughed.

"Oh that?  Yeah."

"Executive and professional women?"

"Happens all the time.  My name confuses them."

"'Colin' confuses them?"

"Well, that's not actually my name.  It's Colen.  I use Colin just because I got tired of correcting people."

"Do you always frame these kinds of things?"

"You haven't looked at the wall yet, have you?"  I started to browse among the other framed pieces.  A letter from a Nigerian attorney, "I am most hopeful and pleased to present you with a nomination for a diplomatic post with the Nigerian Department of the Exterior."  Of course, a modest processing fee would be required.  A diploma from someplace called the "State University of Springfield."  The name of the state in which the University was organized was not listed.  Next to that was a certificate from "Paranormal University."  Then, a commission to the Texas Navy, complete with embossed seal.  The list went on and on, each framed memento sillier than the last.

"When I was in undergrad," he started to explain, "it became somehow funny for my friends to sign me up for any crazy offer or service that they found.  Of course, in college one comes across a great number of these.  I've been in the panty of the month club, the preferred customer list for battery powered assisted living scooters, the hair club for men..."  With this last I looked more carefully at his head.  If he was wearing a hairpiece it was a good one.

"If the initial offer was either free, required no credit card or was under $50 and funny enough, you could be pretty sure my friends would sign me up.  I am on so many mailing lists that here I am, a decade later, and I still get 20-30 offers a week," he sounded almost wistful.

"When I started interviewing for investment banking I saw all these managing directors with their tombstones and bragging walls. Sometimes these guys have tombstones for deals that have gone so south as to be embarrassing, but they keep them.  How'd you like to be a senior member of the lead underwriter for the last WorldCom offering? Yet that tombstone is a bragging piece right too.  It says 'We got rich on a deal that fleeced everyone else, aren't we sharp?'  The whole thing seemed pretentious and stupid to me.  So I made my own version."

We talked for a while about the industry I was interested in and when I was finished he reached into his inbox and pulled out a piece of junk mail.  "Apparently, I've been nominated for the Manchester Who's Who for overachieving women again.  This time I have two ells in my name."

Debt Bitch

Right after I joined the firm I spent several weeks meeting with people from the leveraged finance desks of a series of investment banks.  The point, of course, is to develop a strong relationship with a few key players who dole out leverage for buyouts and inspire enough trust to buy yourself concessions when it matters.  Initially, I thought this a fool's errand.  Why, after all, would hardened bankers give up even a touch of advantage because you bought them a few drinks?  This was the hardened, hyper-capitalist realm of Wall Street, wasn't it?  What had happened to "if you want a friend, get a dog?"

While I didn't think it particularly useful for the reasons suggested by, among others, Armin, I went along.  It would, certainly, be useful to know the players in any event.

Of course, what I didn't properly account for was that the debt gang at banks are trying just as hard to schmooze the private equity folks for deal flow.  They are as anxious to take us for drinks as we are to take them for dinner.

At the crack of dawn, Armin's driver took me down to the Midtown offices where I picked up Laura, our "Debt Associate," affectionately the firm's "Debt Chick."  Sometimes, owing to her tough-as-nails reputation on interest rate negotiation, our "Debt Bitch."  Laura was a tallish brunette who wore a lot of Hermes scarves.  They became a sort of trademark for her.

The Debt Bitch and I had arranged for a whirlwind tour around Manhattan.  We scheduled 5 meetings starting at 9am and going in a sort of radiating pattern emanating from the nucleus of our offices.

Most of our little jaunts were only 30 minutes or so.  Sure, we had a pair of deals, here's the initial materials.  Are you interested?  Oh, this is Equity Private, by the way.  Equity will be around more and more as our newest Vice President.  Well, give me a sense of where you think we are on this.  We'd love to see your term sheet.  Drinks?  Later tonight?  Could be.  Excellent.  Ciao.

Sometimes we'd meet a Managing Director, but typically it was at the Vice President level.  Oddly, a private equity Associate seems to start off life at the Investment Banking Vice President level.  And as a Vice President, I seem to spend a lot of time being introduced to Managing Directors at Investment Banks.  At least, that's how it seems to work with us.  Title inflation, perhaps?

Our fourth meeting was with Morgan Stanley.  Apparently the Morgan Guy, let's call him "Nicholas," prefers to meet outside the office.  Later it was explained to me that Morgan can be a pretty oppressive environment and that therefore their younger people took any excuse to get out of the office that afforded itself.  A date with the Debt Bitch, I figured, had a reputation for being a good gig.

I was puzzled because though we planned to meet for a late-lunch "drink," Nicholas insisted we come up to the office before heading out.  Nicholas turned out to be a five foot five, blonde haired and blue eyed workaholic type.  At first I figured he just wanted to talk some shop before we went anywhere and that he preferred a more professional environment for that sort of thing, but when we were shown to his office his reaction was strange.  He and Debt Bitch locked eyes silently for a solid and wordless twenty seconds and after that the first thing he did was grab his coat and lead us out.

"What's the story on the useless office visit?" I whispered to Laura while Nicholas ducked into an Associate's half-office and gave some instructions.

"Well, he needs some people to see that he's going out with 'clients,' and not just 'going out.'  The 'face time' thing is big here."

"That sucks.  Does Nicholas pull this often?"

"I've never met this guy," she told me.  This surprised me.

"The way he asked us out for drinks and the way he looked at you, I assumed that you knew him well."

"Never met him," came her reply.  It was short and abrupt.  Laura, though I barely knew her, was prone to long, expressive discussions.  I was sure she was hiding something from me.  I wanted to pry, but Nicholas emerged from the Associate cell and led us to the elevator banks.  On his way out he announced loudly, "Headed out with the folks from Sub Rosa," here he jabbed a thumb back through the air indicating us to the admin.  "Be back in a couple hours."  Laura gave me a knowing look.  That was for the benefit of any Managing Directors who might later ask.

Debt Bitch Part II

We ended up walking into Joseph's without a reservation or so much as a "by your leave" and plopping down at an upstairs table next to three older women, classic New Yorker widows I suspect in their 60s or even 70s who looked to be well on their way to being seriously sauced.  The annual meeting of the spinster society.

By contrast, our "meeting" immediately turned weird.  Very weird.  Laura and Nicholas were constantly locking eyes and having this strange exchange which excluded me entirely.  By the third time they connected like this, and all the while debt-speak was pouring out of Nicholas' mouth, I was beyond unnerved.  I was certain they knew each other and that there was some deep secret event or happening they needed to discuss without cluing me in.  If their goal was to keep me from noticing, their efforts were a total failure.

If I was in shock before, I slipped into near heart failure when first Nicholas and then Laura, without hesitation, ordered vodka martinis like they were club sodas.  Suddenly, it felt like the 80s again.

It was just as my frustration and curiosity was at its peak when something clued me in.  The formerly constant chatter from the spinster table, which was behind me, had fallen silent.  I hadn't seen them pass by, and since our table was between them and the door I figured something unusual had passed.  Over the course of 4 minutes I engineered to drop a piece of silverware behind me so I could turn around and determine what had stifled them.  They were all staring, rapt, at our table.  Or more directly, at Laura and Nicholas.  It hit me.

Who better to detect lust vicariously than these three?  Nicholas and Laura weren't hiding some critical business deal from me, afraid I would take the credit or something.  Laura was just trying to avoid being labeled a slut on her first full day with the New Vice President.  When I looked at her again I could see it.  Lightening had struck her.  She was screwed.  Or rather, about to be.  They just wanted me to leave so they could go somewhere and fuck.  I almost laughed out loud on the spot.

The best excuse I could come up with was that I had forgotten I had to finish up a model and could Laura handle the next meeting and meet me back at the office?  Of course she could.

Somehow I suspect Nicholas has never been so eager to see a potential client leave in his entire life.

What has happened to my psyche that such blatant sexual tension is totally lost on me even when it's slapping me in the face for 45 minutes?

Laura didn't make it back to the office that afternoon.  Nor the next day.

Nouveau Wealth Step 4: Writing a Best Selling Book

After steps 1, 2 and 3 (Develop massive wealth quickly with little to moderate skill; Form Foundation for fashionable charitable cause and expense trips as Foundation business; Buy money losing airline, brewery or sports team and support with personal wealth for as long as it takes to get bored and sell at a loss) step 4 appears to be "Have a best-selling book written."  Last week, I had the chance to peek at a manuscript along these lines that was never published.

My "office" on The Estate is actually the library.  Armin basically "gave" it to me, but it is still filled with a massive and very broad collection of mostly wonderful and some depressingly bad books.  I have stumbled across early Walt Whitman editions in there and something that looks to have been signed by a very young Margaret Atwood.  Also in the stack, right next to the Ginsburg and Levin volumes on Mergers, Acquisitions and Buyouts, was an old FedEx envelope with a "final draft" manuscript written for the head of a large and fairly well regarded, private equity firm (which a business school friend of mine would have given reproductive organs to work for) inside.

Since I had been told that the library was "mine to use," I felt only a little guilty taking it out and starting to work through its 150 or so pages.  What I found was disheartening.

First, what appears to pass for print-worthy business writing in this day and age is enough to make one puke.  Honestly, I felt ill reading it.  The first 25 pages, literally, were the highest order of self-aggrandizement I have seen since... I take it back, I've never seen worse.

Second, if I see one more sentence that takes the form "The [company name] Way," I am going to clean out my checking account and retain the three best professional killers available in the market today to dispose of the author and anyone vaguely connected with the formation of that sentence.

Third, being able to write doesn't seem to be a requirement in order to be a business ghostwriter.  Apparently, this manuscript cost the "author" about $70,000.  I am in the wrong business.

The total value of firms acquired by "David's Equity Playland," the subject of this masterpiece, is mentioned seventeen times in the first two chapters.  No, I'm serious.  I counted.

Here are some other interesting statistics on number of mentions in the first two chapter of:

1. "Author's" net worth: 12
2.  Firm's extraordinarily high retention rate: 15
3.  "That's the [Firm Name] way.": 9
4.  "We do things differently.  We do things the [Firm Name] way.": 3
5.  "Author's" rank on various lists of wealthy people: 4

Something interesting occurred to me around Chapter 5.  The entire book is written with the "Author," who is ostensibly the writer, referred to in the third person and, occasionally, quoted.  The work doesn't even try to make a pretense at being by the "Author" in any text at all after the cover page, where "By David Smith" appear in bold letters.

The manuscript, which tantalizingly promises to let the reader in on the secret of private equity wealth in 15 easy chapters, does nothing more for 4 chapters than recite the most basic of outlines on how one goes about buying a company.  After all this it doesn't even have the common decency to be particularly accurate on most points.

Not to toot my own horn, but the two shaved down "primer" entries I wrote for any readers here who might not be up to speed on the process of private equity M&A, "The Hunt Part I (Chase)" and "The Hunt Part II (The Seduction)" are far more detailed.  And I thought I had cut corners and done a generally bad job of giving the reader any "flavor."

The contradictions in the work are quickly obvious too.  After citing the high retention rate of the firm 15 times, it is later announced that a massive purge in the early years permitted the organization to finally grow beyond those institutional limits.  Early citations of the firm's intense honesty and ethical standards are proven false within 22 pages when it is revealed that the firm's first big acquisition was such a windfall only because of borderline fraud-like deception by the buying team.

A note attached to the manuscript indicated that the author had decided not to publish as it might, "reveal too many secrets about the way we do business."  That, at least, is true.

I finally had the courage to ask Armin about the manuscript.  I thought he would be mad.  I knew that the "author" was a friend, or at least an acquaintance of his.  Instead, he laughed loudly.  "Isn't that a huge pot of shit?"  He meant "crock of shit," I think.

Don't Cross the Debt Bitch

Laura, "The Debt Bitch" and I have been working overtime to get a deal financed.  I am supposed to be preparing things for the soon-to-be-here interns but instead I have had to delegate all that work to an associate who is now annoyed to be tasked with an internal project.

The Debt Bitch likes her martinis.  I can't say I disagree but I really can't do them at lunch like she can.  "If it is good enough for the heart-attack prone attorneys, it is good enough for me," she quips back at me when I ask after her lunchtime orders.

After a day and a half of solid meetings in the city we are sitting at a bar around 1:30 and she orders a vodka martini.  Ironically, within ten minutes of arriving she spies some young bankers doing pretty much the same thing.  I would be embarrassed to be caught sipping hard liquor on my weekday lunch hour if I were a banker in the city, but they seem to have no shame.  The scene is right out of a mid-1980s finance movie.

The Debt Bitch recognizes one of the bankers and we drift over, drinks in hand (mine is a water) to do the banking-social thing.  Things are pleasant enough and the Debt Bitch introduces me as "my Vice President," which is odd, and a thrill at the same time.  She says she has a deal for them to look at and we should all discuss it the next day.  Schedules are traded, gossip exchanged, all is well.

But things turn sour as soon as we turn to go.  I catch a snippet of not-quite whispered conversation as what I assume is an Associate banker describes me to what I assume is a Vice President in the most suggestive terms you can imagine and in a fashion that calls into question the professional nature of my relationship with Sub Rosa's Senior Partner, Armin.  I am prepared to ignore it, though I can feel my neck stiffen.

Since she was two paces in front of me I suspect the Debt Bitch's hearing is more acute than my own.  Her reaction is also more severe.  She turns around without hesitation, takes two steps towards the offending banker and unloads her entire martini (minus two sips) into his face without even cracking an expression.  The entire section is silent and at least ten people are staring.  Laura then pauses long enough to gingerly place her glass on their table before leaning forward and wordlessly delivering the best slap I have ever seen (or heard) outside of a Hollywood production to the left cheek of the already stunned Associate.

"Your firm won't see a dime of our debt needs from here on out," she deadpans to the Vice President before turning on her heel and collecting me towards our table with a "C'mon, let's go."

Not having learned the obvious lesson I hear one of the other junior bankers intone, "Woah.  She's hot."  If Laura hears this as we depart she ignores it, instead sitting down and ordering another martini, which our server, ironically, makes a point of buying for her with a wry smile on his face.  For the next ten minutes, the eyes of the entire place shift between us and the banker's table, that has now been joined by a more senior looking, and quite unhappy, banking type.

"Wow," I say.  "Thanks."
"Oh, you were only part of the equation.  The guy sitting with them now, I saw him walking in right before I tossed the vodka.  That is the VP's boss.  He knows Armin quite well and I am sure he remembers me.  I'll get an apologetic call in a few days and it will be good for some reduced covenants and maybe a half a percent one day."

Just then our server returns with two more martinis, I suppose one is for me, and points to a table across the bar.  "From the gentlemen at the table there."  They, 40somethings, nod their distant approval to Laura.

Don't cross the debt bitch.

Cheap Money, Europe and Activism

It will be no secret to Going Private readers that Sub Rosa, LLC has been frustrated lately by the absolute sea of cheap debt.  We have had four misses on auctions where EBITDA multiples have hit 9.5x and even 11x.  Quick interest rate sensitivity calculations tell me that the deal we lost at 11x had about 1.3% of headroom before the firm would have problems servicing the debt.  This still assumed some rosy projections about revenue would hold.  Given where The Fed seems headed, I just cannot see how it is rational to close a deal with that kind of interest rate risk and no margin for error.

There is always pressure to push price to close a deal, even if price gets pushed beyond the rational.  Part of the difficulty in being one of the junior people in a firm like Sub Rosa is the need to push back at the senior people who want to close a deal and rely on the junior people (like me) to "make the numbers work."  That can be a tough job when one has to confront charismas like Armin's.

The result has been a renewed focus on other opportunities.  Europe is one that Armin has been looking at for the better part of the last 18 months.  For reasons I won't go into here that particular approach has a lot of appeal for Sub Rosa.  It has less for me, as I'm not really inclined to want to move to Europe in the next 6 months, though it seems things are headed that way.

Another area that Armin has been contemplating for a long while is activist investing in public firms.  Recently, I was privileged enough to meet with about as famous an activist investor as you can find nowadays.  The meeting, on the estate, was either kept very quiet, or happened to be totally spontaneous.  I suspect the former.

One minute I was hunting for an apple to eat and the next I was being introduced to, let's just agree to call him "Theodore."  I managed a weak and distracted "Hello," before we collectively endured the schizophrenic weather and the prospects of cooperation were discussed.  It took a good bit of time, or so it seemed, before it dawned on me why I felt I had seen Theodore before.  I had.  In the Wall Street Journal, Fortune, McBusiness (Business Week) and etc. etc. etc.

For all his reputation as a brazen irritant to the biggest names in the corporate world, Theodore was amazingly humble, down to earth- but also very staccato and matter of fact.  He projected a kind of confidence that is at once self-assured and subtle.  The face of a man with nothing to prove, except perhaps to himself.

I must admit that the prospect of being an activist shareholder, or working for one, appeals to the growing arrogance in me.  Core to succeeding in activism like this, hinted Theodore, is not the belief that you know better than management, but the certainty that you do.

The Power of Seven

Occasionally, one is surprised to find, in the midst of the corporate jungle, individuals who have managed quietly, and without public fuss, to build a large and thriving corporate body.  One such is the 38 year old "Jake," who, more by luck than anything probably, managed to be in the right place and the right time for five years in a row and build a $800 million business from essentially nothing.  Unsurprisingly, Armin is somehow connected to Jake and got the first call when Jake tired of his business some months ago and decided he should buy a small airport in the islands, as it would be much more fun playing in his personal control tower (no, I am not joking) than firing admins who then sue him (probably rightfully) for sexual harassment (again, I am not joking).

As should also be unsurprising to Going Private readers familiar with such entrepreneurs, I would be substantially understating the matter to describe Jake as "eccentric."  Equally unsurprising should be the fact that he has also managed to attract a great deal of legal attention in the form of any number of lawsuits, generally involving one (but occasionally both) of two classes of plaintiff.  First, various minority partners which, despite the near certainty of litigation (or perhaps because of the near impossibility of Jake prevailing in any forum presided over by an elected official or a panel of his "peers"), he seems to have no difficulty attracting.  Second, former personal assistants (universally in their 20s, blond, formerly involved in competitive college sports and female).  In fact, so frequent are these actions that one, small and local legal office has developed a practice highly specialized in "Jakeigation" and lucratively represented 4 such plaintiffs in separate suits over the last 3 years.

According to legal counsel familiar with the matter, Jake has not only carefully salvaged defeat in every action he has become embroiled in, but he has failed to prevail, ever, on a single motion or counterclaim he has presented.  It was, at first, unclear to me if this perfect record is a function of Jake's total unsuitability as a witness for himself because of his eccentric (indeed borderline bizarre) behavior both on and off the stand (transcripts of his testimony read like the videotape "confessional" in a bad reality show wherein 7 totally incompatible 20somethings are thrown together in tight quarters and the producers sit back and record the fun) or his seemingly tenuous relationship with reality.  Then I met Jake and it all became as clear as sapphire crystal.

For reasons that should be obvious given my description, Jake and investment bankers simply do not get along.  And so it was that I was given care of Sub Rosa's new intern, "Craig," and dispatched to Greenwich to cater to the Howard Hughes understudy.

Jake has seven Blue Persian cats.  Actually, it might be more accurate to say that seven Blue Persian cats have Jake, their manservant and trustee.  They essentially have the run of the property (which is a not insubstantial plot in Greenwich) and are treated with a deference formerly reserved for tempestious dieties prone to anger quickly, raze villages and turn vast swaths of the population into pillars of salt if not lavished with constant supplicant mewings, offerings and, indeed, human sacrifice.  Indeed, many a servant running only casually afoul of one of the cats, found their lucrative tenure at the Estate du Jake to be a fickle fount.  I heard a rumor which, after reflection, has gained substantial credibility in my mind, namely that Jake's entire estate will pass in trust to his cats and the two children he fathered out of wedlock with one or another personal assistant will be left with next to nothing.

I should pause at this point to say that I am fairly neutral to positive when it comes to pets.  Frankly, any pet not able to sustain itself without direct human intervention for at least a month and unfortunate enough to be put in my care would surely expire given my work schedule.  Despite this, I mostly enjoy pets.  Or, I should say, I enjoy the freedom from responsibility afforded me by other people's pets.  I even have a mild affection, if you could call it that, for most cats.  Cats are generally unoffensive and benign.  They are usually low maintenance.  They are mostly self-sufficient.  I get along with cats.

I fucking despise Jake's cats.

Here's the thing.  One Blue Persian could, properly managed and seen but not heard, be a subtle statement of evil world domination intentions.  Two might hint at some instability beneath the evil genius layer.  Three... well.... But seven?  Loony bin.

Jake's Blue Persians look like a hairy ball of the dryer lint you remove from that filter thing (after 65 loads of blue jeans were dried) with a hairy pug face in the middle of which someone has stuck two big, yellow, (and beyond creepy) plastic teddy-bear eyes.  The problem is that this dryer lint ball walks, and talks.  I should say, talks incessantly.  The damn things never shut up.  I think they sleep vocally.  Often they form impromptu a capella groups, generally wherever Jake's guests have congregated, all struggling at the same time to be heard over the whinings of the others, volume progressively rising, pitch progressively raised, as they seek to drown out the others.  I can also attest with some confidence also that they are all completely tone deaf. This process is accelerated if they fail to attract the affection of guests.  And, of course, once even the slightest bit of affection is shown them, the other six flock to the issuer.  I know this because I carefully watched it happen to Craig, who, to my absolute horror, was foolish enough to intone "Here, kitty kitty kitty."  As you might imagine, this caused my opinion of our intern to slip rather dramatically.

It is a very good thing Jake can afford substantial hoards of household help to deploy an armored battalion of Oreck vacuum cleaners twice daily, or the sum of the living areas would be upholstered in "Blue Persian Wool."  Even as I write this, nearly a week on and a dry cleaning session later, I have recovered half a dozen cat hairs, which I suspect are actually viruses given their propensity to replication, from my suit.

We are invited to sit in the living room, a massively vertical space that, as there are no carpets or rugs for some reason, acts as an echo chamber, reflecting back down from the domed ceiling the voices of those below, delayed and slightly out of phase.  The effect is to double the number of cat voices audible at any moment.  To quote an Austrian Emperor: "The ear simply cannot follow so many notes."  I think at first that this effect must be intentional.  It would be trivial to dampen the sound in the room with some proper attention to fabric, after all.

Amazingly, Jake spoke in almost monotone, and without raised voice, though the entire session.  I grew so tired of straining to hear him that I finally just gave up.

I couldn't relate much of the meeting.  I spent most of it watching in horror as Craig collected five tuna smelling lint balls in his lap in the course of 20 minutes.

We walked out of the place with the beginnings of a deal framework but on the way to the waiting town-car Craig suddenly stopped and began to closely examine his laptop bag and then, to my amazement, to sniff it.

"FUCK!" he finally intoned.  "One of the fucking cats pissed on my new laptop bag."  The lack of rugs or carpeting fell suddenly and with an almost audible click into the grand order of things.

I made him sit in the front for the ride home.

Get Well

Please get well soon, Colin.  We miss you.

Dimensional Complexity

Accolades in Private Equity are granted twice.  First, and most mercurial, for the successful close of a deal.  Second, harder won and more critical, for one's reputation and career, the successful sheparding of the highly illiquid assets through 4-7 years of challenges and macro uncertainty to realize the paper returns it better damn well have accumulated.  Appreciate this, and the difficulty involved, and it becomes easier to see why private equity is an intensely long-term endeavor requiring the same qualities it takes to move large icebergs: constant, even, unrelenting pressure.

Knowing these two career drivers one can gaze upon a representation of the political forces in a private equity firm.  I say "representation" for two reasons.  First, those political forces are possessed of such Byzantine quality and harbored by such secrecy that all that is available even to the astute insider is the woefully insufficient three dimensional projection of an intensely intricate four dimensional object.  Some of the lines of the projection are overt.  Others are quite thinly drawn.  Understanding with something remotely approaching clarity is both difficult and a essential element in preserving one's career, particularly when things start to get dicey.

Recognizing that actually closing a deal is only the short-term part of the career advancement equation, one sees that closing a "good deal" is the long-term component, and far more critical.  This is the mechanism with which the whims of private equity partners with respect to the careers of their minions take root.  Specifically, the selection of deals to which a given minion will be assigned.  Find yourself working on a deal that shows the promise of a 1980s Japanese real estate deal?  Start showing your resume around.

I was somewhat slow to recognize the foibles of deal politics in this fashion.  To some degree I was shielded from this glare by Armin, who looks upon me fondly, but my own naiveté often worked against me early on, let us say, shall we, several months ago:

Armin: "You know, I imagine your fancy would be titillated by a project I have come across this week."  (He meant that my "fancy would be tickled").

Equity Private: (Immediately on guard, fearful of being overloaded) "Well, I'm pretty bogged down with Project LameCashFlow at the moment...."

Armin: "Oh, yes, I know.  I think, however, that you might want to consider shifting your priorities, that is if you aren't set on closing the LameCashFlow deal."

Equity Private: (No bells.  No whistles.)  "I would feel bad jumping mid-ship, that's all."

Armin: "Ah, I understand of course."

Several weeks later and our best bid for Project LameCashFlow is soundly trounced by "Truly Massive Fund, LP" a FAR better resourced hedge fund that shouldn't even be in the space given the size of LameCashFlow.  It occurs to me about a week later that only days before my conversation with Armin, we had dinner at the Estate with "Tom," a rather senior type from Truly Massive Fund, LP just before Armin and Tom retired to the study for 3 hours of after dinner drinks.  I thought nothing of it while being driven home, rather tipsy I might add, in the back of the horribly cliché black Town Car.  This sort of thing was typical at the estate.  What was to worry about?

I am convinced, by the way, that the black Town Car has a calming, even a numbing effect on the brains of young finance professionals.  A kind of subliminal channel to the lizard brain whispering the soft words "sleep... relax... forget... ignore..." like some early John Carpenter social commentary film with Roddy Piper in it.  Armin was trying to steer me clear of a flop, I was too dense to listen.

When, some weeks later, I relayed these events to the Debt Bitch she laughed out loud.  "The old man sure wants in your tight little silk panties, doesn't he?"  This is a not-so-casual but good natured dig at the favor Armin shows me, but for Laura sex is always a factor in this game too.  Still, her own career is on track such that it becomes hard to discount this old standby career builder out of hand.  "Hah!  You'll be lucky if he hits on you again like that.  He hates stupid.  Reminds him of his ex-wife.  Hey, tell Minnie (this is her nickname for Armin) I dumped the guy from Goldman.  If I say something it will be too obvious."  She was kidding, of course.  I think.

I vowed to myself to pay closer attention, and started thinking about what signs I had missed up to now.  These worries lingered shyly in the background of my thoughts for a week before, one dark and rainy early morn around 2:00 am, I bolted upright just before drifting off to sleep and nearly barked outloud: "London."

I have been gently pressured to move to the London office of Sub Rosa for some time now.  I've been gently putting it off, making a show of wanting a raise beyond the cost of living adjustment out of the deal, or a uptick in carry perhaps.  The reality is that I have no desire to move and I feel I would be unhappy with any amount of money in London.  Well, ok, not any amount.  I don't mind confessing that the quandary has had me in tears more than once.

Still, we have been losing more and more auctions.  This, in itself, is not overly concerning.  There are fewer deals worthy of bids, and those that are are being pressed by fierce competition.  Hedge funds, once too large and new at the game to play in the middle market LBO domain that is Sub Rosa's hunting grounds, have begun to creep down to our space and thrash our bids.

To some extent I do not mind this.  Those bids we have lost in which I had enough involvement to speak intelligently about I never regretted.  The prices at which those companies traded hands were so absurdly high to make me quip: "Good luck" to the poor sods who were responsible for the debt service.  I have no doubt that the ability of the leveraged finance VP at the lending hedge fund (we haven't borrowed from an actual bank for any of our last three deals) to throw the obligation off to a CLO somewhere before it blows up plays a big part in the absurd deal terms we have been seeing of late.  Moral hazard at work.

Add to this the present boom in private equity and smaller shops like us have to begin to be worried.  Armin's answer to this has been the European office, where the LBO machine is going like gang busters.  The combination of old family-owned businesses, soft labor practices, weak management and plenty of room for cuts and outsourcing has made Europe the new hunting grounds.  I knew intrinsically that the encroachment of hedge funds was going to spoil things for us in the United States eventually, I've written it here in one form or another many times, but it never seemed quite as real as it suddenly became the last several weeks, and London weighed heavily on my mind.  I remembered suddenly that Armin's wife had been to London several times now and the word "schools" has been tossed around repeatedly on the Estate.  How could I be so blind?

Sometimes, two highly tense structural elements, pressing on each other in something like balance, only break with the introduction of yet another element.  I'm sitting in Chicago just recently when it all comes crashing together with this "third element."

We are quickly getting in over our heads on bidding on "Project Dustbowl," a significant piece of a corporate break-up in Chicago, a city I love to visit- before the winter sets in.

We're downtown after an annoyingly long drafting session with one of our lawyers, "Abe" who I first met in New York with the Debt Bitch.

Abe believes there is a black list for New York restaurants such that if you fail to show up for a reservation you will be shunned ever after.  Accordingly, he never makes reservations in his own name.  The Debt Bitch finds this as silly as I do, but she's more vocal about it than I am.  We're in a little café near our corporate target planning dinner.

"Reservations for four.  Ten o'clock.  Mossberger," Abe is on his cell phone.

The Debt Bitch intones loudly, "Why don't you just use H.E. Pennypacker or Art Vandelay?" 

Abe, covering the mic of his cell phone frantically, and who is probably the only Manhattan attorney never to have seen a single episode of Seinfeld in his life hisses back, "Shhhh! What the hell are you talking about?"

"Look, even if there is a blacklist in Manhattan there isn't one in Chicago."  She has a point here.

Abe is quick with a retort.  "You think these people don't talk?  Think of all the overlap in ownership between successful Chicago and New York restaurants.  I need a Red Bull," and with this he wanders off to the counter.

We drift over to the door rolling our collective eyes at Abe before we meet him out front of the café.  When Abe comes out he drops a handful of change on the sidewalk in front of the café.  It jingles loudly and passers-by, suddenly jarred by a Pavlovian response to the sound of fallen money, halt in their tracks and look to the pavement.  Abe, nonplussed, starts walking on his merry way as if nothing happened.  I am about to call out to him, just intaking the breath to do so when the Debt Bitch grabs my arm and starts pulling me away in Abe's direction.

"He doesn't believe in change," she says, rolling her eyes.  This all sounds very familiar.  I start to say something to the effect of "Who the hell 'doesn't believe in change'?" but Abe cuts me off from 5 paces in front of us.

"The six minutes of time I would have to spend to sort it later is worth far more, $35 to be precise, than the sixty eight cents I just threw away."  I notice he picked six minutes to make the math easy for himself.

Some guy standing next to me butts in with a "Nice friends you got there."  I am frozen by the comment, but the Debt Bitch steps gently to the side, fully in New York mode and ready to eviscerate the guy before I recognize that it is "Sean."  Sean is easily the smartest man I know, an old friend, also a private equity type in New York and a JD/MBA.

"Oh my god," I say stupidly.  "What are you doing here?"  He's grinning at me. 

The Debt Bitch is either alarmed or intrigued.  Sometimes I think they are the same thing for her.  "You know this suit?"  I don't point out that she's wearing a suit also.  She means it affectionately, after all, even if it doesn't sound it.

"Oh yes, I know him."  I repeat myself, "What are you doing here?"

"Oh, top secret.  Hush, hush."  His expression tells me it is exactly the same reason we are here.

Abe is itching to get to the hotel, but the Debt Bitch is suddenly not in a very big hurry.

"Who are you with?" demands the Debt Bitch.

"Adjuvant Capital," he smiles back.  This silences the Debt Bitch, which is unusual.  It silences her because they won an auction from us a few months back and Laura later found out they got better financing terms than we did.  "Do you have time to catch up," he asks me.  I am anxious to talk with him.

"Sure.  We're doing dinner at ten, but it is informal."  Abe is now stopped but standing seven paces away and glaring at us impatiently.  I can see that the prospect of adding another person to the reservation is already stressing him out.

"Let's go for a drink then," he suggests.

"Sounds good," this is Laura inviting herself.

"The Four Seasons is not far.  Nice bar there."  Abe shakes his head and starts walking back to the hotel.

And so the Debt Bitch, Sean and I end up at the Four Seasons drinking vodka.  Sean's perspective on the middle-market of LBOs is about the same as ours.  Things are getting tight.  People are getting squeezed.  He wonders if bidders are using the Yen carry trade to finance things, the bids are getting so high.  The Debt Bitch is unusually quiet on this topic.  Sean's solution, move over to The Dark Side.  Sean is job searching at hedge funds.

"If you can't beat them, and I'm having a hard time beating them lately, then join them," he comments.  "Plus, why in the world would I want to be illiquid right now when I can move over to the buy side in public equities."

The entire conversation leaves a sour taste in my mouth.  Are those my options?  London or hedge funds?  What in the world would I do in a hedge fund?  Seems bizarre to work for a LBO group in a hedge fund.  Nothing about the compensation structure is long-term oriented.  None of the advantages one gets from those structures can be used to extract value from the portfolios.  But Sean is convinced the future is elsewhere.  "Get out of LBOs.  Their time is passing."

The night passes pleasantly enough other than that.  Sean heads back to his hotel before we stalk off to dinner.  I can see that the Debt Bitch wants to ask him for his number or something but she can't figure out a classy way to do it.  I've never seen anyone disarm the Debt Bitch before.

My amusement is dimmed by the dark seed that Sean has planted in my head.  "Send me your resume," was his parting line.  "I'll pass it on to some people."

I'm brooding on it on the flight home sitting next to the Debt Bitch who pisses me off thoroughly when she asks, "Hey, how do you know Sean exactly?"  Never mind that I told her three times already.  "Is he single?"

All I can think about is his parting shot.  "Send me your resume."  It is a measure of how mixed up I am that, once back in New York, I do.

Yesterday, after lunch, I called in for my voice mail and my blood ran cold.

"Ms. Private, this is Linda Plotkin at Hedge Row, LP in New York.  I'd like to schedule a thirty minute phone call with you and our manager of recruiting, Sara Grace.  Please give me a call back at your convenience and we can try to find a suitable time."

Oh what, dear reader, am I to do?

Tick Tock, Tick Tock

"I'm on top and just beaded with sweat."  Laura the debt bitch, who has been selfless in trying to cheer me up given all the downtime I have endured owing to a shattered wrist and who, moreover, can soften life's hard edges better than my morphine drip did, is relaying across the pond her latest carnal dalliance with some banker or another to me on one of her mornings and my afternoons.  I've long since turned off the speaker phone.

"Were on the floor in front of this huge flat-screen TV he has on his wall like its a piece of art or something above a breakfront against his wall.  You know, like that commercial?"  I do, in fact, know the commercial but I keep silent, knowing better than to interrupt her to answer her rhetorical questions.

"I've already got rug burn on my left shoulder from his carpet on the floor and I guess I must have rubbed my knees raw too because I could barely walk yesterday.  Anyhow, we arrive simultaneously..."- you have to love Laura's euphemisms- "...and make rather a lot of racket and I just collapse on top of him and we are there panting, hearts pounding, in the glow of the screen which used to have Saw III on it but now has that blank, faded blue background like it is trying to be a screen saver."  I neglect to ask the obvious question: "How exactly did the two of you get riled up watching 'Saw III'"?

"We are probably laying there for twenty seconds or something before one can hear this very peculiar ticking.  Less a 'tick... tick... tick...' than a 'fluck-ah... fluck-ah... fluck-ah...'  Strangely muted.

We are quiet for a minute before he says, 'do you hear that?'  I do, of course, and I say so.  'What is that?' he is asking me over and over again.  I have no idea.  And it is really hard to tell where it is coming from because we are on the floor.  We listen again for a minute, then I realize, it is coming from his chest.  It is his fucking heart!"

I am quiet on the phone call now.  I really don't want to be told that Laura killed a man via coitus.

"So I tell him.  I say, 'It is your fucking heart!' and he is totally silent for a minute, and we just listen to that sickening ticking, like a loose hinge flapping back and forth or something and then he just starts to freak out saying 'My god, my god,' over and over again.  I must have blown his valve or something.  My heart is pounding too and that noise is freaking me out.  We really have no idea what to do.  Call an ambulance?  Should I perform CPR?  Run?  And if run, then where are my clothes and how long will it take me to put them on and how many fingerprints would I be leaving behind?  I can just see the fucking cast from CSI Miami dusting for my vaginal secretions and David Caruso busting me with the line, 'why exactly did we find your bodily fluids all over the victim's penthouse?'  The line is bad in itself but I really hate David Caruso, you know?"

I do know, as it happens.

"This goes on for several minutes while we both run frantically around the bedroom, nude, and I'm finally looking for my cellphone to call 911 when the noise stops.  We both sit really still, I put my head to his chest and hear nothing but a thumping.  'It was probably nothing,' he says like six times.  'Probably,' I agree.  What else am I going to say?  Anyhow, he goes down to the kitchen to get a glass of water or something and I'm getting dressed because you better believe I am not staying the night at this point, what if he dies?  And when he's gone and I'm crawling around looking for my panties under the bed I hear it again, 'fluck-ah... fluck-ah... fluck-ah....'  Now I almost freak out.  Maybe it is my heart.  But it doesn't sound like it is coming from me.  I stand up, walk around the room a couple of times until I track it to the breakfront.  It is the fucking DVR thing in his cable box and the hard-drive or whatever is writing or reading or whatever the fuck it thinks it is doing.  'Fluck-ah... fluck-ah... fluck-ah....'  I almost laughed, but instead I went home."

Then I make the big mistake, I ask her: "So he must have been relieved he wasn't dying."

"What?  Oh, I didn't tell him.  What the hell would I do that for?"

Spreading Holiday Sneer

It is probably counterproductive to admit to having a thing for the Vienna Boys Choir no matter what your position in the world (or your gender). The Vienna Boys Choir is one of those things (like substance abuse) that, even should it move the very foundation of your soul, must be celebrated with discrete subtlety. Of course, any all boys group that attends boarding school at Palais Augarten from kindergarten on, well, you should expect this. Not only this, but, owing to the suspicion its public appreciation would bring, one must initially frown gently on mention of the Choir until it can be determined if one is in friendly company. This is best established by careful observation of the other frowns that accompany mention of the Choir and careful observation of the careful observation by the other frowners. By the fourth derivative of observation it is safe to vocalize careful and caveated approval to test the waters of the group.

For reasons beyond understanding, a public address system, which during my tenure has never been used, was installed in the New York offices of Sub Rosa. I bring this up because, as I no longer work in the New York office with any regularity, I was forced to search out an empty office for my recent temporary stay. Unlike many market participants who want broad exposure to the tenor of their office and its comings and goings, the theory being that this permitted you a better view of the way the wind blows, my goal was to find the most isolated and sheltered office- the theory being that in this way I wouldn't have to talk to anyone. The office that gave no external hint whatsoever that it might entertain an occupant was an ideal choice. Armin had gotten quite a deal on space in New York, by what hook or crook I do not wish to learn, and accordingly, Sub Rosa's New York facility is (and has even been) barely 50% full. I don't for a moment imagine he actually felt the firm would grow so large as to fill the space, only that he couldn't pass up the rate he managed, like the middle schooler who buys a three pound bag of M&Ms because the unit price is 25% of that paid with the small bag and then throws up chocolate for three days. My little temporary enclave was, therefore, surrounded by abandoned (or perhaps more accurately, never originally occupied) space. The perfect "land moat" for the anti-social finance professional. It also had the advantage of a great view of the city.

Being a mostly Londonesque denizen now, my first task was to stow the indispensable tool of London finance: My long coat. Opening the office's closet what did I find? Thousands of dollars in audio equipment hooked up to the office PA system. A thick layer of dust covered the stuff.

Of course, finding such a setup there was nothing I could do but abuse the discovery. I was right in the middle of hooking my old iPod Nano to the RCA to 1/4 inch stereo adapter and plugging the cord into the jacks reading "CD IN" when my cellphone rang.

"Where the fuck are you?" It was the Debt Bitch. I had been foolish enough to tell her I was coming.

"Uh, in the New York office?"

"I know that screwball, where?"

"I don't know, let me look." I walked outside the office and looked for the room number tag. "Nowhere I guess. There's no room number or nametag." I smiled to myself. Why do I delight in being difficult? Years of experience perhaps?

"You harlot. I'll be right there." She hung up before I could ask how she planned to find me. All the better. She would have taken it as a challenge.

I left my door open and continued to fiddle with the system until I heard a distant cry in the halls. "Marco...."

Marco?

"Marco...." More insistent now.

Oh. Duh. "Polo," I bellowed back.

"Marco...." Laura rounded the hallway corner.

"Polo." She walked in and then just stared at me, or, perhaps, the many cables issuing from the closet in my office. Or both. "Don't ask," I said.

"But I must know," this delivered in as perfect an imitation of Inigo Montoya as a girl could possible render. (And it's pretty good. I'm not sure if that's a reflection on Laura's femininity or Inigo Montoya's manhood. Or both).

"Get used to disappointment," I replied without even the thinnest effort at imitating Wesley. It is an "in-joke" of ours. I continued to connect the iPod.

Suddenly, an audio-equipmentesque pop and crackle issued from the round, white speaker grill above our heads, and, I assumed, the rest of the offices, and as if from the heavens.... pure, uncorrupted and floating voice. The sound of the divine. Or, at least, as close as an atheist like me can get to such a thing.

The Debt Bitch stared at me for a long, long moment. Or rather, she stared through me, her eyes lost. I knew just how she felt. The first song was "In Dulci Jubilo," and, no matter when I listen to it, including this particular occasion, it always pulls hesitant tears into the corners of my eyes until I have to look away and pretend to sneeze to find a tissue and hide what a sentimental being I really am. I am not even sure why. It just has the most mournful, and yet hopeful tenor to it. The most humbling and wonderful air.

Laura seemed just as lost, until, after a deliciously long twenty seconds, her eyes lost their glaze, her focus returned to me and a rare smile crept across her mouth. "Oh my god!" She said breathlessly. Another long pause. "Is that playing in the whole office?"

"Well, gee wiz, Laura. I don't know," I smiled. She laughed out loud. "It's too bad I only have three songs. I guess I will just have to leave it on repeat."

"You know," now the look of real mischief was in her eye. "People will wonder where this is coming from."

"They will?"

"Of course, and we will have to make sure there are some answers. There's nothing worse in a private equity firm than unanswered questions." This was actually intensely amusing since it was a highly overused pet phrase of one of the partners.

"That's true," I nodded. "Well, I will make sure that a few people know that it is because the building broadcasts holiday music on all the floors during the holiday season."

The Debt Bitch frowned. "Well, if your three songs are all the same, won't some people be offended by the rather obvious lack of religious diversity in the material?"

I hadn't thought of this. "Well, that's true. I guess it would be unfortunate if the management office was populated by Catholics."

"Even worse if it was populated by Jews."

I laughed.

"Did Seuse write anything for the chosen people?" She asked. This was alarming. How anyone, much less the Debt Bitch would be able to pull out Seuse was beyond me. I didn't even know he held the writing credit until I looked it up the next day. Laura continued, "I'll spread the rumor that it's Armin's idea. He's in Europe anyhow right? Who will know the difference?"

"My rumor is better."

"Ok, then you tell two people yours and I'll tell two people mine. The losing rumor buys dinner."

"Deal."

And so, after 9.5 hours of repeat, I won.

Activists are Sort of Hot

You know what I mean.  In that sort of squirmy-can't-hold-still restless-leg-syndrome we-can't-afford-a-dividend and I can't-not-get-the-wife-jewelry this year sort of way.  Well, and they are just hot in general too, frankly.  Forgetting even that they fear no CEO, and love causing discomfort to others at cocktail parties.  What's not to love?

(muffiehbs05 has joined the chat)
3:17:54 PM ohhoneyitstess: look what the pussy dragged in
3:18:45 PM muffiehbs05: Hey tessy!
3:19:06 PM muffiehbs05: What's doing?  Did you meet that guy over the weekend?
3:19:46 PM ohhoneyitstess: which one
3:19:57 PM muffiehbs05: You had more than one date?
3:22:01 PM ohhoneyitstess: no, just one date, but i thought you meant the guys we were talking to saturday
3:22:06 PM ohhoneyitstess: w/ EP?
3:22:28 PM muffiehbs05: Gawd! No!  Ew!
3:22:51 PM muffiehbs05: That one guy worked for Morgan Stanley, for crying out loud.  Where the hell IS ep?
3:25:29 PM ohhoneyitstess: i don't know, working? that harpy bitch.
(equityprivate has joined the chat)
3:25:56 PM ohhoneyitstess: it's almost close, maybe she'll be done soon
3:26:02 PM ohhoneyitstess: by close i mean the close of the market, muffie
3:26:20 PM muffiehbs05: What?  It closes at 5, doesn't it?
3:26:51 PM equityprivate: muffie, you are so mercifully free of the ravages of intelligence.
3:27:19 PM muffiehbs05: That's absurd.

3:28:53 PM ohhoneyitstess: muffie, tell us what you did today
3:29:05 PM ohhoneyitstess: you didn't go into the office, i'm assuming, yes?
3:29:52 PM muffiehbs05: I was too tired.  And I'm kinda sore after last night.
3:29:59 PM equityprivate: hi tess
3:30:29 PM equityprivate: do I even want to know how you managed to get sore on a monday night?  clearly not from the treadmill.
3:31:25 PM ohhoneyitstess: you didn't go in b/c you were sore?
3:31:29 PM ohhoneyitstess: how'd the md take to that excuse?
3:31:49 PM muffiehbs05: I don't really do excuses anymore.
3:31:55 PM ohhoneyitstess: oh, that's nice for you
3:32:03 PM muffiehbs05: Well it really just saves everyone time.
3:32:24 PM muffiehbs05: Plus, the guy I was working for, I don't think he's working anymore.  I guess the fund he worked for didn't do very well.
3:32:39 PM equityprivate: wait, your boss worked for the flagship fund?
3:32:52 PM muffiehbs05: Not my boss, my patron.  You know, my sponsor.
3:33:08 PM equityprivate: from the orientation class or what?
3:33:34 PM muffiehbs05: No, you know, like he looks out for me and we go out when his wife isn't in town?
3:33:57 PM ohhoneyitstess: wait
3:34:05 PM ohhoneyitstess: you mean the guy who looks like our activist crush?
3:34:11 PM muffiehbs05: Who?
3:34:21 PM ohhoneyitstess: dl!
3:34:30 PM equityprivate: he looks like Dan Loeb!?!
3:34:42 PM muffiehbs05: What?  Who is Dan Loeb?
3:34:54 PM equityprivate: my god, he is so hot!
3:35:06 PM equityprivate: and so married.  its such a shame.
3:36:51 PM ohhoneyitstess: yeah it is a shame, although it's not as though marriage has ever stopped big muff before
3:37:34 PM muffiehbs05: Hold on, let me google Dan Lobe.
3:37:42 PM equityprivate: muffie, it's Loeb.
3:37:46 PM muffiehbs05: Oh.
3:37:56 PM equityprivate: Activists in general are just... hot.
3:38:44 PM ohhoneyitstess: yeah they are
3:38:47 PM ohhoneyitstess: they get so riled  up
3:38:53 PM ohhoneyitstess: u still have a thing for tom?
3:39:08 PM equityprivate: Loeb wrote me an email once.  he was the namesake of one of my worst management prizes on the Going Private blog.
3:39:20 PM equityprivate: oh, tom hudson DOES make me weak in the knees.
3:39:32 PM ohhoneyitstess: even though his fund has shit the bed?
3:39:44 PM muffiehbs05: Activists?  Like protestors?
3:40:01 PM equityprivate: just getting back to his roots, tessy.
3:40:30 PM ohhoneyitstess: hehe
3:40:36 PM equityprivate: no, muffie, shareholder activists
3:40:39 PM equityprivate: you know, they buy up 5% of a publicly held...
3:40:42 PM equityprivate: ...that triggers a SC 13D filing requirement...
3:40:45 PM equityprivate: ...then they proceed to alpha-male-investor away at the current management *swoon*
3:40:56 PM muffiehbs05: They are not hot.  What about Carl Icahn?
3:52:19 PM ohhoneyitstess: carl icahn is hot, objectively, but i'm not attracted to him
3:52:22 PM ohhoneyitstess: something about his...
3:52:23 PM ohhoneyitstess: age
3:52:35 PM equityprivate: oh, that's the part I love!
3:52:51 PM muffiehbs05: EP just wants her daddy to spank her, that's all.
3:53:08 PM equityprivate: carl icahn does NOT look like my father.
3:53:16 PM muffiehbs05: Ok, EP wants her uncle to spank her.
3:53:42 PM ohhoneyitstess: eww
3:53:45 PM ohhoneyitstess: to the uncle
3:53:48 PM ohhoneyitstess: the spanking?
3:53:49 PM ohhoneyitstess: maybe
3:54:40 PM equityprivate: whatever, I still think icahn is kinda hot.
3:57:51 PM muffiehbs05: Yeah, if you want to be spanked by your uncle.
3:58:23 PM equityprivate: muffie, you should be so lucky that Carl Icahn would want to put you over his knee and smack your little, lilly white ass.
3:59:45 PM muffiehbs05: I've been spanked by better.
3:59:55 PM equityprivate: better *what* exactly?
3:59:55 PM ohhoneyitstess: oh, yeah?
3:59:57 PM ohhoneyitstess: who
4:00:02 PM ohhoneyitstess: spanks
4:00:05 PM ohhoneyitstess: who
4:00:06 PM ohhoneyitstess: names
4:00:06 PM muffiehbs05: Just never you mind.
4:00:09 PM ohhoneyitstess: where/when/what appartus
4:00:11 PM ohhoneyitstess: shut up muffie
4:00:13 PM ohhoneyitstess: you love to talk
4:00:16 PM muffiehbs05: Hairbrush.
4:00:20 PM muffiehbs05: If you must know!
4:01:03 PM equityprivate: the newly promoted MD down the hall from your office doesn't count, muffie.
4:01:19 PM muffiehbs05: Why not!?  That's bullshit!
4:01:25 PM equityprivate: see, i knew it.
4:01:49 PM ohhoneyitstess: why doesn't it count, ep?
4:01:52 PM ohhoneyitstess: just out of curiosity
4:02:00 PM ohhoneyitstess: does it have to be a fund manager?
4:02:05 PM ohhoneyitstess: cause they take no prisoners?
4:02:10 PM equityprivate: because she didn't do anything but walk by his office once (since she's only been there once)
4:02:31 PM equityprivate: well at the very least he cant be from the same office.
4:02:50 PM equityprivate: its not some kind of HR thing, its just keeping the crush pure.
4:03:10 PM muffiehbs05: Well how am I supposed to compete then?
4:03:40 PM equityprivate: muffie, we weren't talking about guys you slept with, it was crushes.  you don't have to bang everyone you have a crush on.
4:03:49 PM muffiehbs05: Wait, I don't understand...
4:03:53 PM equityprivate: nevermind
4:04:14 PM ohhoneyitstess: sorry, dozed off there for a sec
4:04:17 PM ohhoneyitstess: but wait
4:04:18 PM ohhoneyitstess: muff
4:04:21 PM ohhoneyitstess: re: how can i compete
4:04:27 PM ohhoneyitstess: showing up to the office would be a start
4:04:36 PM ohhoneyitstess: it's all smooth sailing/spanking from there
4:04:49 PM equityprivate: you working or something tess?  I notice most of the articles are from you nowadays.
4:05:00 PM muffiehbs05: Ok, just shut up.
4:05:35 PM ohhoneyitstess: ep, tell us who the latest hf crushes are
4:05:57 PM equityprivate: well, I kind of have a thing for Bob Chapman.
4:06:06 PM equityprivate: he reminds me of the alien bounty hunter guy on x-files.
4:06:30 PM ohhoneyitstess: i don't know him
4:06:39 PM ohhoneyitstess: hey, if you like ichan, what about james simons?
4:06:43 PM ohhoneyitstess: he's a dinosaur
4:06:52 PM equityprivate: that sort of deep, penetrating look that says, "just try to avoid completing a stock buyback program."
4:07:46 PM equityprivate: well, he's not really an activist, tessy.
4:08:10 PM muffiehbs05: That guy looks like Camilla Soprano's father.
4:08:12 PM ohhoneyitstess: bob chapman does?
4:08:22 PM muffiehbs05: No, no no.  Simons does.
4:08:26 PM equityprivate: you know Simons muffie?
4:08:38 PM muffiehbs05: Sure, I was at a party somewhere and he broke it up.
4:09:01 PM equityprivate: I don't want to know.  really.

Wealth and Fame

At least in contemporary finance culture (is there such a thing?) the interplay between money and fame is most glaringly apparent in the world of hedge funds.  Be this as it may, some recent incidents have caused me to wonder to myself if this dynamic, like many in contemporary finance culture (if there is such a thing), isn't more complex than it first appears. Incentive fees (and management fees) being what they are, there are strong incentives for hedge funds to grow assets at (nearly) any expense.  There are some noted exceptions to these rules (I can think of an activist or two who have returned rather large sums to investors when they have been unable to, in good faith, place the funds in sufficiently worthy investments) but these are few and far between.  Getting the word out, and pushing the hype is, as with any financial product, part of the fundraising game.

Of course, technically hedge funds aren't supposed to be engaged in "general solicitation."  That is covered by Rule 502(c) which provides in part:

Except as provided in Rule 504(b)(1), neither the issuer nor any person acting on its behalf shall offer or sell the securities by any form of general solicitation or general advertising, including, but not limited to, the following:

(1) Any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media or broadcast over television or radio; and

(2) Any seminar or meeting whose attendees have been invited by any general solicitation or general advertising;

Hedge fund managers who are prone to quoting returns and figures in publications, or chatting too liberally with members of the press are likely to get something of a spanking from the SEC.  We must, after all, protect non-accredited investors from themselves (though I suspect this bit of nanny-statism is preferable to a legislative unwinding transactions between consenting parties because they are judged "unfair" after the fact and in the context of a shift in markets to something other than permabull dynamics).

Fame, then, would seem a shortcut, even a loophole, to such restrictions.  Many managers court such publicity actively.  This is, to the extent this term has any meaning whatsoever, "marketing."

It amuses me then when such managers are described as "secretive," "publicity shy," "reclusive," or "intensely private."  It is hard to take, for instance, Bloomberg very seriously when they "speculate" on the "ever secretive Renaissance."  Apparently, Renaissance wasn't so secretive that its founder the "reclusive" James Simons couldn't be persuaded to give Bloomberg an exclusive interview (or three), pan his life story and sit for an extensive Bloomberg photo shoot.  Of course, Bloomberg tries to maintain the illusion of hard hitting investigative financial journalism with lines sprinkled with breezy comments like "...according to Bloomberg calculations," and "...though Simons dislikes talking about it...."  Ah, yes.  Of course he does.  But not so much that he won't talk about it.  Guess the hard hitting investigative reported had a nice pair.  ("Of what," is the question- but then I think Simons' smile in the picture might be a clue there).

Any number of hedge fund mangers or private equity firms have found themselves in warmer-than-comfortable water with the SEC after a puff-piece appeared on Bloomberg under the "Bloomberg.com: Exclusive" banner.  And Bloomberg, by the way, is particularly guilty of such sins.  This should be enough to land them in Going Private's Maxwell Smart category by itself, but their ethical lapses are not limited to managers cast from the publicity hound mold.

Rare are the managers who are, in fact, "secretive," whatever Bloomberg may try to sell you- but they do exist here and there.  Not that Bloomberg has much regard for such privacy in the rare instance that they encounter it among the rolls of professional managers.

Recently, a good friend of Going Private pointed me to a Bloomberg profile on a number of hedge fund managers, including his boss, the head of a rather successful family of funds which have made him quite wealthy by almost any standards one would care to articulate.  In the course of reading the article I managed effortlessly to determine:

1.  His street address
2.  The price of his house
3.  His daily exercise habits and, thereby, his daily whereabouts
4.  The school his two minor children attend
5.  His performance and management fees for the year
6.  His wife's habits

I could go on, but time forbids me.

Ah well, I thought, another ego-driven hedgie who's publicist managed to score a puff on Bloomberg.  *yawn*  Yeah, except not.

Turns out that the subject of the article had nothing to do with it, refused to comment and asked Bloomberg not to print it.  Forgive me my cynicism, but I wonder if the classic journalistic threat (Want a favorable piece?  Give us access.) wasn't at work here.  If so, and this is just my speculation, it borders on criminal in my opinion.

Suffice it to say, if I was running an international kidnapping cartel, my arrival in New York would be followed immediately by a visit to the most anonymous internet cafe I could find (or some wireless wardriving perhaps) and several Bloomberg searches.  (Law and Order had a totally cool episode about a hedge fund manager kidnapped by his employees recently, so you just know that I'm current).

Still, some hedgies, and other professional "money runners," do get some use out of publicity.  For some, this is merely an ego gratification.  (You people know who you are).  Indeed, publicity hounds in this category are, at least in my view, violating at least the spirit of Rule 502(c), and the hedgies I respect avoid rather than court publicity.  Still, it can be useful in some circumstances.  For instance:

Your investment vehicle is going public.  I don't know that anyone would make the argument that Steve Schwartzman's stock suffered when the over-the-topness of his birthday parts became (and by this I mean, was encouraged to become) public.  Sure, Congress might be pissed off, but a few dollars in share price buys a metric ass-ton of lobbyists.

You are an activist.  Before you ever get to the point where you are soliciting shareholders for your proxy fight, the pure intimidation factor your name lends to the initial discussion with management can keep campaigns simple, quick and effective because you are a "credible threat," (Dan Loeb filed a 13D?  Go to threat level RED: severe risk of activist campaign!)  This helps even more if management decides to fight and you need to go to street for support.  So here, well, I'm more sympathetic.

As for the rest?  Really, let your performance do the talking.  Or my hedge fund friend would say:

"Just because you have $10.00 and everyone knows about it doesn't make it $11.00."

But then, he gets mad when investors leak their (outstanding) performance figures to the press- so he's a rare bird.  Think, dear hedgies, about the company you keep:

In America, I find, it's fame, rather than money.  Now, after all this unpleasantness, I always get the best table.

- Klaus von Bulow

Debt Bitches, LPs and the FBI

Two of the guys from one of our limited partners are always floating around the offices at the beginning of a new quarter.  I feel like they always show up a few days after our investor letter goes out.  I haven't watched too carefully, but I suspect that if I started sampling data I would find that they start with the girl who runs investor relations, before drifting into the office of one of the more senior partners.  I don't need to do any more sampling with respect to where they end up.  That's easy because I've seen it almost half a dozen times.  They end up orbiting around or sitting in Laura the Debt Bitch's office.

"Fitz and Sam," as I will call them, always seem to arrive around 3:30 or 4:00, and their pre-Debt Bitch business seems to occupy them for about an hour or 90 minutes.  Of course, this puts them right in the zone for the quick afterthought of a watch-check and the kind of "subtle" hint drop that sounds something like, "Hey, Laura, we are headed out for an early drink.  Care to join us?"  Of course, and despite the fact that she typically works until at least 7:00 (or if she leaves earlier than that it is to stroke percentage points out of one or another debt provider over martinis) she normally takes them up on their offer.

On this last occasion I happened to be sitting in Laura's office when the drink solicitors dropped by.  They drifted past Laura's office slowly, careful not to look, paused briefly almost totally past her office, as if to consult each other on something totally unrelated in any way to the fact that they were, actually, mostly standing outside Laura's office, and then, as if on cue, Fitz checked his watch.

"Oh boy," The Debt Bitch chimed in.  "Here we go."

"What's that?" I asked.  My back was to her office window, and though I could see their ethereal and substance-less forms framed in translucent reflection on the surface of The Debt Bitch's external window, I pretended not to notice.  I didn't really want Laura to know I paid this much attention to the likes of Fitz and Sam.

"Frick and Frack are about to ask us to head out for a drink," she didn't even look up from the white legal pad she was scratching out "to do" items on.

Laura uses a ruler and a black, extra fine Uniball pen to draw perfect strikethrough lines through the to-do list items she keeps on a running legal pad- white 8.5" x 14", dated at the top of each sheet and not a single sheet torn off.  Instead, she folds them back behind the pad and holds the old sheets there with a binder clip.  Once I asked her why she kept them all she replied, "If any of those fuckers try to fire me for incompetence or related bullshit then I have quite a compelling bunch of exhibits to fuck them right back in court with." Makes all the sense in the world when you hear it that way and remember the mantra "Don't fuck with the Debt Bitch."  Still, the pads seem sort of strange, until you see a completed to-do list.  Very methodically filled with to-do items eviscerated with the brutal finality of a perfectly drawn strikethrough gutting them from crotch to head.  Very satisfying.  All that remains is a neatly un-struckthrough date of completion next to each item.  I suspect if she could, and though it might finally trigger the fifth indicator in the "If your employee exhibits any five of these ten symptoms of mental collapse, call the New York Police SWAT team immediately"-list that some human resources professional is doubtlessly checking Laura against on a regular basis, The Debt Bitch would use a straight razor to kill her to-do items.

"They never ask me anywhere, thank god." I point out.

"Oh, they will now."

"Why would they bother?"  Really, this is an honest and un-self deprecating question when I ask it.  I just consider myself beneath their notice (because they are mostly beneath mine).  If they were in the habit of hitting on anyone else besides The Debt Bitch I probably wouldn't even know they exist.

"Because you are sitting in my office.  They will rightly conclude that they have to ask us both out if they ask me out or I will think them rude.  Plus, there are two of them.  One or the other one, probably Frack (she means Sam) will glom onto you because he is tired of losing me to Frick's more engaging conversation on every outing." Laura is barely done getting this sentence out of her mouth before they make their move.  I watch their thin reflections look at each other, suddenly seem to "notice," they are standing outside of Laura's office and reach for her door to knock.  Laura waves them in with a sigh that only I can hear and that happens to be the precursor to the little chirp of surprise she emanates like some pleasantly startled cat suddenly away and happy to see you after a long absence.  Of course, she manufactures this chirp expertly, and solely for their benefit.

"Why hello," Fitz offers in return.

"Yes, yes, hello to you too."  She barely contains her annoyance here, a slip to be sure, but she manages to candy coat it with a perfectly delivered bit of plausible, if pompous, sarcasm.  "Have you completed your latest tour of our world-class, alpha inspiring, value creation facilities?"

"Yes... yes... I think... we have."  Listening to anything Fitz says is this kind of breathy, unsure until the last clause of his sentence of what his conclusion will be, sort of pondersome experience.  As if everything before the "we have," was just a very elongated and multi-sylable "hmmmmmmmm."

"You guys are our favorites," Sam beams.  Sam is as plain and afraid of conflict as Fitz is pensive.  One day I will do the research, but I suspect I will find that Sam was one of those analysts back in the "good old days" who had a two-word recommendation vocabulary: "buy" and "strong buy."  You know the one, prone to ask a difficult question on an earnings call but the mere hint of displeasure by the management team in responding to him and he is all apologies and "I see, I see. Yes, of course"'s.  Always looking to see if the company he covers is also an investment banking client.  Spineless and, on top of it all, very guilty about that too.  Ok, so I take it back.  I'm never going to bother to do that research.

"You knooooooooow," Fitz begins, with a hushed tone and a sideways glance in my direction, as if perhaps three kilos of cocaine are about to trade hands in that office but he's not sure if I'm "cool" with it. "We were... sort of... perhaps thinking of heading out... well..." and here a strained look, "...EARLY for a few cocktails."  Again, the last clause, clear as a bell after a long swim through chilled maple syrup. "If... you ladies... would want to...."

The Debt Bitch is in no mood for dalliances.  I don't blame her, we could be here all day.

"Yeah, let's go to the Peninsula."  Again with the Peninsula, I think to myself.  Laura is always taking me there.  I suppose that's not a bad thing.  It's a nice enough spot, pleasant seating and makes for nice conversation.

The four of us are sitting, just after the drinks have arrived and The Debt Bitch has asked for a larger martini.  The waiter just brings another martini and puts the still half-full shaker on the table next to it the second time.

Sam has put a stack of documents from other funds on the smallish table and Laura reaches over and grabs them when the drinks come.  This strikes me as rude, after all, are we supposed to know what other funds our limited is pondering?  Sam looks about ready to protest but Laura has him wrapped around her pinky toe and instead he just sits watching her, helplessly, with his mouth slightly ajar while Laura shamelessly peruses them, chuckling occasionally as if to say "Ha!  You are investing with them?"

She comes to a few colorful leave behinds and holds them up for us all to see.  They are from a fund with a rather elemental name that astute Going Private readers certainly would recognize.  But that's not what is amusing.  What is amusing is that they are laminated.

Everyone looks at her before Fitz chimes in.

"Yeah... that... it is... sort of... well... unusual... that they would be laminated."

Laura laughs out loud.  "You dolts.  You don't get the subtext?" Everyone looks dumbfounded.  I do my best to just look impassive and cover myself by starting to sip my drink.

"You are supposed to be so enthralled by the documents and so enraptured by all the money you are going to make that you can't help but drool and ejaculate all over the paper right on the spot, and then how are you going to give it to the investment committee with your 'recommendation,' so to speak?"

I almost snort my drink right out my nose and onto the table.

Sam looks like one of those effete foils in a Humphrey Bogart film that simply cannot believe you just slapped them and has no idea what to do next and may, in fact, have just forgotten their lines.

Fitz starts an extended "hmmmmmm" that is going exactly nowhere fast and is composed mostly of words like "incredible" "doubtful" "rather not what I expected."

My drink has now reversed course and wants to head down my throat which I am desperately trying to prevent less I descend into a fit of coughing.  Laura gives a cute little snort and with a short little "excuse me," drops the papers on the table, gets her purse and heads in the direction of the ladies room.  I am stuck with Frick and Frack and their stammering or silent disbelief.

After about five minutes I realize that my phone has buzzed me three or four times.  I try to be subtle about looking at my texts but I'm still really concentrating on not coughing up a lung.  It's The Debt Bitch on SMS.

Coming?

Where are you?

Equity?

I can't wait forever.

I type back.  "Where are you?"

"Downstairs, nimrod.  C'mon."

I type back again, "Oh, we didn't know we were leaving."  I am about to ask for the check when I get another SMS from Laura.

"Answer your phone."  I barely finished reading when my phone rings.

"Hello?"

"Oh my god, the FBI just raided the office!"

"The FBI?" I hiss.

"Yes  It's every girl for herself now sweetheart.  Look, I've been wanting to tell you for a long time.  I'm totally in love with you. All the other boys have just been a sad attempt to convince myself and others that I am anything but totally, irrevocably in love and lust with you.  I'm on the 10:15 to the Cayman Islands from JFK.  I have a bag full of money.  Let's go, just you and me."

I am as lame as they come this time.  It took me this long to catch the joke.  I am quiet for a long time before Laura speaks again.

"Wait a minute, did they just hear you say 'The FBI'?"  I look up at Fitz and Sam.  They are both staring right at me, wordlessly, no attempt to conceal the shock on their face.

"Uh huh," I manage.  Laura starts laughing hysterically.  "C'mon you idiot, tell them you have an emergency and let's go do some real drinking."

I stand up with the phone still in my ear.  "Guy, I really have to go."

They both nod in violent agreement.  "Of course.  Of course."

I am such an idiot.