In this article, I will tell you the top private equity success stories and firms in the US.
The details covered would be a little background about the company and what were the differentiating factors for these companies that helped them in succeeding in the market place.
All the details mentioned in this article are derived from the respective company websites and a few other sources.
Please note that these companies are not in any order, and the success factors presented are my opinion based on the industry experience I have.
So, let’s get started with the success stories, and I’ll start off with my favorite company:
- 1 Top 5 Private Equity Success Stories
- 2 1. Bain Capital
- 3 2. TPG Capital
- 4 3. Carlyle Group
- 5 4. The Blackstone Group
- 6 5. Goldman Sachs
- 7 Now I’ve Got a Question For You…
Top 5 Private Equity Success Stories
1. Bain Capital
Bain capital Private Equity is one of the leading global private equity companies in the world. Started in 1984, by two dynamic young graduates from Harvard University, the company has raised billions of dollars since its inception and is today one of the most successful private companies you will ever come across.
It operates in three continents across 8 countries and so far has raised 10 global private equity funds.
Many economists and market pundits have had conflicting opinions about the success of this company, and its modus operandi.
But it didn’t stop the company from being a 7 member company to a more than 100 strong today with worth more than USD 4 billion.
According to me, the three factors that contributed to Bain’s success are as follows:
a. Strong leadership
Started by Harvard graduates the company was taken to greater heights by its people in the management and its leaders. One of the ‘’heroes’’ of the company is Mitt Romney, who took the company leaps and bounds ahead of competition in very little time.
b. Retaining dividends
As a part of the company policy, the firm has the dogma of deriving large portions of its revenues from the dividends of the bought out companies.
This has been a revolutionary change in the fortunes of many private equity firms, and has led Bain to newer heights in the corporate world.
c. Holding the company for longer durations
Another interesting strategy adopted by Bain is to hold the company and not sell of for extended durations of as longs as 5 to 7 years. They usually postpone the selling until the company is in pink of financial health and then sell it off at a higher premium.
This practice sure delays the revenues but in the hindsight reaps greater returns when compared to competition.
2. TPG Capital
TPG Capital is a leading private equity firm with regional offices in 10 locations and 17 offices that is another success story in the private equity universe.
The company was founded in 1992, and is one of the first private equity companies in the US to expand operations in Europe and Asia.
Following are the differentiating factors that helped company succeed in the corporate world.
a. Separate operations team
They have a Global Operations Group that is responsible for the operational efficiency and improvement of the bought out investments.
The team ensures that the company maintains healthy financial records and works in tandem with the investment assessment team. This enables them to understand the real problems behind underperformance and then troubleshoots them using their expertise.
b. Focus on due diligence
Initial diligence is given a lot of weightage before making an investment, which is an essential element of private equity investments. This is a mere compliance of many of TPG’s competitors but here it is given a lot of value which is a major contributor to their success.
c. Diversified portfolio
The company has diversified its investment portfolio which is highly risk proof.
This diversification is not only in terms of the size of the companies but also the industry verticals, geographies and cultural backgrounds.
This practice has helped the company in gaining better returns and minimizing risks involved.
3. Carlyle Group
One of the biggest private equity firms in the US, Carlyle Group is operational with more than 30 offices across all continents and major economies of the world.
Founded in 1987 by 3 budding entrepreneurs with a capital of USD 55 millions, today the company has grown to nearly USD 180 billions since its inception.
According to me, following are the 3 stand out strategies that are critical to the company’s success:
a. Political connections
This is one of the biggest advantages associated with Carlyle group.
Among many political connections of the company, one of the most controversial connections is with ex-president of the US Mr. George Bush.
These political connections have helped the company crack a few major financial deals in the history of private equity in the US.
b. Investment in United Defense
Carlyle’s investment in United Defense Industries has been critical in the company’s success.
After the infamous incident of 9/11, the company earned major revenues in the post incident events.
There have been questions raised over the involvement of Bin Laden’s connections in the group but nothing has been legally probed against the company.
c. Geographical reach
The geographical reach of the company is quite noticeable and played an important role in company’s expansion and growth over the years.
Unlike many of its competitors, the company has spread its operational wings to a larger portion of the developed and developing economies.
4. The Blackstone Group
The company was founded in 1985 by Stephen A. Schwarzman and Peter G. Peterson with a modest balance sheet of less than half a million dollars.
Today after almost 3 decades, the company employs more than 2000 employees with 24 offices across leading countries of the world.
The company went public in 2007 on the New York stock exchange with the ticker symbol BX.
Below mentioned are some of the major factors that contributed to the company’s success:
a. Emerging markets and entrepreneurs
The company has always focused on the emerging markets and entrepreneurs.
The vision of the company has helped in investing in the right investment option at the right time.
Unlike many other private equity firms that are skeptical in investing in third world countries, Blackstone has always backed its investment forecasts even though it meant going against the industry norms.
b. Large workforce
The company has one of the largest workforces in private equity domain in the US.
Lead by a strong and experienced team of managers, the company has always believed in investing in its employees and training them to be the best in the business.
The company has always believed that any company is as good as its employees and therefore maintaining adequate skill level of employees was given utmost importance.
c. Valuing client requirement
Another differentiating factor that has helped Blackstone succeed is valuing the client objective more than the top line or the bottom line of the company.
It has many clients that are associated with them for a very long time now, purely because of the value delivered by the company over the years.
A major portion of the revenues of Blackstone comes from its repeat clients which is a rare phenomenon in private equity domain.
5. Goldman Sachs
Founded way back in 1869, Goldman Sachs is one of the oldest financial companies of the world, and is also one of the first private equity success stories in the US.
The company offers almost all financial services imaginable and has its presence in all the financial centers of the modern world.
The private equity division of the company is called the Private Equity Group and employs nearly 85 highly qualified professionals.
Following are the factors that I believe are the major drivers of the company’s success:
a. First mover advantage
One of the biggest advantages of the company is that they are one of the “avant gardes” of private equity in the US.
Much before the terms was globally accepted; the company offered such services to its clients in the US.
With all these years of heritage and corporate experience the company own a large number of experience professionals which makes getting business easier for the company.
b. Open door policy
Unlike its competitors, Goldman Sachs has an open door policy for all its potential investments.
In other words, mostly the private equity players maintain a portfolio of industries to invest in on the basis of their initial study and analysis.
These companies stick to their strategy and do not even bother to look at other investment options, whereas at Goldman Sachs no investment option is a bad investment option.
The company has kept its portfolio open for all possible industry sectors and geographies.
This is the reason why the company has been able to invest in all industry sectors possible, directly or indirectly, which has helped the company in gaining unexpected returns which their competitors lose out on.
Hope this article gave you some insights on what it takes to be successful in the private equity domain.
The opinions mentioned in the article are absolutely unbiased and hold no interest of the parties mentioned.
Now I’ve Got a Question For You…
How do you plan on using these success stories?
I’m sure you can see the potential they have to improve your private equity career. It’s just a matter of applying the points to your career.
So I’d love to hear what you have to say.
Leave a comment below to let me know what you think.
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