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00:00Alright, so guys, exciting to be talking to you. Big fund closing, your fifth, takes you over $10
00:09billion. Rich, tell me about the process of putting this fund together. What was it like?
00:15In this environment, Jason, it was really, really interesting to see. You had all these
00:22geopolitical tensions. You had this flight to quality with private equity. We play in the
00:27mid-cap space. We were on the road quite a bit, but we couldn't have been more delighted that we
00:32were
00:32able to raise an oversubscribed fund that we were able to increase our hard cap to close at over $3
00:39billion. And so, Steve, you're out on the road. You're talking to investors. What are the questions
00:43they're asking you? What's on their minds as you're walking them through the plan here? First of all,
00:48are you returning money back, Tom? And especially through COVID and afterwards, that became the
00:54thing. And we, our strategy, I think, has found its full measure. It started in 2008 when we started
01:01the firm, and it was really built around, at the time, in 2008, we talked about old-school private
01:05equity. What is old-school private equity? Late 80s, early 90s, KKR, Bain. What were they doing across
01:11the table as a partner, not a seller? And then pair, pursue, come together with a strategic vision
01:15and rock arms and go on the way. And so, we started with a strategy that took time for people
01:22to ingest.
01:22And I think this last fundraise cycle, they really saw the bounty in it, right? And the ability to
01:33replicate. And that we had the people that believed in it, another generation of equity partners,
01:39so that we now had time on our side. We weren't trying to run the table out with two guys.
01:45We
01:45were building a firm. And I think that all came together, returning money, our strategy finding its
01:50legs, and then also building for the future with new partnership. I think it really resonated with
01:55the market. And so, Rich, you're talking to these investors. I have to think they, or at least,
02:02if not worried, they have questions about private equity right now. There are a lot of people out
02:07on the road at the same time you are. There are a lot of headlines about all these deals that
02:13aren't
02:13getting done, all this money, you know, that's sort of sitting, committed, and not getting deployed.
02:20How would you describe sort of their tone as they're talking to you?
02:25I think that the opportunity set for many investors has shifted to what we call mid-cap,
02:32or middle market businesses. And so, in the area that we played, I think, Steve, and I, we did our
02:37first $1 billion transaction in 2010. So, in the past nearly two decades, we've continued to do the
02:44same type of transactions in partnership in these medium-sized middle market businesses. I think
02:50investors today are seeing that there's a real opportunity in that size range. And so, I think
02:57when you're trying to fundamentally transform a good business into a great company, that's something
03:04it stands the test of time. And that's what we're focused on.
03:06And so, Steve, you know, you got the money, and obviously, you're right, you have been returning
03:11money, but you got to put it to work. So, what does the deal-making environment feel like right now
03:17in that mid-cap, middle market space that you're playing?
03:20You got to remember, Jason, we, our strategy, again, is we're not asset, we decided from the
03:24beginning, we're not asset managers. We're not going to go raise as much as we can. We're going to stay
03:28in what we call the middle market, right, classic middle market. And in doing so, all of
03:34our scars get folded back into the, we don't raise more money and leave the market. It's
03:40the same type of business we've been looking at for many, many years. And so, that's the
03:45consistency of our, and the replication, and the learnings, and the next generation, I told
03:51you about the next generation of leadership, next generation of, you know, our principals
03:55and VPs are all tied into this, you know, now 18 years of learning so that, in many ways,
04:03what the, the companies that we're looking for, they're looking for that partner. They
04:07now recognize that partnership and investing is, is not esoteric. It's really fundamental.
04:13And that's what people know us for. And so, to us, we don't, it's, it's a battle out there.
04:18But when we can look, pump someone in the eye and say, look, we have 110 referenceable partnerships,
04:24not always perfect, not always goes exactly right, but look them in the eye and we've done
04:29this for a long time. Now, I'm actually looking for that from somebody, tell me more. And so,
04:34for us, that's the distinguishing part of it. In a, in a really crowded market, RCO and,
04:39and leadership teams and owners, and, and even the, and the financials, they, they want
04:44to see somebody that has scar tissue, understands the market, been around for a long time, and
04:50is consistent. And so, that's, it's like bam, bam, bam, bam, HGGC. That's what we want to do.
04:54So, Rich, where are those opportunities right now? What, what are the sort of fertile places
04:59where you're seeing, you know, deals that are, that are able to get done, that are actually
05:04able to get transacted from a buying perspective, you going in and acquiring a company?
05:08Sure. I, I think, Jason, that we as an organization have a little bit of flexibility in that we focus
05:13on not only technology as a sector, but also non-balance sheet, financial services, business
05:19services, consumer sectors, and we do it in a medium-sized format. So, when we're
05:24looking for companies in that, the denominator of businesses in the middle market in the United
05:29States and Western Europe is only growing. This is going to be a tailwind vintage year from our
05:35perspective. We've already invested in four platform companies from Luxembourg to Scottsdale,
05:41Arizona in this environment. And we think there's going to be more and more opportunities to partner
05:45with really wonderful, not only management teams, but founders, and in some cases, other private equity
05:51firms. Talk to me more about that. I mean, in terms of the other side of the equation, you know,
05:57being able to, to sell either to a sponsor, to another company, taking public, how does it feel
06:04right now? How does the exit market feel right now? Because again, you read the headlines on Bloomberg
06:08and elsewhere, it's like, world's a pretty turbulent, I think is a nice way to put it in place.
06:14Steve? You know, what's funny through 2008 to 2020, the, you know, it's just an explosive
06:19market. We kept waiting for the worm to turn, right? When's this going to end? And it just never
06:23did. And so in that way, we stayed consistent. We didn't, because we weren't asset managers,
06:27we weren't running, we weren't raising $30 million, billion dollars. We were, we were,
06:31we were blocking and tackling. It's like the old metaphor. And now by finally, as things turned in 20
06:37and COVID and everything kind of, you know, interest rates and everything kind of became very,
06:40very difficult. That's, that's kind of when we rise up, right? Because we've been doing the same
06:45thing. People could have said you, you could do it faster, better, more in the past. Today,
06:51I think people are resonating with, you know, just basic fundamental business building,
06:57a good business to a great company. That's right in the middle market where we sit and we've done it
07:01for, you know, 18 years. It just, it feels like we're, we're like a 20, you know, an 18 year
07:07old,
07:0718 year old overnight success because all of a sudden everything we're doing is paying off in
07:11rate. And so are, are people willing to, to buy companies right now? Oh, Rich. I mean, are you,
07:17do you have people knocking your door? Do you have investment makers coming to you and saying,
07:19listen, I like what's in your portfolio or they're receptive when you go out and shop something?
07:25Yes. We've had a number of full exits. And I think a lot of times folks in this
07:30environment are always focused on, are you exiting in full or are you reinvesting? And we've had a number
07:36of transactions. We've realized an enormous amount of our, of our NAB here in the past 12 or 18 months.
07:41So yes, I think there is an opportunity, but I think Jason, the, the, the thing that we tend to
07:47find interesting, a wise person once told us, they said, it's far easier to partner and buy a business
07:51for a quarter billion or half a billion or a billion and sell it for three than buy it for
07:56three and
07:57sell it for six. Yeah. And we have focused on that because in this environment, irrespective of size and
08:03scale. One of the things that we have found is that if you have a fundamentally good business,
08:08call it a 15 or 20% grower, you know, maybe gross retention of 90 net of a hundred rule
08:16of 50 or 60 or
08:1770 company, there's, there are so many firms that have checklists and those businesses are extremely
08:23expensive. And there's so much liquidity to your point and capital that's pent up that people want to
08:29invest it, that they're driving the prices for certain assets unnecessarily high. So there are
08:36things that are being transacted. We as an investors in this environment and a tailwind vintage think
08:42that there are far other greater opportunities and overpaying for good businesses. We think there's a
08:48lot of great businesses. In fact, one of the things we talk about in with our team is the notion
08:52of a
08:52hidden gem. We own times new Roman, uh, with our portfolio company monotype on your iPhone, Jason. So,
08:58you know, a hidden gem, right? We wish there were hidden gem conferences out there that we could
09:03go to and find these wonderful- They wouldn't be hidden gems then. They wouldn't be hidden gems anymore.
09:07I see what I did there. So are, do you, would you say, Richard, are you a net buyer or
09:13a net seller in
09:13this market? I think that we're both because we now have a brand new private equity fund. Uh, we, we
09:19had
09:19tremendous demand from all over the world, uh, over two thirds of our LP bases from outside the US. So
09:25people
09:25like investors like what we're doing. Uh, we think the denominator businesses are increasing and we've
09:31already done four platform transactions in the new fund. Right. And so in our mind, we're open for
09:37business. We've never been busier. Uh, but at the same time, as we look at our portfolio, uh, we've had
09:43some tremendous outcomes or we wouldn't have been able to raise this fund. Right. And, um, many of our
09:48companies today are performing well. And when they perform well, we typically tend to go and partner
09:55with these, these teams and say, let's underrate a three to five year plan. Sometimes you hit your
10:00plan in three years. And in many of those cases, we begin to think about what are good outcomes. Uh,
10:05and we've had a number of them over the past 12 to 18 months that, that resemble that. We're resilient
10:10to the vicissitudes of it all. Like that's, we're built for it. We're built to not have to time things.
10:16We're building great businesses and great businesses are always that, you know, they're
10:20always sellable and we're buying businesses that are not reclamation projects, not turnarounds.
10:25They're like, they're good businesses. And so we, if you, if you stay again with the blocking and
10:30tackling the basics, the middle market and the way that we do it in partnership, because then again,
10:35our, our strategic partnership that we build is a hundred day plan before transaction. So our DPI's
10:41are always a little bit better because we're, we're faster to the execution. So we've been,
10:45again, it sounded pretty esoteric to the, our investors in 2008, in 2025, 26, it was really
10:52resonant. As you talk to, to CEOs in your portfolio or, or you go talk to them about a transaction,
10:59what is their mood, Steve? Like what, how were they, and CEOs, if you can generalize or, or some more
11:05optimistic, are they, like, what are they, what are they excited about? What are, what are they worried
11:09about? Obviously AI, everyone wants to talk about AI. And AI to me is an enablement and we need to
11:14get
11:14it the, every employee in the system, in the, you know, in our portfolio needs to have a report to
11:23them, a self-report of what is AI to me? How can it affect, affect my job in a positive
11:28way? What can
11:29it actually do, you know, what do I have to watch out for? And so everybody is trying to ingest
11:32it. I think
11:32we've tried to create this partnership mentality so that we can approach difficult subjects like AI and
11:39not be afraid. Look, we, we, we, we transacted with each other and created a partnership because it
11:44resonates. It goes back to the old football days. Like we want people who can come together, you know,
11:49figure stuff out and stay, you know, resonant with each other and, and, and deal with really difficult
11:54problems. And so our CEOs are not afraid right now. They're not frozen. We're leaning in, but yet we're
12:01fundamental. And I think in that way, um, we have a strategic plan for every business to grow
12:06and to become a great, a great business. And so in that way it's execution. And it's like, well,
12:12what, give me a, what about, what about, what we recognize it. We're not afraid of it. We'll,
12:17we'll ingest it. We'll find the best way to deal with it. And the CEOs in our portfolio are not
12:23reactive. They're proactive. And I think that's the way we've built it from the beginning.
12:25Well, I think too, Jason, um, Steve mentioned this before, but this notion of, um, repeatable,
12:31um, there have been very different business cycles. We've been together for 27 years,
12:36GFC.com, right? COVID. Um, but if you think about just the last few fund cycles, I'll never forget in
12:43our 17 vintage fund, what a blue sky moment, right? Interest rates were at zero. Um, a lot of the
12:50businesses that we were doing back then, um, our management teams were doing buying bills. We did
12:54over 500 add ons to our portfolio companies during that period of time in that 17 vintage fund. And
13:01then fast forward to the next fund cycle. And all of a sudden interest rates are up 500 basis points.
13:06And you have all of this geopolitical strife. Um, and we've been able to continue to work with these
13:11companies, uh, in the mid cap market, um, to build a better business. You come through this with flying
13:18colors, um, by all accounts, you beat the hard cap, et cetera, for the investors out there who were,
13:24you know, also out on the road watching Bloomberg television, what's your advice to them? How did
13:29they be more like you then? Uh, my first thing I say, don't become an asset manager because I think
13:36it takes you out of your strategy is inevitably. Um, and then, you know, have a strategy that makes
13:42sense to the, to people across the table. And I think it has to have a partnership angle,
13:46uh, some sense that we're in this together. Uh, and so for me, what I would tell them and then
13:52build businesses fundamental, like it is the time of the LP. I mean, it's there in control. They're
13:57more in control than ever. And if you, and to, and convince them, uh, to invest in you, it has
14:02to be
14:02something that is, it's not a momentum play, right? It's a fundamental play. And I think those are the
14:07people that were really successful and invest in your organization, your people. We've spent a lot of
14:12time thinking about the future here, Jason. And, uh, we are delighted that we have, uh, people that
14:18have been with us for, you know, over 15 years on average. And so we've built a great bench and
14:24we
14:24continue to bring and attract good people. So we would tell you out there when you're trying to build
14:28a firm to attract capital, go build a great organization that people want to be at because
14:33that is infectious. And investors see that too. Yeah, there's two of us. Now there's six of us.
14:39Generationally, it's built to continue to resonate. And now we know we've got the strategy set. No
14:44one's going to change. People can, investors can say, what's, what's going to happen in fund six,
14:48one fund seven. I can already tell you what size it's going to be essentially within a range. I can
14:52tell you who's going to be doing it. We have six partners, equity partners are going to be around
14:56for generations. We're going to work. We're loving it. And, and I think that really resonates with,
15:01with investors.
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