Stewart Kohl did not grow up with dreams of being a private equity dealmaker. He read a story in the newspaper about leveraged buyouts, was intrigued and took off down a path that brought him to The Riverside Co.
In the years since, he has strived to make profitable deals for everyone involved and to help people understand what a strong private equity firm can really do.
“Some think of private equity as just being financial engineers who just try to leverage up and then cut costs to make money,” Kohl says. “Nothing could be further from the truth. In almost all situations, the only way for a private equity investor to make money is to help the company become bigger and better. The best private equity firms have developed proved skills and tools to accomplish this outcome on a regular basis.”
Riverside has an international portfolio that includes more than 75 companies and has more than $7 billion under management.
In this edition of Dealmakers Live, Kohl talks about how he got his start and mentors who guided him early in his career. What follows is a transcript of the above video, edited for readability.
Entering the world of private equity
I got into private equity in 1988. When I graduated Oberlin College, that powerhouse of finance in 1977, I did something very different for the first 10 years. But in 1987, I was reading about these things in the Wall Street Journalcalled leveraged buyouts. I thought they sounded really interesting and would be fun, challenging and something I might like to do. So I was very fortunate to be hired by the folks at Citibank and did a 180 degree pivot into what we now call private equity.
An apprentice business
I have to give a big nod to some early mentors, certainly the folks at Citibank — Jim Petras, Joe Carreras, John Kirby, Jim Marra. They were extraordinarily generous with their time and their wisdom to learn this business. Private equity still today really remains an apprentice business. It’s a business you learn by doing and often kneeling, if you will, in front of somebody who knows what they are doing.
So many deals
At Riverside, we’ve done over 520 transactions in our 30-year history. There are so many that I’m very proud of. Proud of our team, proud of the outcome, proud of how it benefitted the company and its community. Then some of my early deals that I worked on when I was at Citicorp, I would particularly mention a transaction called KEMET Corp. That was a very successful private equity transaction. We made an acquisition from Union Carbide, grew the business, ultimately taking it public and making it a very successful company.
Not too little, not too much
The key to finding the right amount of capital to provide is to start with what is the objective, then to lay out a clear strategy and then to properly quantify what that’s going to require in terms of investment into the existing company, as well as to do add-on acquisitions. It’s important that businesses have enough capital that they not be capital constrained. On the other hand, human nature being what it is, anything in abundance or too much or free tends to be squandered. I don’t think we want to starve businesses. But we also don’t want to make them too fat.
Related post: Why there are so many more ways to add value to a business than just money