September 2, 2011
Interviewed by: David Snow
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Culture of Operations

Privcap founder David Snow speaks with Donald Gogel about how his firm, Clayton, Dubilier & Rice, has made operating talent core to its strategy for adding value, and about what kinds of corporate executives successfully make the transition to private equity investing. Gogel also explains why his firm has remained a ‘pure-play’ organization while many of its competitors have branched out into other asset classes and financial services.

Privcap founder David Snow speaks with Donald Gogel about how his firm, Clayton, Dubilier & Rice, has made operating talent core to its strategy for adding value, and about what kinds of corporate executives successfully make the transition to private equity investing. Gogel also explains why his firm has remained a ‘pure-play’ organization while many of its competitors have branched out into other asset classes and financial services.

David Snow, Privcap: You have been in the private equity industry through several market cycles, going back to the early 80s. I’m wondering if you are able to compare the economic downturn that we just went through with the previous downturns of the previous cycles. What about the most recent Great Recession, you could call it, struck you as being different, struck you as surprising?

Donald Gogel: The similarities, I think, are much more striking than the differences. In periods of disruption, companies, whether they have a lot of leverage or not a lot of leverage, find themselves stretched. The revenue-line isn’t behaving properly, inventories are building in ways that are unexpected, and there is a lot of uncertainty in the environment that most of the employees in the organization haven’t experienced before.

The cycles don’t come in around neatly boxed decades; they just come when they come. Many of the responsible executives are seeing some of these for the first time. I think one of the advantages that a private equity firm like Clayton Dubilier has is that having started in 1978, we have seen a number of these cycles, we have seen the play before and while the unpleasant experiences differ a little bit, many of the themes are quiet common. The obvious one, which won’t surprise you, is that the focus on cash becomes – which is always important in a private equity leverage buyout – becomes of exceptional importance.

So one of the first things that all of our portfolio companies did was focus very, very carefully on their revolvers, cash availability, the calculations that go into that availability, if it is an asset-based facility, become very focused. And the team probably spent the first six months of the crisis ensuring adequate liquidity. We measured it instead of once a quarter, we measured it every day or several times a day – it became an overwhelming focus so stage one in this is make sure that the liquidity is available.

This was probably more difficult than other periods because the liquidity wasn’t just from our companies, it was whether some of our lenders would have the liquidity to support us. Lehman Brothers was in some of our facilities, and of course, uncertainty about their role was paramount. In a number of cases, we had to redo facilities, we had to create new sources of capital and so that was stage 1, very similar but maybe more pronounced than this period than before.

Stage 2 probably, of equal importance, was to make sure that the companies remained focused on their core business. The distractions in periods of stress can be enormous. Most companies, though, that are good can go back to their core capabilities – building good products, thinking about the customer, providing good service, and back to basics, focus, hold down the fort, whatever analogy you would like to use became an important element of each of our management teams and portfolio companies.

I think the next stage in all of that, once things stabilized, and they did for most of our companies within six or twelve months, was to recognize that, okay, we are okay but that doesn’t mean we are going to be able to grow and prosper. There is an important pivot point which we have always seen coming out of recessions from a defensive posture to an offensive one, or at least one focused on growth, market share and a more optimistic future. Very hard pivot point – you have asked your employee base to basically stay up at night with their worry beans. Now you loosening some of the constrains, and it is an important period of time to think about well what can we do in this period when many of our competitors, many of our customers, many of our suppliers, are still very anxious. I’m happy to say that in many cases, our companies were able to respond with new initiatives, new investments. We worked very hard to make sure that we were leading our industries in both reinvestment coming out of the recession, and I think that we came out of that reasonably well.

Benefits of Being a Control Investor

(4:35)

Snow: As a private equity firm, you either own or you have substantial interests in a number of portfolio companies. So how did the communication work between your firm and the underlying management of the portfolio companies when it became very clear to you that this cash preservation and cash management initiative needed to get very serious?

Gogel: Well, we have the benefit of, in each of our companies, being a control investor. We define that quite simply. One of my full time operating partners is the executive chairman of the company. We have a partnership that has 16 partners, of whom we have six or seven that are operating executives and so of this portfolio of 16 companies, each of those operating partners sits on two or in come cases three boards as chairman. So we can really rally our firm by having partner meetings as we did probably double the number that we would normally have so we shorten the interval between our internal partner meetings.

We review weekly what is going on in each of the companies, but each company has a very seasoned operating partner who typically was the senior executive, usually CEO or president, of their own businesses, that has literally daily contact with the management team. One of the advantages of our brand, private equity, is the deep and sustaining and really constant engagement with the management team. So this was not, well we’ll have a board meeting, we’ll come back three months later and see how you’ve done.  It’s, gee that sounds good, let’s talk later in the day, and that level of engagement, I think, allowed very clear communication and focus.

Snow: Was there every any push back from anyone on the portfolio company management teams about the approach that your firm wanted to take in guiding their company though the economic storm?

Gogel: You know, I am sure there were concerns sometimes whether we were collectively making the right decisions, but one of the advantages of private equity is that there is a remarkable coherence between the management team and the senior private equity professionals.

We go into an investment with a very transparent, clear set of objectives for the company. Every one of our investments carries with it five or six key initiatives – things that we and the management team collectively say, these are really important things to build this business.

A company like Hertz, for example, we said, we know we need to improve our productivity, even before the crisis hit. We need opportunities to work very hard on our off-airport strategy, which was, at the time of our investment, really a money-losing proposition. With the half a dozen key initiatives in mind, many of them cost-oriented – some productivity, some growth, a mix of good initiatives – everybody knows really what they should be doing. The crisis did not change the strategy dramatically, it changed the pace, it changed the intensity, but we really did not have major strategic differences to say, for example, why doesn’t Hertz get into the cut-flower business. You know Hertz is a great focus company, and we just help them through that crisis.

Clayton Dubilier’s Culture of Operations

(8:00)

Snow: Can you talk a little bit about the way your firm is structured with the operating partners alongside the other partners? What does an operating partner do?

Gogel: Sure, well it’s a central element in understanding what our firm does versus some others.

One of the great things about private equity is that it is a diverse set of firms, private equity firms, that approach their investment philosophy, their organization structure, their engagement with portfolio companies, in very, very different ways. And I’d never say that our model is better than others, but it is distinctly different.

It started in 1978 when our firm was founded because Marty Dubilier, one of the co-founders, with the firm with Joe Rice – Marty was an operating executive. He ran thirty of [former ITT Corp president] Harold Geneen’s European businesses. He was the chief, basically the president of Europe; he had been a chairman and CEO of several public companies as well. He had run a turnaround firm. So Marty was a guy that was a hands-on executive. That history really shaped how CD&R grew up and developed.

He and Joe Rice decided that every investment would have an operating and financial partner in the lead on behalf of the firm and on behalf of our investors. The operating partner had to know enough about the business that he could, in making the investment case, say, I know how this will work, I think this is a good idea, that won’t work, you are being too optimistic here. So the set of assumptions underlying one of our investments was always vetted by a senior operating executive who had done that before. If it was reducing costs in a manufacturing line, if it was improving quality, if it was increasing the service content, if it was thinking about developing a new channel – there was a reality quotient to every one of the early Clayton Dubilier and Rice deals that, I think, gave the firm a good advantage, led to good returns, and established a culture in which operations really always were at the fore at everything we do.

Of course, in the period that we are in right now where pure financial engineering, by which I mean – change the balance sheet, take on debt, buy at low multiples, and sell it at higher multiple – that’s a nice arbitrage, a great game; it doesn’t work now. What has work is having the operating experience that our firm has always had, to look deeply into the opportunities, to understand the business plans, to work closely with the management team, to ensure, if not a flawless execution, very good execution of those strategies, to make mid-course corrections and to run and build some very good businesses. Now, what that has required for us is to have a core of full-time operating partners that we have been able to successively upgrade their capabilities to that point now where I think we have some of the best executives in the world, but who understand that what they are doing with us is very different than what they did in some big companies.

If you look at our most recent additions in reverse order, Sir Terry Leahy who was the chairman/CEO of Tesco, Vindi Banga who was president of Unilever and had global span of control and who was also chairman and CEO of Hindustan Lever, one of the largest consumer product companies in India, and A.G. Lafley who built Procter & Gamble with a lot of help, but he was there for a period in which Proctor grew from a $5 billion company to an $80 billion revenue company with dramatic exposure and development in emerging markets.

When I started with Clayton Dubilier more than 22 years ago, emerging markets were not a focus, today it is. Global supply chain was 10 percent of many of our investment theses, now it is 20 percent. So all of those changes reflect, some best practices of very senior management who have thought long and hard, have had very successful careers. We routinely try to have at least five, six full time operating partners with diverse industry experiences. If you look at our website, you will see where some of these individuals come from. It’s industrial, consumer, retail, what they have in common is they have been successful in driving organizations to build great companies; they are very focused on building talented management teams in the portfolio company, building core capabilities, staying focused and helping these management teams succeed.

It’s a core competence of what we do because every one of our investments requires one of my partners, the operating partners to play that role. We won’t make a minority in the investment, nor will we make an investment where we will say to the management teams, you guys are doing great, we will see it next quarter. It is a high level of interaction and very specifically, each one of our operating partners is involved in the early due diligence, in putting together the investment case, vetting the financing, evaluating the management team, putting together the plan that is the first hundred days, the first year, the first five years, looking very carefully at the composition of the initiatives that are going to change the business, that are going to change the success, and ultimately they are responsible for the transformation of these businesses.

If there is a single key word that will account for what I think will be continued success in private equity, it is that private equity firms, at least the best ones, have the ability to work with management teams in companies to adapt. And anyone that doesn’t think that adaptation and flexibility and quickness of response is the essence of successful business today, I think is going to be disappointed – the world just keeps on changing.

From Corporate Life to Private Equity

(14:14)

Snow: I would imagine that over the years, executives have come to your firm inquiring about what it’s like to work there and seeing whether or not there might be a role for them. Are there talented executives who, nevertheless, don’t quite get what is going to be required of them in a role as an operating partner in a firm like yours?

Gogel: Sure. I probably spent time with no less than 50 chief executives a year talking about our private equity model. In some cases, it’s a low level sort of early inquiry, it’s someone that may have three or four years sitting as CEO, but they are just interested in what might come next. In some cases, it’s a CEO that wants to come to talk us about a specific transaction, but inevitably it turns into a discussion about what is it like to be on a private equity firm like Clayton Dubilier and Rice.

And of the 50 people that I would spend time with over the course of the year, there is probably a handful that really want to do what we do and that we think could do what we do. Why that small percentage? Well, a combination of many things. Typically, we are talking to executives in their late 50’s, sometimes early 60’s. They have worked very hard for a very long period of time. We are asking them to work at least as hard for a very long period of time. As you know, private equity is a long-dated asset class. A fund will start, have an investment period of five years and it may take another five years until the portfolio is fully returned.

So I’m asking someone that has worked very hard to continue to do that – not everyone wants to. Some people would much prefer, if not retire, to sit on a few boards, be active in some meaningful ways, but not to get on an airplane to go to Topeka at 7:00 at night to be there for a 7:00 AM due diligence session with a potential acquisition the next morning. So that is one element.

A second element is that there is a high level of variability of the types of businesses that we ask executives to participate in. We have had an executive from Emerson Electric, Jim Berges, as the chairman of Sally Beauty, and as Jim would joke, you know he went from selling all kinds of sophisticated electronic and telecoms equipment and generators to hair color. Well, that requires a flexibility of mind. A lot of executives like to stay in their field, and many of our companies don’t have a very clear sort of focus that is the same as an industry executive that we would hire.

A third element is that many executives are used to really running the show themselves, not really being coaches as much as being the all-star, and that is just a personal preference. A lot of executives said, look you know, I really like running things. And as private equity operating partner, your job really is coach. Not player-coach – you can’t say give me the ball; it’s you got to work with an executive and really develop that person. A lot of executives love that; a lot of executives say, you know I’m not sure if that works. There are different skills and it takes a rare individual, at least in our experience that wants to play that role with the level of intensity, at least, that we require.

Compensating the Operating Partner

(17:38)
Snow: Over the past several years, and especially in the wake of the financial crisis, you have seen more and more private equity firms add their own operating partners, add people who have come from industry, as opposed to coming from maybe a Wall Street or consulting background. So I’m wondering if you could imagine yourself as an LP assessing various private equity firms bringing their funds and talking about how they have an operating program. If you were to assess the quality and the efficiency and the success of these operating programs, what kind of questions would you ask the GP?

Gogel: Well, if I only had about 30 seconds, my first question would be, show me how you compensate your operating partners. That is a litmus test of sorts because most firms historically – it’s changing – but historically, have looked at operating partners as variable cost resources. And so, gee, we have a retailer, let’s get a retailer and ask him to work with that company. So when I say look at the compensation, look at the operating partners and say, is that operating partner really a manager, a board member, a chairman of a board, just for that company? Or are they participating in the life of the firm? It’s an oversimplification, but it’s an accurate one that most firms really hire senior executives for purposeful roles; it’s effective, it’s good, I’m not criticizing at all, but it’s very different than the role in which you, say well we want the operating partner to be a full-time member of the firm, and to draw the contrast between our model.

Our senior operating executives are full members of the firms, they participate in every investment decision and to my compensation point, they are compensated on the strength of performance of the whole portfolio not just the individual company of which they are chairman. So that would be my question if I only had a short period of time. If I were really doing due diligence as [an LP], I would just explore the level of engagement that the operating partner has, is that operating partner involved in that whole range of activities that I described, screening initial investments, meeting the management team, going to due diligence meetings, and then importantly, once the business is in the portfolio, what is the ongoing level of engagement? So first, I would look at comp, then I would look at time commitment – is it a once a week phone call, the occasional e-mail or as in typically in our companies, the first six months or year, our operating partner should be on site a couple of days a week, speaking to the CEO many times a day, working on key issues. It is a very intense first year, and I think that just time commitment is a very good leading indicator of the level of engagement.

I think those would be my two – compensation, and then looking at the level of engagement. If I had to test my hypothesis on those two, I would pick up the phone and call the CEOs of the portfolio companies, and if David Snow were my portfolio company chairman, I would say, how often do you see David, how does he help you, what else does he do for you, can you name three cases in which the company is doing something differently today because David helped you think that through? I think you get a pretty clear sense from that what level of engagement operating expertise plays in different firms.

Measuring Sources of Success

(21:11)

Snow:  Let’s talk about the way that your firm monitors the effects that your own partners and the management of the portfolio companies have on the portfolio companies to help them to grow. How do you measure to what extent your efforts have improved the fortunes of the companies, and where those sources of success come from?

Gogel: It’s actually not so hard to do. The goal standard in private equity is measured by the improvement in the cash flow of the underlying business. Stock markets may value that cash flow differently in different periods of time but if you are increasing the cash flow, the earnings before interest, appreciation, taxes and amortization, you are doing a good job.

I can tell you that our portfolio collectively and individually against peers outperform the S&P and other industry comparables through that period by a determined focus by improving the cash flow of the business. So we measure cash flow. It’s not the only thing – as I mentioned with Hertz, you have to measure things that have a longer-term impact on the business. So we look at our customer satisfaction, MPS [Motivating Potential Score], we look at employee surveys all the time – employees are really the strength of every one of our companies and if they are disturbed by things that are happening then you are just not going to deliver what you need to do.

So the financial metrics of course, employee metrics, customer metrics. And then are a variety of other things that are really company-specific. In a number of businesses, innovation, new products are key and so that will be a key measurement that we will review on a routine basis.

In other businesses, it may be new product introduction. In some, it may be the strength of a new channel. For example, Hertz, I had mentioned off-airport, very clear focus on our off-airport business, which by the way has grown about around 20 percent a year, maybe 30 percent since we made our investment.

So there are a lot of metrics, good private equity firms are data driven. You need a couple of big metrics to look at and then by companies, some smaller ones. Some of it is just reporting through the board, but as an extra level of scrutiny and support, we established 10 years ago when [former GE CEO] Jack Welch joined the firm, operating reviews which has a handful of our most senior executives – people like Terry Leahy, Jack Welch, A.G. Lafley – reviewing the management presentation team’s discussion twice a year. So each portfolio company would come in whether it’s ServiceMaster, U.S. Foodservice, Rexel, either in the United States or in Europe, will sit down and have a morning or an afternoon with Jack, A.G. and others, talking about the business. So we are able to monitor not only what’s happened, but prospectively to have conversations with, well, what’s coming down the pike or what are you worried about now, what keeps you up at night, what are your new initiatives for the next six months, how do you see the market work, how are your suppliers doing, are some of your channels troubling, what’s happening with pricing, why that margin squeezed, what can you do about it? Those kinds of discussions, I think, are invaluable to provide as real time feedback on what the company is doing and allow us to suggest mid-course corrections.

Snow: Well, just as the recession was largely to blame for the 20 percent drop in car rentals, isn’t it the case that your EDBA will grow because the economy is improving and that is not something that Clayton Dubilier or anyone else has control over. So how do you measure the difference between the company getting better as a result of the world getting better and the company getting better as a result of the sweat put in by you and your partners?

(25:07)

Don: Sure, well, there are comparative measures based on what you see the industry doing, what your competitors are doing. So if you are gaining share, this is good. I mean the whole sea may be rising, but if you are rising faster than others, that’s very, very important. So we are very careful looking at share gaining as one measure of difference with our competitors.

But you’d be surprised – the broad cyclical changes, at least the business press seems to miss the underlying turbulence in the water, you just look at the top of the sea level.  That top sea level is important, but because of our data driven approach, the nature of our operating executives, scrutiny of these businesses, we are looking very carefully whether this is just a lift or whether it is something more. Now don’t get me wrong, the strong lift helps everybody, it certainly helps us. And there are a variety of different factors. We own the world’s largest electric supply distribution business, and there is no question that there is a construction cycle comes back as the demand for copper is high and copper, which we sell a lot of, is priced higher. That helps everyone in the industry – we have to outperform that industry benchmark, and we look at that all the time.

Why Not Gather Other Assets?

(26:29)

Snow: Clayton Dubilier is one of the largest private equity firms in the world, but to date it seems to have resisted expanding its business model to perhaps managing different kinds of investment strategies, getting into real estate, maybe getting into infrastructure, getting into the advisory business as some of the other very large private equity firms have done. Why have you not expanded and placed the Clayton Dubilier brand on other strategies and other businesses?

Gogel: Good question – it is on we debate frequently, so this has not been by accident, it has been by design. Our partnership has a very strong sense of who we are, what we do, and what we would like to do. The business we are in is a terrific business; I can tell you without exception, we think our business is a better business than a hedge fund business, than an infrastructure business, than the real estate business. I understand people can argue that case the other side, but our partners actually believe that. If you say, gee, would you like to spend some of your firm’s resources and some of your own time in some of those other businesses, on balance, we come back to say, you know, we really like what we do – we like building businesses, we like working with management teams, endlessly fascinating. We are on the cutting edge of lot of the global best practices. We can participate in industries by design that we want to be in. We can keep a small partnership, a coherent culture. It is conscious choice to say that we like this focus.

Now, I think the challenge for other firms as they become alternative asset gathering platforms is not whether they can have financial success because I’m sure they will – they are both smart, capable, and their business models, I think, are sensible. But what happens to their private equity returns? Because if you have a senior management team that started in private equity and is now stretched across multiple asset classes, do they have the same focus, do they participate in the same way? In purely competitive terms, it’s great for us that many of our competitors have senior managers now worrying about other businesses. It allows our pure-play status to work very well.

It is also, I think, going to be an increasing competitive advantage with our investor base and some of the limited partners that you’re appealing to listen to your programs and read your content, as I think they increasingly want to make their own asset allocations based on the intensity of focus and the pure-play nature of some of the executives. At Clayton Dubilier, you know exactly what you are going to get – you get a committed buyout firm, dominated by an obsession, absolute obsession, with operating improvements and everything else in our business model accordingly. For us, to stretch across five asset classes would make us into something different that we prefer not to be.

Now, before I leave it at that, though, there is opportunity for geographic expansion of our model. Although our companies are very global in nature, we really do not focus on companies headquartered outside Western Europe, inside the United States, and that is something that I think we can do, maintaining our focus on just expanding our global footprint. No immediate plans, but I would be surprised if that wouldn’t be an important part of our future.

(29:57)

Snow: Is there validity to the argument made by some in the alternative investment industry that success with one type of strategy, the success of maybe the investment committee, the success of maybe the way that success opportunities are vetted, can be applied to other strategies which is an argument often made as firms branch into new strategies?

Gogel: Theoretically, I understand the argument. I think, practically, it is quite difficult. I mean looking at it the other way, from a hedge fund perspective, a number of hedge funds have tried to hedge into private equity. At best, you could say the jury is out. I think, generally, these related asset classes are different enough, one from another, that it’s not clear that the skill base will carry. Can Michael Jordan play golf? Michael Jordan can play golf. Is he a good golf player as he was a basketball player? No, but if anyone can do it, it would be Michael Jordan, but we would agree that there is only one Michael Jordan. Generally, I wouldn’t take an NBA player and expect him to succeed on the golf tour, any more than I would expect a golf player to carry across to the NBA or hit three-pointers with Dirk.

Private Equity: Good Citizen

(31:15)

Snow: So clearly Clayton Dubilier is going to continue to grow, but it’s going to be purely focused on private equity strategy. What kinds of people are you going to be looking for as you grow?

Gogel: The talent, as I had indicated, is always something that we worry about – making sure that we’re on the absolute pioneering front of getting the best people. And as I said, people like Sir Terry Leahy and A.G. Lafley and Vindi Banga are good examples. But the history of the firm has always been to do that. That will continue – attracting stellar executives with great insights into growing business is critical. What differentiates them today is probably more their global experience. I wouldn’t even begin to try to guess how many days outside the United States or the UK those three executives just spent in the last ten years. They’ve got to go through a passport book a year, if not more. So global nature, I think, is very, very important.

I think a broader sensitivity to the social constituencies is something that those executives have and that private equity is going to have to have. Some of my colleagues talk about private equity needing a social permit or license. And increasingly, I think, there’s going to be scrutiny on all forms of corporate activity, private equity included, to say, “Well what are you doing and is it good for everybody?” To that end, we’re looking for executives that appreciate that private equity is not just about driving economic returns because those economic returns require being a good citizen, a good corporate citizen, which in turn means good labor practices, sustainable environmental practices, good citizenship within the communities and a lot of factors that are just not the narrow financial factors that you typically would associate. So I think executives and CD&R are going to have to continue to have those broader skills.

I think we’re going to need to communicate better. One of the reasons that I’m happy to do this is that I think it’s important that people understand what we do and what the major firms are doing so that there’s not the cloud of, well, we really don’t know – and I’m looking at a black curtain behind you, and gee, is private equity some wizard behind the black curtain? Is he a wizard? Is something going on? You know, move the curtain across and say what we do is good.

Clayton Dubilier is one of the main sponsors of research at the World Economic Forum under the leadership of Josh Learner, who teaches private equity at the Harvard business school, and a number of other global academics, to look at things that really matter, we think, in the world, that would justify private equity activity. And those include employment, productivity, governance. And I’m happy to say that that work, which has been ongoing now for four years, has a very good series of conclusions to say that private equity is a net benefit, looked at the right way. You can’t characterize it saying it is all good, of course it’s not. But there’s a lot of things that came out of those studies in terms of private equity firms creating more employment in the long term, doesn’t mean there never cost cuts or reductions in force, but long term, private equity versus peer businesses, actually, has a better record in that regard. In terms innovation, something I didn’t mention before, private equity firms versus their comps invest more, not less, in research and development and that’s been evidenced and measured by the number of patent filings, for example, which has been terrific. And I think increasingly you’re seeing private equity firms, although this is not part of the World Economic Forum yet, but playing a good role in these broader citizenship issues of sustainability, so I think that’s a skill base that private equity firms and their individuals and the talent is going to have to have.

Transitional Corporate Governance

(35:19)

Snow: You have long been an advocate for the private equity form of corporate governance. You argue that it can actually have much more of a beneficial effect on the corporations that are owned. What do you think the future will hold for the way that people perceive the private equity model versus the public model? Do you think it will become more accepted, more popular?

Gogel: I do. And I don’t want to overstate the case. The private equity governance model is a transitional model. It’s not something that. . . IBM just celebrated its 100th anniversary. I wouldn’t tell you that I think private equity should’ve owned IBM for 100 years. I would tell you that when we bought the typewriter and printer business from IBM twenty years ago – the Lexmark transaction – that private equity was the only form of governance that could have helped a typewriter business become a printer business, could’ve carved out of a highly functionalized heavy manufacturing, heavy researching development business that did not sell at all through retail channels, and create the modern Lexmark, which has been a great success.

So, I don’t want to overstate it. The model is great adaptation for transition, for changing direction. And then at some point the energy of private equity, the benefit of it, is diminished and you need other forms of governance. But I will really strongly argue that for these periods of inflection and of change, which there are many in businesses, you really want to have those changes take place under private ownership.

Snow: And it sounds like you believe that there will be an increasingly number of typewriter-style businesses in need of some form of transformation in the future?

Gogel: I’ve been doing this for about twenty-five years and at any one point, people could have said to me, “Gee, there can’t be an endless supply of these opportunities.” And my answer is never changed.  It is – what creates our business is the dramatic, unceasing changes in the business environment. And I never know what they’re going to be, but I know there will be change. And I know that the corporate form of ownership is always going to require some meaningful series of change and adaptation. And legacy thinking and historical ways of doing things don’t move as quickly. And so, as long as there aren’t active boards, active shareholders, changes in the broader environment, economies that go up and down, commodities that spike, technologies that change, customers’ tastes that change, channels that are no longer as relevant, there were no big box retailers in certain segments, now that are. . . all of these things just create, at least as we see them, an endless number of opportunities. In any six month period, I can tell you maybe that some variation in opportunities, up or down, but to me twenty five years after I started in private equity, the world is more opportunity rich than it was twenty-five years ago. And increasingly, there’s an acceptance that private equity, at least the best firms, have a legitimate role to play and again, they’re not behind the black curtain.

Snow: Don Gogel, thank you very much for joining Privcap today.

Gogel: Thank you.

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