January 14, 2013
Interviewed by: David Snow
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From Citi to Private Equity

Gary Crittenden, Managing Partner of Huntsman Gay Global Capital, describes the culture change he faced in moving from the CFO of a major corporation – Citi – to joining a medium-sized private equity firm. While his schedule at Citi was highly regimented, in private equity, he says: “I’m lucky if I know what I’m going to be doing at the end of this week.” Crittenden also shares the big-company skills that come in handy in a private equity setting, as well as what opportunities the downsizing of bulge-bracket Wall Street firms will mean for private capital firms.

Gary Crittenden, Managing Partner of Huntsman Gay Global Capital, describes the culture change he faced in moving from the CFO of a major corporation – Citi – to joining a medium-sized private equity firm. While his schedule at Citi was highly regimented, in private equity, he says: “I’m lucky if I know what I’m going to be doing at the end of this week.” Crittenden also shares the big-company skills that come in handy in a private equity setting, as well as what opportunities the downsizing of bulge-bracket Wall Street firms will mean for private capital firms.

Privcap: What was it like to move from your role as CFO of Citi to a medium-sized private equity firm?

 Gary Crittenden, Huntsman Gay Global Capital: There’s a big change between being in a private equity business and having a senior role in a large corporation. I had been CFO of a public company for, I would say, most of the years prior to the time that I joined Huntsman Gay. And along with that quarterly reporting requirement, there is just a lot of stuff that fills in your calendar.

You have to have meetings to evaluate what your actual results were. You have to do forecast meetings. There’s cost-management meetings. There’s asset-management meetings. There’s process-improvement meetings that you have.

And so, if you look at your calendar, you look at a year, and you have a pretty good idea on a particular day a year from now what you’re going to be doing. There’s just very little flexibility, because the rigidity of public reporting kind of builds all of those necessary steps into the process and makes flexibility with your schedule a little bit more difficult.

Private equity is exactly the opposite. So I’m lucky if I know what I’m going to be doing at the end of this week, because that’s the nature of doing transactions and because whatever needs to happen on a deal actually does happen, and it has to happen in that time frame. There’s just a lot more fluidity.

So you have a lot more ability to structure your time during a day in private equity than you would have had in the kind of public-company world. But in the public-company world, you’re committed for a lot longer time period, in terms of how your time is actually used. So I have found being in private equity to just be a delight.

When I worked in a large company, you obviously do lots and lots and lots of transactions, and so you’re involved with those transactions. As CFO of a large public company, you see the headlines on all those transactions. It really is fun in the middle-market business to work on middle-market opportunities.

Although it’s not easy, it’s easier to take a business that’s making $20 million in EBITDA and turn it into a business that’s making $40 million than it is to take a business that’s making $2 billion in EBITDA and turn it into a business that’s making $4 billion. It’s just easier. And to see the exciting things that go along with making that kind of transition are really a lot of fun.

 Privcap: What kinds of big-corporate skills are useful in a private equity setting?

 Crittenden: There are tools that you learn in large-company management that are useful even in smaller companies. Let me give you a good example. We have a portfolio company called Citadel that is run by a guy named Mike Huff, who most of his background is from GE. While at GE, he learned a lot about the process of continuous improvement and how to react quickly to changes in the market to try and maintain the margins in his business. That’s a discipline that was drilled into him from years and years and years of working in a larger company.

Fast-forward now. We’ve been fortunate enough to have Mike running this company since 2008. When the environment changes, Mike reacts very quickly with some of the sophisticated strategic skills he developed while he was at GE. And there are just many things you take away from large companies.

American Express has really an extraordinary process for managing its people. And the way they do people evaluation, the way they think about the contribution that people make to the company, is applicable to smaller-company situations. But you typically wouldn’t see it if somebody hadn’t had larger-company experience.

I think there’s lots of specific management skills. And then, obviously, you do many, many deals when you’re in a large company, so you see lots of transactions. But there are many skills like that that I think are applicable in the private equity world that have been useful to some of our portfolio companies.

Privcap: What kinds of opportunities will the big changes on Wall Street bring for the private capital industry?

 Crittenden: It appears as though there is going to be less of an opportunity for the major banks to develop their own private equity divisions. And exactly how that will evolve and what form it will take, I think we’ll know here over the next little while. Likely the banks—obviously the large banks—are going to be more focused on the real banking business, sort of the deposit and loan-taking business, which I think is going to be healthy for the country. The banks are obviously going to be taking less risk with their own money—that is, they’re going to still provide client services but take less risk with their own money. And so that will be a change for those in-house private equity organizations, and we’ll see how that evolves a little bit over time.

At the same time, the expertise that is developed in a private equity firm in many of these kind of vertical categories—like high-yield debt, for example, or mezzanine debt or whatever the area might be—some of those activities are obviously migrating now into the large private equity firms. And they’re developing independent stand-alone expertise and capabilities in those areas that are completely salable in the outside world to people who want to buy those services, to people like us and to other just normal companies. Those services are certainly very commercially capable and salable. So I think there’s a little bit of a parting of the seas here, which I guess, over time, will probably be healthy for the financial services business but will create some change in the next year and a half, two years, or so that we haven’t seen for a while.

 

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